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The Moods of the Moon
by Randall Ashbourne

Trading the mood swings of the monthly Lunar cycle will produce three-to-six times the profit of a simple, buy-and-hold strategy. I know that’s a dramatic call, but I intend to prove it.

All astrologers, and not a few experienced traders, know that – statistically – Full Moons tend to occur near temporary price lows and that New Moons tend to occur near short-term price highs.

And we all know there are Lies, Damned Lies – and Statistics. Many of the Lunar trading articles found easily on the internet tend to suggest the potential gains are relatively minor, or that the phenomenon

 

inverts so often that it can’t be used as a reliable trading technique.

Even if we go to the trouble of mapping the Loonytoons on a price chart, a simple eyeball of the chart tends to make us think it works some of the time, but can be downright dangerous to our cash at other times – as with this 2011 chart of the SP500.

 


What “eyeballing” does is give you an impression. It doesn’t give you the facts.

Over the past year I decided to test the assertions for myself and log the results in a spreadsheet to test just how profitable it is to trade the mood swings of the Moon. The results were simply mind-blowing.

Not simply because they showed truly massive stock market profits during certain periods, but also because they showed when it was absolutely UNSAFE to risk your money.

 
What I discovered was that, statistically, the old assertions not only hold up, but when traded consistently over time, produce big profits for small amounts of time exposed to market conditions.

By introducing a simple mechanical filter before making a decision to trade, the spreadsheets showed not only which Moon phases could be traded safely, and when, but which trades should NOT be placed under any circumstances.



The results were so staggering they form a standalone system of trading in my new book, The Idiot and the Moon.

But the proof of the pudding is in the eating, so let’s see what the facts are when we trade The Moods of The Moon during the first 6 months of 2011 on the SP500.

Buying a single share of the index at the closing price of our starting date on the January 4 New Moon and holding until the close of the June 1 Solar Eclipse New Moon, produced a profit of $44.35 – 3.49%

However, going Long for one share from each Full Moon close to the next New Moon close, produced more than twice the profit - $90.96. So, we were in the market for half the time and twice the profit.

Staying OUT of the market during all New Moon-Full Moon phases would have protected us from losing some of our buy-and-hold gains … but delivered much better profits for our Loonytoons strategy by being profitable Short trades. We were in the market ALL the time, but continually reversing positions – to get three times the profit of buy-and-hold.

However, it’s the use of Quarter Moon phases that make the biggest impact on trading Lunar moods. We can see from the above table that only one of the assumed trades resulted in a loss – when the trades were automatic and used as a system over the whole period. We increase the trade by 1 extra index share at the Quarter Moons!


That is, going Short we take 1 Short at the NM, 1 extra Short at 1Q; Long trades also double up at 3Q.

 



Taking advantage of the extra Long or Short position at the closing price on the day of the First Quarter or Third Quarter Moon dramatically increases the profits.

While the buy-and-hold strategy produced a profit of 3.5%, we could have made marginally more money by Shorting the index for a couple of weeks at each New Moon; twice as much money being exposed to the market for only half of each month from Full Moon to New – and almost six times as much money by playing the odds that the “statistics” will hold true when traded automatically, but consistently, over time.

   

Now, I confess it takes some courage to overcome the “eyeball” impressions we got from glancing at that first chart of the Moon phases marked onto a price chart. That is why The Moods of The Moon chapter in my book employs The Idiot as a filter for measuring whether long term and intermediate conditions of the market are Bullish or Bearish.

But, let’s not rely on eyeball impressions and examine instead the breakdown of our Lunar phase trades on the SP500 for the first half of this year.
 

   

Inserting the results of each individual assumed trade into a spreadsheet allows the creation of a table which can point up any phases where the odds tend not to favour a particular trade – and we can see that Shorting immediately at the New Moon is not such a good idea in the generally positive period after the annual Santa Claus rally and into the “Sell in May” period.

 



The Moods of the Moon also produced significant profits for Australia’s ASX 200 index over the same period – in the face of a loss on the cash index itself.
 

A buy-and-hold strategy on the ASX 200 for the first half of 2011 produced a loss, not a profit. In contrast, being Long the index only for two weeks each month from Full Moon to New Moon produced a profit of nearly 4%.

Playing both sides of the market – Long and Short – was considerably more profitable. Playing by the rules of The Moods of The Moon … Short at New Moon, extra Short at 1Q, reverse to 1 Long at Full Moon, add extra Long at 3Q …

Well, it was MUCH more profitable than sitting there praying the ASX 200 would follow the SP500 upwards!

 
 

Instead of losing $28.50, the Loonytoons strategy gave us $620.12 – a gain of more than 13% in 6 months.

I said at the beginning that trading the mood swings of the Moon would produce three-to-six times the profit of a lazy buy-and-hold strategy – and that I would prove it. The “system” works, much more profitably than much of the available literature would have us believe. Of course, there are certain conditions under which placing the assumed trades can result in massive losses.

But, they are secrets only to be revealed in  The Idiot & The Moon.  (click to purchase)


Click image to read Kaye Shinker's reveiw of The Idiot and The Moon

Randall Ashbourne's e-Book, The Idiot & The Moon is a password and print protected eBook which you can download on to your computer in the popular PDF format.   You will be able to highlight key sections or add "sticky notes".   It is possible to copy the file into your iTunes library, which will allow reading on your iPad or similar device.


 

 

 

2011 chart of the SP500 created using Galactic Trader Software, by P.A.S. Astro-Soft, Inc. makers of Galactic Investor Astrology software.

 

All of the written material and graphics are copyrighted by AstrologicalInvesting.com and Randall Ashbourne. Unless otherwise noted, written material and graphics may not be reproduced without written permission. This includes but is not limited to any current articles or archives on Astrological Investing's web site on financial astrology, how to start an investment club, technical analysis, business astrology, or stock market investing ©2011

 

 

 




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