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Best day of the week to trade (buy or sell funds in S&P500)- Best day trading strategy




Disclaimer: This is my own analysis and it may have errors. It is for information or exploration purpose only and use it at your own risk. I am not responsible for any loss or gain.

 

Recently, I was wondering about finding a possible trend or correlation with a day of the week and it’s trading pattern. I searched the internet to find some information but was not satisfied with what I found. I decided to research my own and try to find the best trading strategy that statistic supports and can be automatically implemented.

That lead me to download the historical S&P500 data and do my own analysis. Here is what I found after analyzing the data on my own.

Data below represents January 3, 1950 to September 10, 2015. I have downloaded it from the internet so it may have errors that I am not aware of.

Limitation: This analysis is based on the historical closing price of S&P500 data. It may not be valid for other indexes and past stock market performance doesn’t warrant identical future performance. This is just a research article written to help you understand a trend.

  • Table 1. Number of days S&P500 closed negative, positive or unchanged compared to the previous close
  Monday Tuesday Wednesday Thursday Friday

S&P500 closed in Negative

1623

1625

1473

1517

1419

S&P500 closed in Positive

1533

1712

1874

1775

1853

Unchanged

18

28

20

30

28

 

  • Table 2. Percentages
  Monday Tuesday Wednesday Thursday Friday
S&P500 closed in Negative 51.1 48.3 43.7 45.7 43.0
S&P500 closed in Positive 48.3 50.9 55.7 53.4 56.2

Unchanged
0.6 0.8 0.6 0.9 0.8
 
 
  • Monday is the best day to buy

Historically, On Mondays S&P500 has closed in negative more days than the positives. In fact, it is the only day of the week when it has closed in negative for more number of days than positives. The difference is 2.8%, but the next best difference is –2.8% (For Tuesdays when closed in positives more often than negatives). So I would call it has almost 6% advantage over next best day to buy S&P500 index. 

 
  • Friday is the best day to sell

On Fridays, S&P500 has closed in positives for more number of days than the negatives. The difference is huge (~13%). I am sure there may not be many automatic withdrawal setup in IRA or 401k but if there is one, I would choose Friday to do so.

 

Conclusion

In this analysis, it seems that the best automatic day trading strategy is to trigger automatic investment on a weekly basis on each Mondays for the best dollar-cost averaging and maximizing the potential of return by minimizing my purchase price as much as possible, automatically.