not all first trading days of the month are bullish

 first trading days of the month tweaks you may want to know

happy first day of the month

image from : http://happyfirstblog.com/2012/happy-june-1st-ecard/

As is one of the greatest regularities known to seasonal players is the tendency for the market to rise on the first day of the month, but not all first trading day returns are equal , here the tweaks that you want to know

Scenario 1 :  $SPY First Trading Day of the Month trading odds since 2000 

assuming one goes long at close on one day before the first trading day of the month , below the odds of winning for $SPY longs

  • Winners : 101
  • Losers : 59
  • % Winners : 63%
  • Average Change % : 0.24
  • Median Change % : 0.41
  • Maximum Gain % : 4.81
  • Maximum Loss % : -8.86
  • Average Gain %if Winner : 1.06
  • Average Loss % if Loser : -1.15
  • Average Gain % / Average Loss % : 0.92

not bad for a one day holding period , an average gain of 0.24%

Scenario 2:  $SPY First Trading Day of the Month when $SPY is above 200 DMA 

on one trading day before the  first trading day of the month ( i.e last trading day of the previous month ) if $SPY is above 200 DMA , here are the trading odds for $SPY longs

  • Winners : 73
  • Losers : 32
  • % Winners : 70%
  • Average Change % : 0.39
  • Median Change % : 0.50
  • Maximum Gain % : 2.56
  • Maximum Loss % : -2.52
  • Average Gain %if Winner : 0.89
  • Average Loss % if Loser : -0.74
  • Average Gain % / Average Loss % : 1.20

that’s your winning odds increase by about 7% from 63% to 70% and , the average profit per trade increases from 0.24 to 0.39

Scenario 2a:  $SPY First Trading Day of the Month when $SPY is below 200 DMA 

  • Winners : 28
  • Losers : 27
  • % Winners : 51%
  • Average Change % : -0.04
  • Median Change % : 0.06
  • Maximum Gain % : 4.81
  • Maximum Loss % : -8.86
  • Average Gain %if Winner : 1.49
  • Average Loss % if Loser : -1.63
  • Average Gain % / Average Loss % : 0.92

that’s negative average returns of -0.04% during bear markets ( defined as , the close is below 200 DMA)

similarly as an exercise you might want to use 50 DMA , but 20 DMA is bit useless in this regard to filter or optimize the first trading of the month trading strategy.

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