The gravitational pull of the moon controls the earth's tides. Given that the human body is largely composed of water, it is no surprise that lunar cycles profoundly impact human emotion—and by extension, the financial markets.
The Full Moon Effect
During a Full Moon, emotions run high. In trading, this manifests as extreme volume spikes and peak market euphoria or panic. Retail traders are most likely to make impulsive decisions during this phase.
Swing Trading Strategies
As a swing trader, the Full Moon can be utilized as a powerful reversal indicator. If a stock has been rallying aggressively leading into a Full Moon, the cosmic energy often signals an impending exhaustion of buyers. This is an optimal time to tighten stop-losses or take profits, rather than initiating new long positions.