Definition of a Seasonal Stock Market

Investors use statistical data to determine the trends present in the stock market trading. The statistical data analysis has revealed that the stock market behaves in a particular upward or downward trend during different seasons. This has given rise to the theory of "seasonal stock market trend." The trends in the market refer to the general upward or downward momentum of the market. Investors use these trends to their advantage when making their investing decisions.

Significance

The seasonal stock market refers to the set of well-documented seasonal trends that the stock market has exhibited through history. Though these trends are not definitive, they give the investors an inference about the general direction the market may take based on the historical data.

Features

Some of the seasonal trends include statistical observations such as: summer months have better probability of positive trade, Mondays have low trading historically, January and October statistics have been historically positive whereas September and December have been months with low trade.

Function

The observations are meant to help investors use it to their advantage. The low trading months and days are considered better for buying stock and the positive trading months and days are better for selling stock. Therefore, having an inkling if the month was historically positive for trading can help investors use it to their advantage.

Warning

Though the seasonal stock market trends have been written about and discussed widely, the theory itself is a subject of much debate in the investing world. Seeking relevant advice from experts in the field is always the recommended course of action to take before investing any money in the market.

Warning

One of the reasons why the seasonal theories are highly contested is because in the light of major events the trends vanish. Therefore, trading decisions should not rely only on statistical observations.

Resources

• Seasonal Stock Market Trends