Most Forex traders look at their intraday charts, whether is a 15 minute, 5 minute, 2 minute, or 1 minute chart to make their decisions on when to enter a trade. There is one often ignored market predictor that will improve your chances of succeeding in many of your trades. That predictor is the season in which the trade is executed. 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 rate.
What You Should Know About Seasonal Trading
There is a common way that people usually look at the charts, and that’s following chronological order. Usually, a chart provides valuable information for Forex investors on the movement of currency throughout the years, months, weeks, all the way 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 Forex seasonal charts or patterns, so what does it mean? Seasonality works on the basis that the movements on the Forex market follow specific patterns throughout the year. Years of accumulated data is usually observed to come up with a trend that a currency follows. In this regard, we can pinpoint certain times in the year that a currency pair is expected to be higher or lower.Now that it’s obvious that the movements of the Forex market tend to follow certain fashions at different times of the year, there is an opportunity to make profits by integrating seasonality patterns along with your Forex strategy.
Seasonal patterns in EUR and USD
Is there a seasonal pattern in EUR and USD? By observing EUR/USD futures we can expect to see either steadiness or decline, this shows that we can pinpoint certain times of the year which are predictable turning points. For instance, by around March, we can anticipate the EUR/USD to soar after plummeting during the second half of February. By April, we can expect relative steadiness in EUR/USD and a downward spiral from August up to the second half of September.
As we can see, seasonality can be pretty effective, but this is not to say that these patterns are not subject to change without warning in any year. One important thing to note is that you should not rely on seasonality pattern exclusively when trading in Forex. It is best to use seasonality to back up what technical analysis indicates.