Aug 09
17
Retired Institutional Trader Reveals Stock Trading Secret That Does NOT Use A Stock Screener
What I’m about to show you has nothing to do with a stock screener. This one little secret can totally improve your trading accuracy in any market.
A retired institutional investor told me this secret years ago. The amazing thing is that this simple secret still works today. My accuracy now hovers around 80% thanks to this secret. I use it every week and I’m going to show you how you can use it every week as well.
Have you ever heard the term two minds think better than one? Well… I have actually redefined that term: 5 Professional Institutional Minds Can Produce What 89,697,618 Unprofessional Minds Can’t
That’s right. There are an estimated 90 million Americans who are invested in the stock market and not one of them figured out the secret I’m about to tell you. Why? Because they don’t have the same tools that the Institutional traders have.
What I’m about to show you is called behind closed doors the “Weekend Effect”. The Weekend Effect is basically this: trading activity is less on Friday and Monday with Monday having negative returns.
Way back in 1988, a genius called Miller proved that returns are usually negative on any given Monday. Miller said that this anomaly might just be the result of small investor trading activity. In another study done two years later, Lakonishok and Maberly (1990) and Abraham and Ikenberry (1994) used odd-lot trading as a measurement for what smaller, non-institutional investors were doing and found evidence that supported the Miller hypothesis.
Trading activity is lower on Friday for large-size trades which is why volume tends to be lower on Fridays. Institutional traders often zero out their trades on Thursday or the latest Friday. Institutional traders do not like to go into the weekend news cycle with open positions.
Monday has lower trading volume than any other day of the week. Small, individual traders have more sell orders on Monday than any other day of the week. If small-size trades show individual investor activity and large-size trades show institutional investors then both types of investors play a key role in Monday being a negative return day. The individual traders contribute through their trading while institutional traders contribute through their withdrawal of liquidity on the proceeding Thursday or Friday. Institutional traders contribute by their absence on Friday and Monday, which reduces liquidity.
Your odds of making money on your trades are better on Tuesday through Thursday. You will discover your trading accuracy greatly improves when you go long a stock on Tuesday and sell on Thursday.
Because markets have a tendency to dip on early Monday trading, don’t get stopped out of your trade too quickly based on Monday trading activity. Monday’s have the highest occurrence of head fakes to the downside.
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