As a researcher with experience in the stock and crypto markets, I have come across the popular seasonal trading strategy known as “Sell in May and Go Away.” This strategy suggests selling assets in May and rebuy them after October due to historical volatility during the summer months.
The “Sell in May and go away” strategy is a well-known seasonal trading approach in the stock market, which involves selling off assets around the first of May and then repurchasing them after Halloween. This tactic was popularized in the 1970s by market strategist Alfred Fielding. He developed this method following his company’s bankruptcy in 1974.
According to this approach, from November through April is the ideal timeframe for making investments. Therefore, once April concludes, investors have the option to liquidate their holdings and then repurchase them starting in October.
The investment strategy known as “Sell in May and Go Away” involves selling stocks around May to capitalize on market instability during that month, with the aim of later re-entering the market for potential gains.
The connection between investing in stocks and cryptocurrencies is subtly reflected in the fact that the concept of “correlation” applies to both markets, despite its origin being in the stock market.
Is Sell in May and Go Away Work For Real?
The “Sell in May and go away” strategy, which involves selling stocks at the end of April and buying them back in November, has some historical basis but may not be the most effective approach. This pattern, first observed in 1974, suggests that the stock market experiences higher volatility and poorer performance during the summer months. However, not all years conform to this trend, which creates uncertainty regarding the strategy’s success.
According to this theory, the S&P 500 index, which is ranked by Standard & Poors, provides the strongest evidence. The S&P 500’s historical data from the 1960s indicates an average return of only 0.18% for May. Contrarily, the summer months, apart from July, have shown below-average performance compared to other months.
The Datatrek report indicates that the S&P index experienced a more sluggish growth rate during the five-month period from May to October. Yet, it’s important to note that this period did not result in a significant decrease or total halt in performance.
As a seasoned crypto investor, I’ve observed some intriguing patterns in the market that could potentially yield higher returns. For instance, the Dow Industrials have delivered an average return of approximately 1.9% since the 1950s. Yet, during the summer months, its average gains hover around the 0.8% mark. In contrast, from November to April, the gains surge to around 7.3%. By paying close attention to these trends and adjusting my investment strategy accordingly, I believe there is a chance to maximize profits in the crypto market as well.
Does Sell in May and Go Away Stands True For Bitcoin?
As a researcher studying the relationship between the “Sell in May and Go Away” phenomenon and the cryptocurrency market, I’ve discovered that its impact is less pronounced compared to the stock market. While there have been certain years where the cryptocurrency market followed this seasonal trend, the majority of the time, its behavior has diverged significantly from the pattern observed in the stock market.
According to cryptocurrency market information, Bitcoin’s price experienced declines similar to those in May of 2013, 2015, 2018, 2021, 2022, and 2023. Among these years, only 2021 and 2022 saw significant price drops, with Bitcoin’s value decreasing by approximately 35% in 2021 and 15% in 2022. The other years, apart from 2021 and 2022, only experienced minor losses that can be disregarded.
Over the past six years, I’ve noticed that the markets have exhibited stronger performance during certain months following May, contradicting the common investment advice of “selling in May and going away.”
The crypto market generally follows a trend similar to Bitcoin’s throughout the year.
Final Thoughts
Financial advisors recommend that investors pay closer attention to their individual analysis rather than blindly following the “Sell in May and Go Away” approach. The effectiveness of this strategy can vary greatly from one year to another, and there have been instances where declines in May were followed by strong market gains in June, July, and beyond. Consequently, the odds of achieving similar results this year are roughly equal between positive and negative outcomes.
Read More Why MicroStrategy Is Still Buying Bitcoin Despite $53 Million Loss?
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2024-05-01 12:12