Most Forex traders review their charts throughout the day, whether it be a 15-minute, 5-minute, 2-minute, or 1-minute chart, to decide when to enter into trades. There is one often ignored market predictor that will improve your chances of success in many trades. Such a predictor is the season in which the transaction takes place. By learning how to do seasonal trading and how seasons affect currency pairs, you will add another winning strategy to your portfolio and improve your trading success.
What you need to know about seasonal trading
There is a common way people usually look at charts and it is in chronological order. Usually a chart provides valuable information for Forex investors about currency movements over years, months, weeks, down to minutes. However, this is not the only way to observe currency charts: another way is to observe them seasonally.
This Forex strategy is also called seasonal Forex charts, or what does it mean? Seasonality works based on the fact that movements in the Forex market follow certain patterns throughout the year. It is commonly observed that years of accumulated data reveal a trend that the currency follows. In this regard, we can determine a specific time of year when the currency pair is expected to be higher or lower. It is now clear that the movement of the Forex market tends to go in a certain way at different times of the year, there is an opportunity to make a profit by integrating seasonality and Forex strategy.
Seasonal samples in EUR and USD
Is there a seasonal pattern in EUR and USD? By observing EUR / USD futures, we can count on either stability or a decline, this shows that we can identify certain times of the year that can be predictable turning points. For example, around March we can expect EUR / USD to soar after a sharp drop in the second half of February. By April we can expect relative stability in EUR / USD and a downward spiral from August to the second half of September.
As we can see, seasonality can be quite effective, but that doesn’t mean these patterns can’t change without warning in any year. It is important to note that Forex cannot be traded solely by seasonality. It is best to use seasonality to reinforce what the technical analysis shows.