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ICT Mentorship Core Content - Month 10 - Stock Trading - Seasonals & Monthly Swings
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ICT Mentorship Core Content - Month 10 - Stock Trading - Seasonals & Monthly Swings

Understanding Seasonal Tendencies in Stock Trading

Introduction to ICT Stock Trading

  • The lesson focuses on stock trading, specifically seasonal tendencies and monthly swings, as part of the ICT mentorship content for June 2017.

Dow Jones Industrial Average Insights

  • The discussion centers around the Dow Jones Industrial Average (DJIA), highlighting its seasonal tendencies based on research by Steve Moore.
  • While other indices like NASDAQ and S&P 500 are mentioned, the DJIA is chosen for its simplicity and representation of major North American companies.

Seasonal Trends Overview

  • The speaker believes that DJIA's seasonal trends closely mirror those of the S&P 500, which is considered a more accurate market depiction.
  • Emphasis is placed on using these seasonal tendencies to filter strengths or weaknesses in averages to inform trading decisions.

Annual Trading Phases

  • Three divisions in stock trading throughout the year are introduced: high magnitude periods, low magnitude periods, and their implications for traders.
  • The first half of the year typically experiences high volatility with a bullish trend expected.

Last Quarter Dynamics

  • The last quarter of the year is also generally bullish due to holiday spending patterns influencing market activity.
  • A contrast between early-year volatility and late-year energy levels is noted.

Low Magnitude Period Explained

  • From May to October, a low magnitude period occurs where markets show less directional movement; traders should be cautious during this time.
  • Despite potential short-term opportunities, aggressive trading strategies are discouraged during summer months due to cyclical spending behaviors.

Monthly Breakdown of Seasonal Influences

January to December Trends

  • Each month has distinct seasonal influences:
  • January: Typically bearish.
  • February: Generally bullish.
  • March: Seen as a consolidation month.
  • April: Usually bullish.
  • May: Typically bearish with June ending on a bearish note.
  • July: Bullish leading into mid-year highs.
  • August: Generally consolidation.
  • September: Split between bullish and bearish halves.
  • October: Often marks lows before an upward trend begins.
  • November: Typically bullish.
  • December: Known for Santa Claus rally effects.

Data Analysis Support

  • Insights are supported by historical data averages over different time frames (20-year, 15-year, and five-year), reinforcing confidence in identified trends.

Understanding Seasonal Tendencies in Stock Trading

The Concept of Consistency in Trading

  • Consistency is not about achieving perfection or eliminating risk; it refers to recognizing historical probabilities and patterns in trading.
  • Analyzing seasonal tendencies can provide insights into short-term and swing trading strategies, particularly for stocks and the S&P index.

Identifying Bullish and Bearish Months

  • Certain months, such as March, June, and August, are typically less favorable for high-probability trading opportunities.
  • While there may be exceptions to seasonal trends (e.g., specific years where August performs well), these anomalies do not negate the overall patterns observed historically.

Implications of Seasonal Trends on Trading Strategies

  • Bullish months indicate strong buying opportunities; traders should focus on swing trading long positions during these times.
  • Conversely, bearish months like May and late September often signal aggressive selling periods even within a generally bullish market context.

Case Studies: Monthly Analysis

February's Performance

  • February is identified as a bullish month. Observations show that major stock averages exhibit signs of accumulation by smart money.
  • Notable price movements include NASDAQ making equal lows while S&P and Dow made higher lows, indicating strength in the market.

March's Market Behavior

  • March tends to be a consolidation period with fluctuations. The second week often shows bearish tendencies before rallying towards the month's end.
  • Divergences between indices highlight potential sell-offs; NASDAQ showed resilience by making higher lows compared to other indices.

April's Accumulation Signals

Market Trends and Seasonal Analysis

Overview of Market Movements

  • The Dow Jones index has shown a decline while the S&P 500 has not, indicating a divergence in market behavior. This is part of a seasonal trend observed in mid-April where markets typically start bearish but rally towards the end of the month.
  • Observations confirm that this seasonal tendency is reflected across various market averages.

May's Market Behavior

  • May is generally recognized as a bearish month. The e-mini S&P shows a slight higher high, while Dow futures do not, contrasting with NASDAQ which does achieve a higher high.
  • A sell-off occurs around mid-May, aligning with historical patterns where there’s an uptick before the month's close despite overall bearish sentiment.

Insights on Stock Trading Strategies

  • The current stock market environment (2017 context) indicates that while new highs are being reached, many leading stocks are failing to follow suit, suggesting potential instability.
  • Traders should be cautious as market behaviors can defy expectations; focusing on times when the market is likely to rise may yield better results than following popular trends blindly.

Investment Philosophy

  • For those investing through retirement accounts or IRAs, self-directed trading could enhance returns by allowing individuals to make informed choices about their investments rather than relying on financial firms.
  • Personal investment management is emphasized as individuals tend to care more about their money compared to institutional investors who may not prioritize individual interests.

Caution Against Market Myths

  • There’s skepticism regarding financial firms' commitment to clients’ best interests; often they are not contractually obligated to prioritize individual investors' needs.
  • Despite frequent stock market crashes and corrections, new investors continue entering the market under the belief that long-term investment will lead to wealth accumulation without recognizing inherent risks.

Strategic Trading Recommendations

  • Investors should adopt both trading and investing strategies—knowing when to enter or exit positions based on historical data and cyclical trends can be advantageous for maximizing returns.
  • Emphasis is placed on understanding seasonal and statistical patterns in stock performance over time for making informed investment decisions rather than following mainstream advice from media figures like Jim Cramer.

Conclusion and Future Learning Opportunities

  • The upcoming lessons aim to provide insights into alternative asset classes and emphasize self-directed investment strategies tailored for personal circumstances.
Playlists: 2017 ICT Private Mentorship Core Content Month 10
Video description

2017 Premium ICT Mentorship Core Content Video Lectures Audio and visuals are exactly as they were distributed in June 2017. CFTC RULE 4.41 – HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED 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 REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN Trading performance displayed herein is hypothetical. Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance trading results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results. U.S. Government Required Disclaimer – Commodity Futures Trading Commission Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don’t trade with money you can’t afford to lose. This is neither a solicitation nor an offer to Buy/Sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this web site. The past performance of any trading system or methodology is not necessarily indicative of future results. Trade at your own risk. The information provided here is of the nature of a general comment only and neither purports nor intends to be, specific trading advice. It has been prepared without regard to any particular person’s investment objectives, financial situation and particular needs. Information should not be considered as an offer or enticement to buy, sell or trade. You should seek appropriate advice from your broker, or licensed investment advisor, before taking any action. Past performance does not guarantee future results. Simulated performance results contain inherent limitations. Unlike actual performance records the results may under or over compensate for such factors such as lack of liquidity. No representation is being made that any account will or is likely to achieve profits or losses to those shown. The risk of loss in trading can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. If you purchase or sell Equities, Futures, Currencies or Options you may sustain a total loss of the initial margin funds and any additional funds that you deposit with your broker to establish or maintain your position. If the market moves against your position, you may be called upon by your broker to deposit a substantial amount of additional margin funds, on short notice in order to maintain your position. If you do not provide the required funds within the prescribed time, your position may be liquidated at a loss, and you may be liable for any resulting deficit in your account. Under certain market conditions, you may find it difficult or impossible to liquidate a position. This can occur, for example, when the market makes a “limit move.” The placement of contingent orders by you, such as a “stop-loss” or “stop-limit” order, will not necessarily limit your losses to the intended amounts, since market conditions may make it impossible to execute such orders.