Best Day of the Week to Trade the Stock Market
Everyone has their own theories and evidence to support their decision to place market orders at particular times when making trades in the stock market. There is certainly a psychological influence on how people react to certain days of the week, and this may translate to an individual’s thoughts and work habits being affected as a result. I am not an expert in psychology, nor will I pretend to be. The expectation, however, is that individuals have a clearer focus and optimism of the week ahead when it comes to Monday through Wednesday, and gradually the focus shifts to the weekend as we progress through Thursday and Friday. So, does the stock market react differently to various days of the week?
How has the market reacted in the past to various weekdays?
Having looked at data for the past 20 years, there is a distinguishable tendency for gains to occur on particular days of the week over others. Now mind you, the results certainly are not statistically significant, favoring one day over another, but the probability of achieving gains on a particular day of the week varies marginally from day to day. Let’s take a look at each day individually.
Monday
Monday has shown results that indicate this is the day with the greatest probability of reaping a gain. Over the past 20 years, 54.38% of Monday’s have gained on the day, averaging a return of 0.05%.
Tuesday
The gains continue into Tuesday with an average return of 0.05%. Although the average return remains constant from Monday to Tuesday, the percent of gaining sessions does not with only 50.63% of sessions advancing.
Wednesday
Moving on into Wednesday brings a rebound in the percentage of days that produce gains. Wednesday shows results that are on par with that of Monday with 54.20% of sessions advancing. However, we do start to see a drop-off in the average gain to be garnered at 0.04%, having fallen 1 basis point from the two days prior.
Thursday
Moving on further in the week to Thursday and we notice a dip from the gains that mid-week brought. History has shown that the number of sessions that gain on Thursday’s amounts to 52.17%. Although this seems favorable, the average return is certainly not as beneficial. The average return for this day was only 0.01%, a 3 basis point drop in just one day based on averages.
Friday
And now that we’re at the end of the week we can begin to relax and witness 53.52% of days finishing up. But before you run out the door be sure to observe the average return. It’s even (0.00%), having not produced an average gain or loss on the day.
Bottom Line
When looking at particular days of the week you are not going to see results that significantly deviate from the 50% level, otherwise everyone would be trading on that particular day. What we are looking for are tendencies, however, that show patterns, as marginal as they may be, of how people react based on historical averages. The gains are prevalent in the first half of the week from Monday to Wednesday, producing average returns of 0.04% to 0.05%, and taper off towards the weekend on Thursday and Friday with averages around even on the day. But of course that is not the whole story with the best chances of receiving gains coming on Monday, Wednesday and Friday, in that order, with around 53% to 54% of sessions advancing. These results are definitely open to interpretation, and you may need a psychologist to assist you with this regard, but clearly Monday has shown tendencies of being the best day to receive gains in the market, with Wednesday following closely behind. You may attribute this to any number of things, such as investors reaction to news, work habits, or even “mental alertnessâ€, but at least we finally have a reason to look forward to Monday!
Disclaimer: Comments and opinions offered in this report are for information only. They should not be considered as advice to purchase or to sell mentioned securities. Data offered in this report is believed to be accurate, but is not guaranteed.
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