There are many theories about the world of trading and indicators. This includes theories that are not entirely based on statistics and logic. but it depends “Coincidence”, “Cosmic Energy” and “Psychology”. One of them is the waning trading indicator.

Understanding Moon Trading

Trading the moon phase is a trading indicator based on the movement of the moon. This theory states that asset prices change with the phases of the moon. In this case, prices tend to increase when the full moon appears. and the rise will end at the new moon

On the other hand, asset prices fall after the full moon and the formation of a new moon. Therefore, this indicator is called the lunar cycle. From research by Page Using S&P index data from 1950-2009, full moon to full moon trading can generate profits of up to 10.9%, and reverse period trading yields around 3.6% profit.

Indonesian people can use this indicator by using the Hijri calendar. This is because the Hijri calendar is a calendar based on the movement of the moon. In this case, every 1-15 can be interpreted as suitable for short periods, while 15-30 is suitable for regular (long) trading.

The important correlation of why the asset price changes after this month’s movement is unknown. However, this indicator is already available in trading applications and websites such as TradingView.

Benefits of the Moon Phase Trading Indicator

One of the reasons why this indicator is found in many trading applications is that it has a number of benefits, including:

  1. Helps predict market price movements. Although the level of accuracy is still in doubt. But this indicator can help traders to predict price movements in the market. This is because this indicator is easy to understand and many traders use it.
  2. Useful for swing traders Swing traders are individuals who trade their assets every few days or every few weeks. The presence of monthly movements that change every two weeks allows swing traders to determine their trading schedule and estimate when they can reap profits.
  3. Useful for short traders. This indicator is also useful for short traders or traders who trade assets borrowed from brokers when prices drop. In this way, they can open positions on days 1-15 of the lunar calendar.

An example of a waning trade

Figure 1: Moon Phase Trading Example (Source: profit now)

In Figure 1 above, you can see two circles below and above the price chart. The lighter circle above represents the new moon. while the circle below represents the full moon. Traders can open positions when the price chart approaches the full moon and sell assets as the price approaches the new moon. This theory is vice versa for short traders.

From the experiments conducted by profit nowIn 100 trades using the lunar cycle for 4 years, 53 wins and 47 losses were obtained from this experiment. In conclusion, the accuracy ratio of this indicator is almost 50:50 aka you will lose in 1 of 2 trades.

Weaknesses of waning trading

Despite the various benefits and levels of accuracy above, But here are some of the weaknesses of this indicator:

  1. Moon trading is not based on the interaction of supply and demand.. As mentioned above This indicator was created by accident or based on something outside of supply and demand. which means You cannot determine how severe the price change will be due to overbought or oversold.
  2. sometimes miss You have to keep in mind that the full moon usually lasts 3 days and not just the 15th. If you use this indicator You also have to be very wise to set the right time to buy an asset within 3 days. In addition, within 3 days it is possible for the asset price to drop.
  3. The profit margin obtained from this indicator will vary depending on the current market trend.. In general, the benefits of using this indicator are greater if: market trend What happens is an uptrend and will weaken if what happens is a downtrend.
  4. The validity of this indicator can be affected by the type of asset.Typical assets such as stocks react to cryptocurrencies. differs in response to the movement of the moon This is because stocks tend to have more investors and have bigger fundamentals than cryptocurrencies.
  5. This indicator is not suitable for day trading and scalping.. Normally, the lunar phase of trading takes effect within a period of 2 weeks, either from full moon to full moon or vice versa. This condition makes this indicator more suitable for swing trading than day trading or scalping. This is because the last two patterns often take advantage of price changes in very short time frames.

due to some of the above defects You should only use this indicator as a timeframe indicator. And don’t make it the main and only indicator. Use other technical indicators such as RSI, moving average, stochastic oscillator and other indicators to determine the quality of trading signals.

Also, traders should too. retrospective First, to test the level of validity of using this indicator for the respective asset. Because again, individual assets may react to the indicators based on this month’s movements.

more accurate strategy

From the above description In conclusion, the accuracy of the lunar cycle indicator is about 50%. This level of accuracy is considered good. but as a trader Of course, you want to use a more accurate strategy to minimize your risk of loss.

to create A trading strategy with a good level of accuracy. It’s definitely not easy. Because each asset has different characteristics. And each trader uses different indicators too.

Use supply and demand trading indicators such as price action and oscillators. in long-term trading and general assets You can use the necessary basic indicators.

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