We are continuing in our short series of articles about calendar / seasonal trading. The main focus of this paper is to show that the well-working calendar / seasonal anomalies can be refined. The aim is to find the right factors and find a way how to combine them in a search for profit from the practitioner’s point of view. Based on our previous research, calendar anomalies are profitable, but there is a possible way how to enhance their performance. This can be done by employing momentum strategies. By assigning a weight to assets from a diversified set according to their momentum value, it is possible to find a profitable asset during various global market conditions. Moreover, a trend factor is used to ensure that when market conditions are not favorable, the strategy will not trade. Such addition is a typical approach used for reducing maximal draw-downs. Finally, since this paper is written from the practitioner’s point of view, we are assuming some model transaction costs and examine the strategy in their presence.

Do retail day traders have a chance in current financial markets? They often lack proper trading research and infrastructure; they are facing high fees and stiff competition from professionals. But it’s always useful to view actual hard numbers and performance statistics and not just rely on feelings. Luckily, some academic research papers are exploring the question of the performance of retail traders. Chague, De-Losso, and Giovannetti have written the newest one, and as expected, their findings are not very favorable for retail day traders.

Authors: Chague, De-Losso, Giovannetti

Title: Day Trading for a Living?