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Best Time(s) of Day, Week & Month to Trade Stocks | Investopedia

Here is our special offer for new users: The stock market is subject to a seasonal effect in that at certain times of the year, month or even week, share prices can rise or fall. This can be because there are fewer traders active in the market for example over summer holidays or more traders in the market for example as companies' and investors' tax years come to an end.

This will also affect how volatile share prices are. It can also be because traders have simply come to expect rises or dips at these times and the expectation becomes 'self-fulfilling'.

Many traders now rely on technical analysis — using charts to identify historical patterns in the price of an asset — so tend to sell or buy at the same time as a result. It is important to remember, however, that seasonal stock trends do not apply all the time and should only be one factor in your trading strategy. Stock markets tend to perform well at the beginning of the year as this is when many investors have fresh capital to place into the market. They are therefore more likely to buy shares and push up prices.

Historically, shares in 'small cap' companies benefit most from this effect. For the same reason, however, January is also often a volatile month for share prices with large, erratic price moves as trader activity surges. The month is also closely watched because many traders believe that how stock markets perform in January will foretell their performance for the rest of the year.

A popular stock market saying is that 'As goes January, so goes the year.

Share prices tend to fall over the summer months as fund managers and big institutional traders go on holiday. They often sell some of their shares and other assets before they go away. This is so that their investments are at less risk of taking a big hit if markets fall suddenly while they are not at their trading screens to respond quickly. This has led to one of the most famous stock market sayings: Because trading volumes and liquidity are lower over the summer, it is easier for one big trade to push prices around.

Therefore share prices can be more volatile over this time and trading can be higher risk. The end of a financial quarter or year can also see stock markets become quite volatile, with the share price of some companies reversing direction.

This is because institutional and retail investors often 'rebalance' their portfolios at these times, looking to see which of their investments have performed well. If the share price of a company they have invested in has experienced a particularly strong uplift over the period, they may decide to take profit on those trades and sell the shares.

This can push down the company's share price.

If the share price of a company they have invested in has experienced a particularly sharp fall, they may decide that the company is now undervalued and decide to buy its shares while prices are cheap. This can push up the company's share price. Towards the end of the tax year, many investors also sell stocks that have declined in value throughout the year.

This is so that they can claim capital losses against their tax bill. Share prices often rally ahead of long weekends and three-day holidays, such as Thanksgiving and Independence Day in the US. There is also a more fundamental basis, however, as consumers tend to spend more over holidays, especially ones like Christmas.

This can push up the share prices of retailers in particular. Share prices are also believed to behave in a certain way depending on which day of the week or month it is.

The so-called Monday effect refers to the tendency of share prices to experience their biggest fall of the week. There are a number of theories about why this happens. Some have attributed it to a large volume of bad news being released over the weekend.

Seasonal Patterns In Stock Markets: Years Of Evidence - SPDR Dow Jones Industrial Average ETF (NYSEARCA:DIA) | Seeking Alpha

Others say it is simply that investors' spirits are low as they return to work. Share prices also often perform better towards the very end and very beginning of a month, dipping in the middle. Tradimo helps people to actively take control of their financial future by teaching them how to trade, invest and manage their personal finance. Trading in financial instruments carries a high level of risk to your capital with the possibility of losing more than your initial investment.

Seasonal Effects in Equity Markets

Trading in financial instruments may not be suitable for all investors, and is only intended for people over Please ensure that you are fully aware of the risks involved and, if necessary, seek independent financial advice. The educational content on Tradimo is presented for educational purposes only and does not constitute financial advice.

Courses Premium Community Brokers About Log in. Share prices often follow a seasonal trend at the same time of year, month or week as the number of traders in the market grows and shrinks and as technical analysis makes it more likely that historical patterns are repeated.

Seasonal trends do not always apply and should only be one factor in your trading strategy. Many big traders go on holiday for the summer and sell out of big or risky shareholdings first, pushing their price down.

Share prices often rally ahead of long weekends and three-day holidays. They also tend to experience their biggest falls of the week on a Monday and their biggest rises on a Friday. Build a stock portfolio. Conservative portfolio - the plan. Refine your list of stocks. Long-term investing using ETFs. Fundamental analysis of public companies. Fundamental analysis of stocks.

Company reports - the essentials. The limitations of financial ratios. External factors affecting stock prices. The impact of the outside world. Market hype and IPOs. Enrol into this course now to save your progress, test your knowledge and get uninterrupted, full access. Related Courses Trade for Profit: How to Find and Trade Stocks Successfully. Youtube LinkedIn Twitter Facebook.