Here, we explore the future potential of SUI coin, providing you with insights on its market performance within the next few years...
A common explanation behind this phenomenon is investors’ tendencies to sell stocks prior to year-end so they can claim capital losses on their tax return while taking profits on winning investments at the beginning of every new year. This guide has all you need to know about the Santa rally.
Santa Claus rally is a phenomenon that involves picking specific stocks set to get a seasonal lift from Christmas shopping trends. The hope is that these companies will get an extra boost driven by consumers spending money on gifts and holiday shopping activities.
The theory behind the Santa rally is that investors can make some rapid returns during this time by using real-world data rather than relying on complex algorithms or back-tested studies. It also depends on certain assumptions, including the idea that companies selling products geared towards children should rise in price during December. Unfortunately, it doesn’t always work that way.
The strategy of investing based on Christmas shopping trends is nothing new, but this one caught on, and it’s not hard to see why given how easy it was for people who had no prior knowledge of stocks at all to jump into the market. The philosophy behind the Santa Claus rally is straightforward, relying more on common sense than anything else. So even though some people may call it a scam or a hoax, there’s nothing negative about thinking about making extra cash during the holidays, assuming you don’t get burned like thousands of other people did.
The idea of the Santa rally is interesting, but the premise itself is not backed by any real data or facts. Therefore, it is not something you should take seriously if you don’t want to lose money.
Many people think that the Santa rally is a perfect strategy for first-time investors and traders. And there are several reasons why. Firstly, the financial system around Christmas shopping trends means we can use actual data instead of complex algorithms and back-tested studies. It relies more on common sense than anything else. Children love gifts, and they spend money on toys and games during December. Mark Fisher popularized the phenomenon in his book “Santa Rally: How to Make Money with Santa Claus.” Hence, the idea behind it has some genuine experience backing it.
There are countless ways you can take advantage of the Santa rally, but there is simply no way that this strategy is for everybody. Here are just a few quick examples of how you could benefit from the December holiday season.
The most straightforward trading strategy would be to go long on companies that exhibit these seasonal trends. It does not get much easier than that, does it? Even though this strategy does not require any previous investment or trading experience, you still have to be careful. After all, the Santa rally only takes place over a concise period of time. Therefore, there is no reason not to take full advantage of this trend throughout December.
The first recorded mention of Santa Rallying was in 1866 in Aalborg, Denmark, where St. Nick had to chase away some robbers who had stolen goods from his home on Christmas Eve. Of course, they were being chased by elves who managed to recover all objects before it was too late.
A more festive celebration occurred again in Denmark seven years later when they decided to combine jolly old St. Nick with another ancient Scandinavian custom called “Yule Goat”.
Santa rally has its origins, though, in Finland. While St. Nick was visiting Finnish children every Christmas Eve, the Yule Goat would be wandering around their living room to see if they had behaved during the year. If that goat could spot some other animal inside the house, then it meant that those kids had not behaved well enough and should have tried harder during the year because now they would receive coal as a gift from Father Christmas (Nisse).
Bishop Mikael Agricola started the tradition of the Yule Goats. He cherished old pagan customs so much he decided to create his own “Christianized” version of them using Icelandic tales about elves bringing gifts for children. So instead of having actual goats walking on the roofs of houses, they started using some straw goats instead.
Then, for various reasons (most likely due to the rising fur prices), they stopped making straw goats and started sculpting them out of wood or clay. One even made of bread was baked in 1866. The actual first Santa rallying contest took place two years later when they destroyed all the bad Yule Goats throughout Finland that had been catching children misbehaving all year long. Father Christmas himself came to save them from this bad goat by burning him at stake! From then on, it has become a tradition in Finland to burn “Tonttu” (Santa’s elves) on December 23.
Several theories try to explain the Santa Claus rally, including optimism fueled by the holiday spirit, increased holiday shopping, and the investing behavior of participants in the market for “put” options.
One explanation is that participants in the market for “put” options (which rise in value when stock prices fall) purchase large quantities of put options near year-end because they expect stocks to be higher at year-end than they are now. This would increase demand for put options and thus lower their price. Since puts rise in value when stock prices fall, this would create an opportunity for arbitrage traders who combine stock purchases with option short sales. Other explanations include increased retail activity due to Christmas and investors rebalancing their portfolios before year-end.
The Santa Claus rally has been criticized as an example of data mining in that the supposed empirical relationship is weak and not consistently observed. Other factors could explain this phenomenon, such as tax-loss selling around the year-end.
The Santa Claus rally also takes place due to increased activity by floor traders due to an increase in volatility during the period,. However, several studies indicate that the number of options traded declines during this period while put option writers experience increased trading volume at these times. Studies have also indicated there is no relationship between the amount of short-term price movement and the number of trades or quotes on a given day.
The Santa Claus rally is a robust and three-day stock price increase in the last five days of December (or the first three days in January). Data shows that it has occurred 66 times between 1928 and 2008. Following are the pros and cons of using this phenomenon to make trading decisions.
Pros:
Cons:
While there are numerous explanations for the Santa Claus rally, the most likely reason is a combination of tax considerations, institutional investors taking a vacation, and retail investors being more bullish. Whatever the cause is, this phenomenon has been observed in markets worldwide for many years and typically results in a sustained increase in stock prices. So if you’re looking to get a jump on your investments for the new year, it might be time to get in touch with Santa.
Santa Claus rally is a phenomenon that involves picking specific stocks set to get a seasonal lift from Christmas shopping trends. The hope is that these companies will get an extra boost driven by consumers spending money on gifts and holiday shopping activities.
Many consider the Santa Claus rally results from people buying stocks in anticipation of the rise in stock prices during January, otherwise known as the January effect.
The Santa Claus rally was first recorded by Yale Hirsch in his “Stock Trader’s Almanac” in 1972.
Firstly, the Santa rally is a very effective and proven way to make money. Secondly, it works during both bull and bear markets. Trading during the Santa rally is very simple: buy at support, sell at resistance line. Finally, you can make money even without your direct participation.
Very few investors participate in the Santa rally, as it is difficult to exit the market after investing. If the curve is upward, the profit margin will be thin. Thus, if many investors join in late, they may not earn much. Besides, it is difficult to find stocks that will follow the Santa rally every year, so one must watch the market conditions before investing. An investor cannot invest big sums of money because many stocks will either not participate in the Santa rally or follow the trend only in the last few days. Finally, no long-term benefits can be obtained by following the Santa rally. The profits in this method are very temporary and thus cannot be relied upon for a more extended period.
Here, we explore the future potential of SUI coin, providing you with insights on its market performance within the next few years...
Here, we explore the future potential and prospects of Render token and offer you insights on how it might perform in both short a...
Here, we explore the future potential of Milady meme coin and provide you with insight on how high its price can go in the short a...