consistently year over year december and
the beginning part of january
is a horrible time for day traders
constantly getting stopped out of
positions for no apparent reason
according to your analysis so in this
video i'm going to explain to you why
some of the things that you're seeing on
the charts are happening
[Music]
welcome back to the channel everybody my
name's artie and this is the moving
average a show where we discuss
everything day trading to keep you
profitable on a consistent basis i'm
getting a ton of dms lately from people
saying hey i've been profitable for the
last few months but this month is really
screwing me over and i'm having loss
after loss after loss and they don't
know what they're doing wrong whether
they need to change their strategy or
just completely quit day trading because
they've lost their touch trust me it's
not you it's the markets there's a
technique that investors use called tax
loss harvesting you've probably heard
this term before but if you haven't i'm
going to explain it in the most simple
way possible let's just say at the
beginning of the year you had two
hundred thousand dollars to invest you
invested one hundred thousand dollars in
tesla and 100 000
in ford your tesla investment went up 50
and your ford investment went down 50
now what investors do at the end of the
year is something called tax loss
harvesting what they're doing is selling
off their losing positions so my ford
stock lost 50 percent meaning that i'm
down 50 000
i closed that investment entirely
showing a realized loss of fifty
thousand dollars of investing for this
year that loss of fifty thousand dollars
is now a write-off there are two
limitations for this number one is for a
married couple filing jointly up to
three thousand dollars per year in
realized capital losses can be used to
offset capital gains the second is that
the irs bans investors from deducting
capital losses on the sale of a security
against the capital gains of the same
security or similar which is called a
wash sale so once you have that realized
loss of fifty thousand dollars basically
you just chop that up into three
thousand dollar sections so with that
fifty thousand dollar loss and being
able to write off three thousand dollars
per year of that you get a three
thousand dollar write-off for the next
16 years so how does that help people
let's look at the profit that we made
off of tesla we are up 50 on our
investment in tesla so what we can do is
sell off three thousand dollars worth of
profit on that investment and because
you lost money on your ford stock you
don't have to pay taxes on your profit
that you made from the almighty tesla
this tax lost harvesting technique is
used by
every single investor
every single year throughout the first
three weeks of december causing a
majority of the market to drop down
randomly on random days so if your
analysis is showing an uptrend and then
it massively reverses on you one second
that's a large chunk of people selling
off their losing positions and or
selling off their winning positions but
it's not all bad news you can still make
a good profit in december if you know
when to trade statistically 16 of the
last 19 years the last week of december
is known as the santa claus effect where
everything in the markets goes up this
is due to a few factors like the tax
lost harvesting prices being undersold
people picking up things that are on
sale as well as people getting christmas
bonuses and spending income on things
causing the overall economy to show an
upswing so statistically since 1950 75
of the time so of those years 75 percent
of the time the last week of december
has shown an upswing so you might be
asking yourself just like i did a few
years ago why would you take that loss
and have realized loss versus holding it
until it was actually in profit it's 100
just for the tax benefit what these
people do is they sell off their losing
positions and then move that exact same
amount of money into something else
that's quite similar or performs
similarly to the stock that went down so
like i said before the irs bans
investors from doing a wash sale so
selling off ford and then buying right
back into ford you are not allowed to do
that but you could sell off ford and buy
back into tesla now that transaction
right there is only relevant to
securities cryptocurrencies however do
not have that rule so if you've had a
massive loss on shiba inu you can sell
off your entire position and then buy
right back in toshiba i'm assuming by
next year that might change but right
now you can do that so if you want to
see this firsthand what you can do is
take us 30 or the s p 500 zoom it out to
a one week chart and you can get a big
picture and look at specific months each
year to see what the price did and if
you've noticed i drew a big ass trend
line right here because it's respected
this line quite well one more thing that
i wanted to touch on really quickly not
relevant to tax lost harvesting and the
december effect and the santa claus
effect is that when the market drops
keeping an eye on the big picture on the
weekly chart and watching this trend
line to see what the price is doing
being very far away from it maybe
wanting to pull back you'll have a great
indication on when to get into the
market on a long-term investment like
investing into the s p 500 etf funds or
something similar like voo or vti and
when markets are taking a dump like they
did in 2020 during the start of the
pandemic where we saw a 38.19
drop in the market using the information
that you've learned off of this channel
in support and resistance and trend
lines you knew exactly when that price
was going to stop and what do we do when
we're looking at support and resistance
we look left where did we have the most
support right there so when the price
dropped
it barely touched that line and shot
right back up so because i'm nostradamus
and i can predict the future the next
drop that we have is going to cross that
trend line and get to this level right
here on us 30. jesus the market has
rebounded a hundred percent since that
drop at the peak of the pandemic anyway
i hope this video was helpful for you
understanding why your technical
analysis isn't working a majority of the
time during the month of december it
might be showing a perfect uptrend and
then randomly at like 12 13
stopped out of your position it's people
selling off their losing positions and
taking profit on their winning positions
it happens all across the industry on
all different asset classes so don't
feel bad as a day trader it happens to
everybody that's why a majority of day
traders do not even trade during
december and the beginning part of
january now i know this video wasn't
your typical technical analysis or
learning a new strategy but if you guys
enjoyed this video and you want to see
more videos like this let me know down
in the comment section and i will make a
ton of them because there's a lot of
information like this that i can make
videos on now if you guys do want to
learn about day trading and all the
strategies that i teach on this channel
check out my intermediate playlist right
here and if you did enjoy this video and
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dropping a like and subscribing to the
channel right here thanks so much for
watching and we'll see you in the next
video