Full-Moon-Trading
🌕 Myth or Market Signal?
Over the past two decades, studies have explored a fascinating idea: do moon phases influence investor behavior and market returns?
📊 Research Highlights
Academic papers — including one from the University of Michigan — discovered that:
- Stock returns tend to be lower around full moons.
- Returns are relatively higher near new moons.
- The average annualized difference can be 3% to 5%.
This lunar-cycle effect was observed in 48 international markets, including Germany and the U.S.
🧠 Why Would This Happen?
Some proposed reasons:
- Investor psychology: Full moons may subtly influence mood and risk perception.
- Sentiment proxies: Full moons have been linked to increased emotional volatility.
- No economic link: This is purely behavioral, not fundamental.
🧪 Backtested Strategies
| Strategy | Annual Return | Max Drawdown | Invested Time |
|---|---|---|---|
| Full → New Moon (Long) | ~4.4% | ~49% | ~50% |
| New → Full Moon (Long) | ~2.8% | ~44% | ~50% |
| With Seasonal Filters | ~3.5% | ~33% | ~23% |
Full → New Moon: Buy at open on full moon, sell at next new moon.
New → Full Moon: The reverse setup.
🖼️ Visual Evidence
- SPY and DAX equity curves show consistent behavior tied to moon cycles.
- Risk-adjusted returns improved slightly over buy-and-hold.
Quantified Strategies
Lunar trading strategies are an approach to market analysis and decision-making that posit the moon’s phases influence market behavior. These strategies suggest that specific lunar phases are more opportune for trading, noting that stock performance tends to be stronger at the start of a new moon compared to the beginning of a full moon.
💻 Lunar-Based SPY Trading Strategy
This strategy proposes that trading the SPY based on moon phases can outperform a simple buy-and-hold approach in terms of profit (PnL), risk-adjusted returns (Sharpe ratio), and maximum loss (max drawdown).
Here’s how it works:
Long SPY: Go long when the Full Moon begins and hold until the day before the New Moon. Close all long positions and go to cash on the New Moon.
Short SPY: Go short when the New Moon begins and hold until the day before the Full Moon. Close all short positions and go to cash on the Full Moon.
Combined Strategy: Implementing both long and short lunar-based trades is expected to yield superior results compared to either strategy alone.