Last Trading Day Of The Month Trading Strategy (Seasonality)

The last trading day of the month is a weak day in the stock market – the last trading day of the month is a negative seasonality. We emphasize that this is the last trading day, not necessarily the last calendar day. As it turns out, the last trading day of the month is one of the worst days of the month.

Let’s start by measuring the average return on the last trading day of the month. We are looking at trading days – not calendar days. These two are often different when the last calendar day is either on a weekend or holiday.

If we invest at the close on the second last trading of the month and sell at the close of the last trading day (sell at the close of the month), we get the compounded return in the S&P 500 as shown in the image below.

100 000 invested in SPY (the ETF for S&P 500) in 1993 and invested only during the last trading day of the month has returned an average loss of 0.05% per trade. This has resulted in a negative annual CAGR of 0.7% CAGR.

We also tested how the Last Trading Day Of The Month Trading Strategy works on overnight trading and day trading with different rules. Check out how it performs here >>

https://www.quantifiedstrategies.com/last-trading-day-of-the-month/