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The Alchemist (11/07/2007)
By Al Thomas

THE GOOD SIX MONTHS AND THE BAD SIX MONTHS

There is a seasonal trading method known as "The Good Six Months and the Bad Six Months. It works - most of the time. There is no seasonal trading method that is 100% accurate. Most of them are about 80% correct, but that is enough to make an investor rich with certain caveats.

First caveat: the investor must take the position on any particular method whether he thinks the entry time is right or not. If a market is headed down on a particular date and the signal calls for a buy it must be bought.

Second caveat which most of the systems do not advise is not to lose too much money if that is the year it does not work. This is done with a simple stop loss order or change in the MACD or stochastic. SY Harding who uses this method has his entry and exit activated by a crossover in the MACD indicator, not just a date.

If you wish to become more familiar with technical analysis go to Google or your favorite search engine and type in "technical analysis indicators" and you will be buried with information.

There are hundreds of them, but the most frequently used are Moving Averages, RSI (Relative Strength Indicator), MACD (Moving Average Convergence Divergence) and Stochastics. Don't let those strange names scare. There is not a single successful professional investor that does not use them.

When I was a floor trader and broker I had a client in the copper business who bought a subscription to a well known seasonal timing letter. He wanted to put on a large copper position telling me that the "guru" told him copper goes up 8 times out of 9 at this time of year. I cautioned him to scale into the position which he did under protest. He had no stops and continued to buy as the market went lower and lower until his money was all gone. It was the 9th year.

When you look at your business, whether you own it or work for someone, you know there are nuances that affect the success or failure. The same is with stock, bond or commodity trading. To be really successful the investor must work at it.

History shows the market is now entering the most profitable 6 months in which to own stocks: November to April. It is eight times more profitable to own one of the major indexes during the "good" 6 months than to own stock during the "bad" 6 months. During the "bad" period it is prudent to have cash in a money market.

Before blindly following an entry by date an investor should research to ascertain the best timing buy (and sell). Many have contingency signals. The old saying, "I'd rather be lucky than smart" does not apply to stock trading. You must do the homework if you want to become rich.

Al Thomas' best selling book, "If It Doesn't Go Up, Don't Buy It!"has helped thousands of people make money and keep their profitswith his simple 2-step method. Read the first chapter and receive his market letter at www.mutualfundmagic.com to discover why he's the man that Wall Street does not want you to know.

Copyright 2007 All rights reserved.

 

 

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