Market Timing via Monthly and Holiday Patterns

A Free Lunch in the Stock Market

The stock market displays a medley of patterns that can serve as the crux of a timing strategy. A showcase lies in the oft-seen surge of the market around the turn of the month as well as the run-up to a holiday.

As with all things, the timing strategy does have its shortcomings. An example involves the need to dart in and out of the market more than a dozen times a year in order to take full advantage of the patterns.

Another drawback stems from the higher rate of income tax on short-term profits as opposed to long-run gains in the stock market. The precise impact will of course depend on the specific circumstances such as the trader’s country of residence.

Despite the hassles, though, trading with the calendar can produce a higher payoff at less risk than the humdrum policy of buying stocks and holding them indefinitely. For this reason, a timing strategy based on monthly cycles and market holidays represents a free lunch on Wall Street.

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