Historically, the stock market does not usually go up on Monday; in fact, it has often experienced lower returns or a downward trend, a phenomenon known as the "Monday effect" or "weekend effect". Monday and Friday have historically shown the lowest average daily returns compared to other weekdays.
However, some traders and investors believe that markets tend to trend downward on Mondays. This can mean much lower returns on Monday than there were to be had on Friday, making Monday traditionally known as a good day of the week to snaffle up potentially undervalued stocks and indices.
According to the theory, if the market moves up and closes higher on a Friday, it will open higher during the first few hours of trading on the following Monday and vice versa if it closes lower. Frank Cross first reported it in a 1973 article published in the Financial Analysts Journal.
The 3-5-7 rule in day trading is a risk management guideline: risk no more than 3% of capital on any single trade, keep total open exposure under 5%, and aim for profit targets that are at least 7% of your risk (or a 7:1 reward-to-risk), encouraging disciplined position sizing and diversification to protect capital and improve long-term consistency.
Many traders avoid Mondays because the market often lacks clear direction after the weekend, with lower liquidity and sudden gaps. Waiting allows them to see how trends stabilize before committing capital.
Gary Shilling explains the only way to beat the market and win
What is the 90% rule in trading?
The "90 Rule" in trading, often called the 90-90-90 Rule, is a harsh market observation stating that roughly 90% of new traders lose 90% of their money within their first 90 days, highlighting the high failure rate due to lack of strategy, poor risk management, and emotional trading rather than market complexity. It serves as a cautionary tale, emphasizing that success requires discipline, a solid trading plan, proper education, and managing psychological pitfalls like overconfidence or revenge trading, not just market knowledge.
Saturdays and Sundays tend to be the least favourable days for trading forex. Most traders tend to avoid trading forex during holidays and around major news events.
In bear markets, Mondays and Tuesdays tend to be the most volatile, which means stocks fall the most on these days, according to J.P. Morgan Wealth Management. When this happens, you're usually better off standing pat rather than selling or buying.
He emphasized that factors such as weekend news, investor sentiment and traders adjusting their positions can create downward pressure on the market. For active investors, this can make Monday a less favorable day to sell.
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Our analysis of over 6,200 trading days shows that Tuesday has historically produced the highest average daily returns at 0.062%, while Friday and Monday show the lowest average returns at about 0.009% each.
The 2% rule in trading is a risk management strategy where you never risk more than 2% of your total trading capital on a single trade, protecting your account from significant drawdowns and ensuring longevity. To apply it, calculate 2% of your account balance as your maximum dollar loss per trade, then determine your position size and stop-loss to ensure you don't exceed that dollar amount if stopped out. This helps manage emotions and survive losing streaks, allowing consistent trading, unlike risking larger percentages that can quickly deplete capital, notes Phemex.
In theory, day trading offers the opportunity to earn a lot of money in a short period of time. However, the chances are extremely poor: only around 3 % make profits in the long term.
The 3-5-7 rule in trading is a risk management framework that sets specific percentage limits: risk no more than 3% of capital on a single trade, keep total risk across all open positions under 5%, and aim for winning trades to be at least 7% (or a 7:1 ratio) greater than your losses, ensuring capital preservation and promoting disciplined, consistent trading. It's a simple guideline to protect against catastrophic losses and improve long-term profitability by balancing risk with reward.
