Stock market almanacs help investors to predict market trends by revealing seasonal patterns, as well as their likely risks and rewards. These books offer no guarantees, of course. Using these almanacs is an art, not a science, as Jonathan Cheng says in a Wall Street Journal article. Still, stock market patterns do tend to repeat themselves, so studying a stock market almanac can help an investor to become more savvy.
1. Learn to recognize the symbols used in the almanac. The symbols provide a shorthand representation of key points such as favorable and unfavorable trading days. Stock market almanacs incorporate these symbols into charts that show vital information such as the overall profit and loss of stocks in the Standard & Poor's 500 index, which can be used as a guide to market trends.
2. Peruse the charts to gain a general idea of the pattern that experts predict the market will follow. In creating these charts, experts consider how the particular characteristics of the current year may affect the market, in addition to market trends that tend to repeat year after year. For example, the timing of holidays affects market behavior. Look at charts that focus on market averages as well as any charts that focus on the types of stocks you're most interested in purchasing.
3. Read the commentary on the charts. Stock market almanacs typically provide articles by expert investors that explain the trends shown in the charts in more depth. The commentary typically lends strategies for investing based on the data in the associated charts, with analyses of the likelihood of success. As you read, write down the names of the stocks that the experts predict will raise in value the most through the course of the year. Also write down the names of stocks that you could buy and sell in a shorter time frame to make a faster profit.
4. Create a separate spreadsheet for each month of the year to illustrate your trading plan for that month. Create a line for each stock you own or plan to purchase, with a column for the beginning, middle, and end of the month. In the appropriate space, write the symbol for the activity you plan to take. For example, if you plan to sell a given stock at the beginning of the month, write "S" for "short" along with the date when you plan to sell the stock. ("Going short" means selling; "going long" means buying.) You may adapt this plan as the year progresses, but your plan will continue to serve as a foundation for your investment activity.
- Always maintain a diverse portfolio to spread out your risk through your different assets.
- Wall Street Journal: Stock-Almanac Followers Like What They See
- Commodity Traders Almanac 2012; Jeffrey A. Hirsch and John L. Person