Investing & Trading

Halloween Strategy

By Samantha Baltodano


TL;DR:

The Halloween strategy is a seasonal investment strategy that involves selling stocks in May and buying them back in October. Historical trends show that the stock market performs better during the winter months, making it an attractive investment option. 


To use the strategy, investors should buy stocks in October, hold them during the winter months, and sell them in May. 


However, past performance is not a guarantee of future success, so investors should always do their research before making any investment decisions.



What Is The Halloween Strategy?

The Halloween strategy is a well-known, seasonal investment strategy that’s been gaining popularity in recent years. 


It’s based on the principle of "sell in May and go away," which means that investors should sell their stocks in May and buy them back in October. 


This is because the historical trends in the stock market perform better during the winter months than during the summer months. The approach is based on the belief that during the summer months, the market tends to be more volatile and, because of this, the returns are lower.


Backtesting of this principle has shown successful results, making it an attractive investment option for many.



How to Use the Halloween Strategy

To use the Halloween strategy, traders must follow the following steps:


Step 1: Identify the right time to buy stocks


Traders should buy stocks in October, preferably during the first few days of the month. The reason for this is that the first bar in October should have a price greater than its Simple Moving Average (SMA). This is the Long Entry signal for the strategy.


Step 2: Hold stocks during the winter months


Once investors have bought their stocks, they should hold them during the winter months, which are traditionally known to be more favorable for the stock market. This period typically starts in November and ends in April.


Step 3: Sell stocks in May


In May, investors should sell their stocks, preferably during the first few days of the month. This is because the first bar in May is the Long Exit signal for the strategy.


Step 4: Repeat the process


After selling their stocks in May, investors should wait until October to buy again and repeat the process.


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The Halloween strategy is a popular investment approach that has shown successful results in the past. 


By following the simple steps outlined above, investors can use this strategy to capitalize on the seasonal trends of the stock market. 


However, it's important to note that past performance does not guarantee future success, and investors should always do their due diligence before making any investment decisions.



Summary

  • The Halloween strategy is a seasonal investment approach based on the principle of "sell in May and go away."
  • It suggests that investors should sell stocks in May and buy them back in October, as historical trends show that the stock market performs better during the winter months than during the summer months.
  • Backtesting has shown successful results, making it an attractive investment option for many.
  • To use the Halloween strategy, investors must buy stocks in October with a price greater than its Simple Moving Average, hold them during the winter months, and sell them in May.


Halloween is just one of many strategies that Archaide automates. For a full list of strategies and studies available click here.


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