Experts at the London Stock Exchange believe that a huge proportion of trading is now done using algorithms. In some markets, it’s estimated to be around 80 percent of trading volumes, which means that it’s become a huge part of financial trading. Software that can recognise patterns and make the appropriate trades is now in very high demand, with many people willing to pay large sums of money for the technology. This is prevalent across the board, with stocks, currency and commodities all involved. The question then, is how effective is this method of trading, and is it better than manual chart observation?
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Good statistics is the key to calendar effects
Many investments show calendar effects like as Santa Claus Rally, January effect, Halloween indicator, October effect. Some of them may be just a coincidences but a lot of them are statistically significant.
Having checked monthly trends of many cases we must say that these calendar effects are not equally strong in the case of each investment. Some of them are very strong (check out the chart below), others may be weaker or completely missing. One can also discover important seasonal tendencies other than the effects mentioned above, regarless on talking about stock market, commodities, forex pairs, indices or mutual funds / ETFs.
Since these effects vary with investments it is better to analyze their effect for each investment separately. This analysis can be made e.g.: per month in a chart like below:
Almost everybody is asking on the Wall Street in each December if there will be a Santa Claus Rally.
Let’s see the chances of having a Santa Claus Rally this year, based on statistics!
A little bit about statistics…
One can prepare statistics for Santa Claus Rally in many ways. As I see, people do not even agree on when it begins or when it ends.
I wanted to know how often prices rise between the beginning and the end of December and how much the average increase is. You can see an example below.
People often ask in each December if Santa Claus Rally exists at all? Besides some disappointed people tell that there is no Santa Claus Rally at all.
Let’s see a some statistics about it instead of rumors!
Lot’s of rumors are told about Santa Claus Rally. Significantly less exact charts can be seen about it, though a good chart could make clear a lot of things.
What does a Santa Claus Rally chart have to be like?
Having read a lot of articles about Santa Claus Rally I realized that people do not really agree on when it begins and when it ends. Somebody says it is just the beginning of the January effect, others tell it may begin in November or it is just the couple days at the end of the year.
Creating the monthly statistics chart of a stock, a mutual fund or a currency pair can be used to highlight the effect of “Santa Claus Rally“.
Preparing it is not a rocket science today. With Chartoasis Sesame it takes only 3 simple steps!