National holidays are a time when everyone just wants to relax and enjoy themselves, including traders. There are about nine holidays observed by most countries around the world where trading is closed. The stock markets experience some changes during these national holidays.
In 2022, the NYSE (New York Stock Exchange) and Nasdaq Stock Market close for nine holidays. Their working hours are from 9:30 a.m. to 4 p.m. EST (Eastern Standard Time). There are also some changes in the trading hours during the Memorial Day, Labor Day, and Thanksgiving holidays.
The nine holidays are;
- Monday, Jan. 17- Martin Luther King Jr. Day
- Monday, Feb. 21-Washington’s Birthday
- Friday, April 15-Good Friday
- Monday, May 30- Memorial Day
- Monday, June 20-Juneteenth National Independence Day
- Monday, July 4- Independence Day
- Monday, Sept. 5- Labor Day
- Thursday, Nov. 24- Thanksgiving
- Monday, Dec. 26- Christmas
It is also important to note that the markets are closed the following Monday if the holiday falls on a Sunday. For instance, the Juneteenth National Independence Day and Christmas day in 2022 fall on a Sunday. Also, the market is expecting to close down on Wednesday, Nov. 23, and Friday, Nov. 25 in 2022 because of the Thanksgiving holiday.
A study done by the Journal of Financial Economics found that “stock returns are lower on the days leading up to a national holiday and on the day of the holiday itself.”
The study also showed that the market usually picks back up a few days after the holiday. So, what does this all mean for traders?
From the data above, it seems that traders should avoid trading in the days leading up to a national holiday and the day of the holiday. However, it might be beneficial to trade a few days after the holiday when the market picks back up. Of course, this is all just speculation, and traders need to do their own research before making any trading decisions.
Now, let’s take a look at how these holidays have affected trading in the past to get more insight.
During the new year in January, most people usually have their year’s resolution and are trying to make moves to achieve their goal. The market usually reflects this by going up. The markets are quite volatile as traders are trying to wrap up their positions from the previous year and starting new ones. For this reason, it is hard to draw any conclusions from the data.
In summer, most people are on vacation and aren’t thinking about their investments. The market usually reflects this by going down. At the end of a financial quarter, there is usually a lot of volatility as traders are trying to wrap up their positions from the previous quarter and start new ones.
Overall, it seems that the markets have been closing lower in the days leading up to a national holiday, but they have been picking back up afterward. Traders should keep this in mind when planning their trading strategies.
What is the best strategy to use?
Well, there is no one-size-fits-all when it comes to trading. It all depends on the trader’s goals and risk tolerance. Some might want to trade in the days leading up to a holiday, while others might want to wait until after the holiday when the market has picked back up.
Doing your research will help you make informed decisions about when to trade. Paying attention to the news and economic indicators will also give you an idea of what might happen in the markets. Also, most trading platforms will give live updates on what is happening in the markets. This is something you should always check out as it might lead you to make better trading decisions.
At the end of the day, it is up to the trader to decide what strategy works best for them. Do a proper analysis of whether you should buy, sell or hold for the long term.
Although the markets experience some changes during national holidays, it gives investors time to reassess their portfolios and make changes if they feel it is necessary. The holiday may also provide an opportunity for a company to release important news that could impact its stock price. If a stock price gaps up or down on holiday, it could signal a change in trend. As seen, the markets tend to rebound and close higher than where they opened. Traders should keep this in mind when planning their trading strategies around these times. You need to be on high alert and have a plan to execute your trade to take advantage of the market movement. And remember, use technology to your advantage, and it will help you make better decisions.