Many traders think that price action means only intraday opportunities. Not the case! In fact, the January Effect can be used for big swing trades. The Atlas Line may produce two to four points of profit for a given day, but in comparison, for a few days holding a position, the January Effect may quadruple those profits.
Of course, trading is high risk. When holding positions for multiple days, it becomes even riskier. Check with your licensed broker and financial advisor to see if this type of trading is a suitable for your unique circumstances.
John Paul believes the January Effect can accurate predict whether price will close higher at the end of the year. According to him, the year’s upward trend will occur if January of the same year also trended upward, closing higher for the month than it opened. If price is expected to go higher, then it’s a matter of finding low points where price is expected to crawl back to previous levels.
In the video, John Paul gives several months worth of examples. He uses the Fibonacci tool to find the 50% retracement point. That’s the entry point. Then you ride it back upward to around the previous high.
According to John Paul, the January Effect is a rather secret technique employed by traders for decades. If your charting provider allows it, test the method for yourself. Go back for the last 10 years, and see how many times January closed higher than it opened, then also check if price closed higher in December of the same year.
You’ll probably need to use daily charts, although switching to a monthly will provide the largest picture. Most platforms support monthly and yearly charts, including MetaTrader.