Understanding Stock Trading Seasonal Patterns

Oct 13, 2024

ICT Mentorship: Stock Trading Seasonal Tendencies (June 2017)

Overview

  • Focus: ICT Stock Trading, Seasonals, and Monthly Swings.
  • Presenter: Steve Moore, renowned for research on seasonal tendencies.
  • Main Indices: Dow Jones Industrial Average, S&P 500, NASDAQ.

Key Indices Discussion

  • Dow Jones Industrial Average
    • Small sample size of 30 blue chip companies.
    • Reflective of general market trends; closely mirrors S&P 500 seasonal tendencies.
  • S&P 500
    • Viewed as a more accurate depiction of the stock market.
  • NASDAQ
    • Tech-heavy, good market barometer.

Stock Trading Yearly Divisions

  1. First Half (January-June)
    • High volatility, directionally driven (bullish).
  2. Mid Year (May-October)
    • Low magnitude, less directional; focus on range-bound consolidation.
    • Use less leverage, less active trading.
  3. Last Quarter (October-December)
    • Typically bullish due to holidays and year-end spending.

Monthly Seasonal Influences (Dow Jones Industrial)

  • January: Bearish
  • February: Bullish
  • March: Consolidation
  • April: Bullish
  • May: Bearish
  • June: Consolidation, ends bearish
  • July: Bullish
  • August: Consolidation
  • September: Split, first half bullish, second half bearish
  • October: Seasonal low, potential for aggressive rally higher
  • November: Bullish
  • December: Bullish (Santa Claus rally)

Importance of Seasonal Tendencies

  • Based on 20-year, 15-year, and 5-year averages.
  • Offers insight into potential market trends.
  • Consistency in data suggests reliable seasonal patterns.

Trading Strategies

  • High Probability Months: February, April, November, December.
  • Low Probability Months: March, June, August.
  • Bearish Opportunities: May, September, January.
  • Use past data and seasonal tendencies to time market entries and exits.

Practical Application

  • Look for divergences in indices (e.g., NASDAQ vs S&P 500 and Dow).
  • Smart money accumulation strategies.
  • Case studies demonstrate practical seasonal trading opportunities.

Conclusion

  • Trading stocks requires understanding of market cycles and seasonal patterns.
  • Self-directed trading can outperform traditional methods.
  • Future lessons will expand on stock trading strategies.

Final Thoughts

  • The importance of personal management of investments.
  • Market anomalies and unpredictable behavior.
  • Encouragement to utilize provided strategies and insights for better market performance.

Next Steps:

  • Engage with the upcoming lessons.
  • Explore bar chart analysis and contract codes as further study tools.