Stock market trading can be challenging. So people are always looking for a short-cut, an easy strategy to invest and trade stocks.

One of the most well-know of these “easy” strategies is the Halloween Cycle.

Because this stock market trading strategy is so well-known, it is worth our investigation. After all, sometimes stock market techniques work for no other reason than a lot of people are trading them. They become self-fulfilling prophecies.

This strategy for trading stocks is about as easy as they come:

Buy the stock market around Halloween (late October, early November) … and then in May, go away.

That’s all there is to it (though surely others have added their own additional rules as people always will).

If you look back enough years, there has been some historic evidence that this may not be a bad strategy. However we must keep in mind several factors:

  1. Past performance does not guarantee future results (how many times have
    you heard that?!).
  2. Market dynamics change from time to time.

So the question stands:

Is this a good, simple, easy stock market trading strategy you can use without knowing anything else about trading or investing?

Here’s a video where we investigate that question with a few examples from recent history.

Thanks for participating in this discussion and please leave your comments below.

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This entry was posted on Thursday, November 3rd, 2011 at 1:29 pm and is filed under Current Market Analysis, Cycles, Investing, Stock Market Trading. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

19 Responses to “Stock Market Trading the Halloween Cycle”

  1. Ted Says:

    November 3rd, 2011 at 5:48 pm

    Good night Dr. Barry,

    Interesting, 1st time I am hearing about this, probably because I am not a trader. However I would not want to trade this way, equivalent to tossing a coin I think. Technical trading with some fundamentals is the way to go.

  2. peterg Says:

    November 3rd, 2011 at 8:35 pm

    Yep this is an old seasonal agricultural cycle, harvest coming to cities, capital cycling to rural then back to manufactures for equipment and supplies. Now a days it has more to due with Wall St. marking up Asset prices to ensure fat holiday and year end bonuses. However this year the buying op. was the start of Oct.; 15% in less than 2 weeks. All we need is a bad non farm # and its off to the QE3 races and S&P 1300.

  3. DrDave Says:

    November 4th, 2011 at 5:17 am

    I don’t have charts with stock realted issues, but I have EURUSD currency pair. Addition of just one of your energy indicators can turn this strategy from ho-hum to profitable, at least with EURUSD pair. Using a monthly chart that goes back through 1999 with indicator stochastic8,3,3, check on Nov 1 the position of the cycle indicator. If it is at a cycle bottom and turned up, buy and then exit when it turns down. If on Nov1 it is not at a cycle bottom, do not enter but wait until the next cycle bottom is in. Do the opposite if at a cycle top on Nov1. Even in a murky period when the indicator stays in the overbought area for several years, using the small cycle bottoms ending as buying signals on Nov1 still tends to be profitable.

  4. Harry Says:

    November 5th, 2011 at 5:51 am

    Hello `Barry,

    It is clear that using just one indicator is generally a bad idea! Just adding a second indicator, as DrDave says, makes a world of difference. But it is equally clear that there is no substitute for knowing how to trade.

    Kind regards

    Harry

  5. Paul Says:

    November 12th, 2011 at 4:46 pm

    If the Witch’s Brew lines up with your own plan, take the trade and manage the position. So far so good with one exit off the table. Only God knows if the market will continue for 5 or 7 more waves. I wish for everyone more Profitable trades and a safe Holiday Season!

  6. Bryan Says:

    November 12th, 2011 at 8:41 pm

    Interesting clip…Looking over the time frames again, start with a “buy” in July/Aug area and sell by March…missed 3x out of 9

  7. Roger Says:

    November 13th, 2011 at 4:24 pm

    This is very similar to the maxim here in the UK:
    ‘Sell in May and go away, don’t come back until St. Leger’s Day,’

    (The St Leger is a horse race run on the second Saturday in September)

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    May 20th, 2012 at 1:56 pm

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