Ever wonder if there was a consistent edge trading on certain days of the month and shorting the market on other days? There are many ways to gain a consistent edge, some more permanent than others. Lawrence Chan has done some backtesting on trading a few days a month that beats the market on a fairly consistent basis. He applies the following rules for bullish trades:
1. Go long on first trading day between 10th to 13th of a month.
2. Go long on first trading day between 26th to 29th of a month.
3. Exit position on the 6th trading day at open.
In short, going long twice every month and exit all trades after holding 5 trading days.
And on the bear side:
1. Go short on the 13th trading day every month except March, April, November and December.
2. Hold the position for 5 days and exit on the 6th trading day at open.
The reason this works, according to Chan, has to do with option expiration week bias for the mid-month long trade, post option expiration bias for the short trade, and month end money flow bias for the end of month long trade.
This is Lawrence Chan so when you see him you'll know you are in the right place...
Not to be confused with that arrow chuckin' Jennifer Lawrence...
Obviously a cheap attempt to get the googlebot web crawler to pull a few Jennifer Lawrence fans into the jungle.
Go over to Seeking Alpha for more explanation. You can also see the awesome tools and brilliant market insight that Lawrence Chan has over at Tickquest or the NeoTicker blog.
Just so you know, the only tool I use is that stick to poke ants with.
