Dow Strategy For Season

NIBOT1

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I'm new to trading and have read that a strategy for trading the Dow futures that has a high probability for success is to go long on the Dow prior to Thanksgiving and hold for 6 weeks. The theory is people/ the market will be upbeat because of Christmas and the New Year.

Is anybody doing this, this year?
Any thoughts on whether this strategy is likely to succeed in the current climate?
 
NIBOT1 said:
I'm new to trading and have read that a strategy for trading the Dow futures that has a high probability for success is to go long on the Dow prior to Thanksgiving and hold for 6 weeks. The theory is people/ the market will be upbeat because of Christmas and the New Year.

Any thoughts on whether this strategy is likely to succeed in the current climate?


I doubt there are many 'traders' who would adopt such an approach - and my guess is that few who consider themselves traders would hold any position for 6 weeks as matter of course anyway.

Seasonality is a factor affecting sentiment and therefore price action but its just one of many - and probably as (un)reliable as other maxims like 'sell in May and go away'. It provides context, like loads of changing fundamental factors and breaking news etc - but a workable stand-alone strategy it is not.

Your post prompted me to have a look at the last 9 years DJIA data I have for December:
7 of 9 were up months; largest 2003 - 6.4%; smallest 1996 - .09%
2 of 9 were down months, largest 2002 - (-6.73%) smallest 1997 (-1.33%)
Average gain over all 9 - 1% BUT

The average difference between high and low for each of the months is 6.05% - so you would have needed deep pockets and a steady nerve to stick with it and finance the margin calls on most such trades in the past 9 years. In 2002 the H-L swing was 9.5% and you'd have been wiped out by the O-C change anyway!

IMHO - this year is a pretty problematical call - general sentiment is at an all time high but rapidly deteriorating fundamentals will affact taht sentiment sooner or later. Those of a contrarian nature will probably take present sentiment measures to be indicators of an immanent reversal. Others will continue to climb that 'wall of worry' :(

Better to just trade the action as it unfolds.
 
Thanks for taking time to reply - your comments were really and helpful informative . For the moment I'll guess I 'll just stick to taking positions for short periods and continuing to improve my trading plan particulary my timing on entries and exits.
 
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