There are many methods that can help with investment decisions.
Of all the different tools, there is literally nothing more extraterrestrial than stock market astrology.
This article will look at stock market astrology and discuss the separation of alpha and noise.
I will probably be the last person qualified to write an article on the benefits of stock market astrology.
Until I was 10, I believed my zodiac sign was Taurus.
Actually, I’m a Leo.
Therefore, I will look at this article from a critical academic point of view.
Perhaps not doing enough research, but asking the important questions.
This may be unfair, so don’t hesitate to leave a review.
I would be interested to read large-scale studies showing the benefits of using astrology in the stock market.
Stock exchange astrology is the practice of relating the movements of planets and other celestial cycles to returns in the financial markets.
The idea is that by studying astrology we can take advantage of certain stocks and sectors depending on certain times that they move in and out of favor.
This creates excess returns from the market.
Below we have the astrological data for one day.
We can see that during the day different forces act on the movements of planets and moons. Inherently, each day is different from the planets, moons, and orbits of the earth.
By equating these planets with certain financial terms, this can be a “signal” for an astrological trade.
In addition, we have points or “transits” that are specific to individual users.
According to stock market astrology, we can be lucky if we place our bets at the ideal time for our personal transits (see below).
In researching this article, I looked at SSRN (Social Science Research Network) to see if any recent articles were written on stock market astrology, nothing.
Unsurprisingly, there are no astrological departments at JP Morgan.
There is a lot of modeling in the investment world.
Although nothing models star patterns.
Our first question to ask is whether hedge funds that have billions of dollars to spend on research aren’t taking advantage of it when there is an advantage in using astrology in the stock market.
This should be our first red flag.
Take the 5-Day Options Trading Bootcamp.
Making money in the stock market isn’t a challenge, but it’s hard to beat.
The internet is full of people who get hype and get rich quick.
Those who promote their “signals”.
Most of these signals are clearly false.
Take the usual method of doubling your money frequently.
Whenever any of these gurus make this claim, I am reminded of a great quote.
A penny earned and a penny lost don’t matter, but if you double a penny for 30 days you have 5,368,709.12 USD!
If these gurus are not as rich as Bezos, this is a sure false claim.
The reality is that noise dominates the stock market while the signal there is often weak.
Because if it were big, everyone would take advantage of it.
People would pile up.
Ultimately, it would be so depleted that it would simply be turned into a risk premium.
Edges like a risk rate of 51% and a risk to reward ratio of 1/1 can make you rich.
Do not you believe me?
Ask the casino.
One small study gave an astrologer a financial analyst and a child five thousand pounds to invest as they saw fit to fit into the FSTE 100.
The child won.
Before you take advice from little Oliver, let’s think about it.
This study only had 3 participants and only followed them for a short time.
Due to the tremendous noise level on the market and the way the study was designed, the results were basically random.
It’s easy to search data to find claims.
They are looking for data to provide evidence of stock market returns.
At some point, you will find something that seems to be correlated. If we look at enough astrological data, we are sure to find something that seems to correlate with S&P returns.
Now we have our signal. We can draw a fancy graph that shows our performance of our “strategy” and how well it works.
Sell it to some users and milk it until luck runs out.
Ultimately, once it underperforms, we’re fine.
We can go to the mountains with the money we’ve made or find some other thing that has been correlated in the past and choose that one instead.
If none of these works work, we can make a personal favorite by doubling down and blaming our subscribers for the “psychology”.
The key to these results is that not all correlation is equal to causality.
If we look long enough, we can find something that “worked” in the past.
This does not mean that it will necessarily have predictive power in the future.
In order for it to be predictable, we need to figure out why one event (in this case, astrological events) leads to another (stock return).
This must be both backed by evidence and intuitively meaningful. Otherwise it’s just more noise.
So far I can’t definitely make this connection.
Many stock market astrologies are used in conjunction with other methods such as technical analysis.
This seems to me to be an excuse that it cannot survive as a stand-alone method.
Combine it with other methods, cloud the water, then you can not criticize the lack of performance or attribute to this individual tactic.
Investors are welcome to use whatever metrics they want to choose to distribute their hard earned money.
Allocation based on astrology is fair if it allows the investor to sleep better at night.
Ultimately, those who claim that the use of astrology to generate alpha versus that of the market must justify their claims to move away from a pseudoscience.
So far this has not been done with statistical certainty.
Disclaimer: The information above applies to For educational purposes only and should not be treated as investment advice. The strategy presented would not be suitable for investors who are unfamiliar with exchange-traded options. All readers interested in this strategy should do their own research and seek advice from a licensed financial advisor.