The days surrounding major year-end holidays such as Thanksgiving, Christmas and New Year’s Day typically deliver relatively low trading volume in the stock market. Traders tend to shift their attention away from the market and toward holiday travel, shopping and events.
However, for those traders that have the time and desire to trade stocks throughout the holiday season, there are several seasonal trading patterns that have historically provided opportunities for traders.
The pre-holiday effect is the idea that stocks perform relatively well on the last day ahead of a market holiday. The NYSE is closed on Thanksgiving Day, Christmas Day and New Year’s Day. Historically, the stock market tends to rise on the day prior to the market closure.
The underlying cause of this phenomenon is supposedly the idea that traders tend to buy on days that they are feeling good and sell on days they are feeling bad. Is there any better feeling that knowing a day off or a three-day weekend is coming?
According to Quantpedia, “Research shows that market return during pre-holiday days is often more than 10 times larger than the average return during normal trading days.”
While many traders will be focused on turkey and dressing this Thanksgiving, seasonal stock traders will be…
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