Do Stocks Rise Or Drop Before A 3-day Weekend? | Holiday Trading
The US stock market has a few 3-day weekends (Long weekends) during a calendar year. Is that a buying opportunity? Do stocks drop or rise before a 3-day weekend?
In this article, we backtest the performance of a 3-day weekend.Trading Rules
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We backtest S&P 500 since 1960. Some of the holidays are recent, but we see a clear pattern:
The average gain per trade is 0.13%! The win rate is 58%. This is significantly better than any random day (3 times better). That said, it performed the best before 1985
Those who have purchased the Amibroker code can download the code on this link.
Disclaimer
Quantified Strategies (SIA Lofjord) is not an investment advisor. The content and information provided are educational and should not be treated as financial advisory services or investment advice. Trading and investment in securities involve substantial risk of loss and is not recommended for anyone that is not a trained trader or investor – it shall be conducted at your own risk. It is recommended that you never risk more than you are willing to lose. Leverage can lead to substantial losses. Any use of leverage, margin, or shorting is at your discretion. Quantified Strategies (SIA Lofjord) is not responsible for any losses that occur as a result of its content and information. Always use a demo account for many months before you try live trading. Trading requires hard and systematic work – there is no easy money.
Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Commissions and slippage are not included. Also, Since the trades have not been executed, the results may have under or overcompensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs, in general, are also subject to the fact that they are designed with the benefit of hindsight. No representations are made that any account will or is likely to achieve profit or losses similar to those shown.
FAQ:
Are there specific trading patterns associated with 3-day weekends in the US stock market?
Historical data analysis reveals an intriguing pattern in the behavior of stocks leading up to 3-day weekends in the United States. It appears that investors, consciously or subconsciously, exhibit certain tendencies in their trading activities before these extended breaks. The phenomenon is characterized by a discernible upward movement in stock prices in the days leading to the extended weekends.
What is the reason of such trend?
One plausible explanation for this observed trend is the influence of market sentiment and trader behavior as they approach a prolonged hiatus. Investors might be inclined to adjust their portfolios or take specific positions to mitigate potential risks associated with extended market closures. This adjustment could be driven by a desire to avoid exposure to unforeseen events or market uncertainties that could unfold during the extended break.
Which holidays are considered as 3-day weekends, impacting stock market performance?
Several holidays are connected to 3-day weekends, including Martin Luther King Day, George Washington Day, Easter (Good Friday), Memorial Day, Labour Day, Independence Day (sometimes), and Christmas Day (sometimes). The article provides insights into the trading rules associated with these holidays.