Wednesday, March 18, 2020

When is the best time to sell stocks and shares? I still don't know

We are in the awkward position of having to liquidate stocks for spending money at a time when stock prices are plummeting due to the COVID-19 outbreak. We are not complete financial idiots, but neither are we experienced day traders (or traders of any sort, come to that). So, I gave been trying to glean some pearls of wisdom from the internet, and here's what I have found so far.
Firstly, it seems that there are good days and bad days on which to sell stocks, although the effect is not very marked. It was always thought that stock prices tend to go down on Mondays (the so-called "Monday effect"), although since that has been more widely known, the effect is now much smaller. In fact, prices tend to go down much more (on average) on Thursdays. But Fridays do still seem to be the best days on which to sell, and Fridays see larger daily increases than other days.
There is even a best time of year to sell: returns tend to be higher in the last few months of the year, and also January (the "January effect"). The worst returns tend to be in September. None of that is going to help me right now.
In terms of the best time of day ... well, it's complicated. Day traders do recognize certain intra-day trading patterns, but they aren't necessarily going to help amateurs like us. For example, trading tends to be faster and more  furious, and prices more volatile and unpredictable, first thing in the morning (9:30am-11am), when investors are acting on overnight information or trends from other stock exchanges, and late in the afternooon (3pm-4pm), when investors close out their positions so as not to be left exposed to overnight fluctuations. During the middle of the day, things tend to be more sedate and trading slower. That doesn't really help much with predicting price movements though.
I had this notion, from unscientific anecdotal evidence, that prices at the moment are tending to plummet during the main part of the day, before rallying near the end of the day, but I haven't really found any evidence to support this.
Of course, all of this can be turned on its head during exceptional times like these, and specific news reports can send stock prices wildly in one direction or other. No-one ever accused stock traders of being sensible and logical beings, and their tendency seems to be to overreact everything.
All I really know is that, given the precipitous downward trend, I should have sold yesterday, or, even better, last month! Not helpful.

No comments: