Cycles Trading Advantages: Lunar Cycles Trading vs. Day Trading


Traders use different strategies and some are certainly riskier than others. Most decide to go either the day trader or momentum chaser route, but we'll explain why cyclic trading with lunar cycles can be easier and safer. The most successful daytraders use intraday cycles to buy and sell multiple times a day with a goal of selling all shares before the end of the day.

For example, it's easier to begin cyclic trading than day trading. Day traders need a minimum amount of capital, expensive software, and must pay high commissions on multiple trades per day. Since 2001, the Securities and Exchange Commission (SEC) has placed a minimum requirement of $ 25,000 in order to day trade. Accordingly, day trading is defined as buying and selling 4 or more times within a 5-day period.

The software needed is very beneficial, but usually costs more than $300. It's beneficial because not only does it give you the Bid/Ask sizes (number of desired transactions), it tells you who you’re trading against and how many shares they want to either buy or sell.  Using such software would also bring commissions to $ 15 - $20 per trade, far more than the average online brokerages.

Beginning day traders who meet the above requirements mostly lose money because they over-trade.  The goal of day trading is to buy and sell within a trading day and to always sell by the end of the day.  This puts constraints on the trader, especially if the stock is moving sideways or trending downwards by the end of the day. The beginning day trader is often misled by short term momentum during the opening 1/2 hour leading the trader to buy near resistance levels. Furthermore the beginning daytrader is forced to sell by the end of the day regardless of price because the daytrader is usually taught not to hold overnight.   Others just get frustrated, impatient, and far too emotional to be consistently profitable. 

If the beginner finally starts making money, then it will most likely average under 1% daily through 1-2 good trades per day.  Sure, the seasoned day trader can profit more than once in a given day for larger profits; however he would need to keep his eyes glued to the ticker at all times during the trading day if he expects to win.  Cyclic trading is simply easier and less demanding. Cyclic traders have more time to think, relax, and do other activities during the day. 

Beginning day traders without the $ 25,000 requirements or the expensive software will find that it's not worth the time, energy, or money.  Besides, if your broker or the SEC discovers that you're day trading without the minimum capital, then they could freeze your account for up to 90 days. 

The advantages over day trading are abundant--especially with highly volatile stocks.  When stocks suddenly jump (gap up), which mining stocks usually do, day traders are at a disadvantage.  This concept is illustrated by the chart below.



As you can see, support seems to be near $ 3.30 and resistance at $ 3.40.  So you'd buy at $ 3.30 and sell near 3.40 but by the end of the day, the prices fall back to 3.30. The next day, to the beginning daytrader's surprise, the stock's price opens at $ 3.38, near perceived resistance levels. Experience tells the beginner not to buy until prices retreat to closer to 3.30, but that doesn't happen. Instead, the price shoots up all the way to 3.78 and the beginning daytrader misses out on the biggest price increase of the month. The lunar cycles trader would have bought just one time, several days earlier and would have waited for as long as 2 weeks before selling. The cycles trader would have profited handsomely and wouldn't have needed to spend 10% of the amount of time that the daytrader spent staring at the ticker.  

Day trading often misses the big profits--especially when it comes to volatile (profitable) stocks.  It all comes down to the flaw in the daytrading philosophy: being the first one in and out the door at all times. The goal in trading in cycles is to be the second one in and out.  You buy when the trend has changed in your favor and wait until it sends reversal signals.  This might take a few days, or a few weeks.  At least it beats staring at a ticker with sky high adrenaline trying to make a bunch of small profits.

The cyclic trader has simply less pressure since he's waiting for a trend low instead of an hourly or daily low.  ANO's trend low was the prior week's low of $ 3.10.  Oversold signals would have alerted the cyclic trader to buy and he could have left the stock alone until ANO reached $ 3.93 just 2 weeks later.  Having invested just $ 10,000, the trend trader would have made about $ 2,500 in just 2 weeks, but more if he traded a little the stock a bit more frequently.

As soon as the up trend is over, cyclic traders can pick a "shortable" (usually a stock over $ 5) stock and short sell.  Check with your broker for any short selling restrictions on stocks.  Short selling allows traders to profit during down times by selling borrowed shares, waiting until the price goes low enough, and buying the actual shares at a lower price.  The difference between the short sell price and the buy-to-cover price would be your profit.    


CONTINUE >> Cycles Trading vs. Momentum Chasing