theirstaxblog.com

Did you ever forget your girlfriend's birthday? If you have ever committed that mistake, you know the consequences. Calendar dates are very important in our lives. We plan vacations during the summers and winters. So, you are always looking at the calendar when planning our future. Some days and months in our lives are very important. But you will be surprised to know this that markets also tend to follow the calendar. Some days and some months in the year are also important for the market. Companies religiously publish their quaterly earning reports and forecast the earnings for the next quater. Companies close their books at the end of the year for tax purposes. At the end of the year, we all file our taxes. As investors we evaluate our returns on quarterly basis. Get these three stock trading reports, The Best Investing Lessons, The Ultimate Investing Test and A Hedge Fund Manager's Best Advice FREE. Turn $200 into $100K in just five months with this Penny Stock Trading System. Learn forex trading the Recession Proof Business of 21st Century! 

There are many interesting patters that we can discover by following the calendar. For example, retail sales tend to go up during the holiday season. Demand for commodities is linked with their growing seasons. The demand for fuel increases in winters. You need to keep these three effects known as the Calendar Effect while trading stocks. These effects are; January Effect, The Monday Effect and The October Effect.

The January Effect: For the last many decades stock market tends to go up in the early part of January. The most obvious explanation is the most of the investors tend to sell at the end of December for tax purposes and buy back those securities at the beginning of January.

It may also be due to the fact that at the beginning of a New Year, people are flush with excitement and hope for the New Year that just started. They want the market to go up, so they go and buy securities and put their money to work for the rest of the year.

If the stocks go up in January, you could take a jump by buying in December. That would make stock prices go up in December and if they go up in December, you could buy in November. This is precisely what people started to do and now you will see a very weak January Effect taking place.

In efficient markets, any publicly available information is immediately impounded into the stock prices. So, January Effect is something that investors are familiar with. Investors want to trade the January Effect to profit from price anamolies in the the market. So when everyone trades the January Effect, it becomes weak or disappears altogether. But you need to understand the psychology behind the January Effect as some years, it is weak and other years it can be strong.

Then there is something known as the Monday Effect. When the weekend ends our mood goes soar. Heck, another week has started. So most of us tend to be in bad mood on Mondays. Most of us are not happy going back to work on Monday. So this bad mood starts getting reflected in the market. During the weekend, we also tend to analyze the bad news during the past week. So the first thing we do is sell the stocks that we thing are not good. So stay away from the market on Mondays.

The two famous stock market crashes of 1929 and 1987 happened in October. So many traders have started thinking the October tends to be a bad month. Nobody knows why those crashes came in October but still people talk of the October Effect in the stock market. Anyway the tech bubble crash in the NASDAQ Market came in March 2000, so you never know October is bad or March is bad. In 2008, stock markets crashed again in March. So people will start talking of the March Effect too!

Tags: calendar effect in stocks, stock investing, stock trading, stocks, stocks january effect, stocks monday effect, stocks october effect