For a day trader to make money successfully every day, he has to have a feel of where the prices of stocks he has invested in are headed by the end of the day.
Unfavourable news is released when markets are closed
MUMBAI: “In the long run we are all dead,” economist John Maynard Keynes once said. No one espouses this philosophy more than day traders: individuals who buy when the stock market opens, and sell out before the end of the day to start the next day on a clean slate.
For a day trader to make money successfully every day, he has to have a feel of where the prices of stocks he has invested in are headed by the end of the day. They need to time the market correctly, ie buy when the prices are headed up and sell when they are falling. In order to be successful on that front, day traders are always on the lookout for innumerable predictions and rumours that are in circulation.
Doing this successfully day in and day out is never easy. Therefore, here is a piece of information that might be of some help. If you are a day trader who buys and sells stocks purely on impulse, you are likely to make more money on a Friday than other days of the week. Over the last five years, the Bombay Stock Exchange’s (BSE) Sensex has given an average return of 0.22 per cent on Fridays. The same is true about the National Stock Exchange’s (NSE) Nifty. The Nifty also has given an average return of 0.22 per cent on Fridays.
On the flip side, Mondays are bleak, and it is best to avoid Mondays for day trading. The average return on Mondays was the lowest. The Sensex has given an average return of 0.08 per cent on Mondays over the last five years.
In comparison, the Nifty has done better and given an average return of 0.09 per cent over the last five years. Other than this, the markets tend to be the most volatile on Mondays. Higher volatility means that returns can fluctuate dramatically. Combine this with the fact that average returns have been the lowest on Monday and this does not make the situation very encouraging for day traders.
The tendency of the stock market to give higher returns on Friday and lower returns on Monday is referred to as the ‘weekend effect’ or the ‘day-of-the-week-effect’. Indian evidence is in line with what happens with stock markets globally. As Syed A Basher and Perry Sadorsky of New York University, in a research paper titled ‘Day-of-the-week effects in emerging stock markets’, say: “Published research for the United States and Canada finds that daily stock market returns tend to be lower on Mondays and higher on Fridays.” This is primarily attributed to companies releasing unfavourable news over the weekend when the markets are closed. This news is reflected in the stock prices when the markets open again on Mondays.
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