Seasonal Trends in the Forex Market
Forex trading that we know is to make the sale and purchase of foreign currency. There are dollar-based and also other cross currencies. If you are familiar with trading, you may often face two options: the dollar strengthened or the dollar weakened.
As a component of more than 85% of all currency transactions, the US dollar is indeed a major driver of exchange rate fluctuations. Most traders will analyze the direction of the next dollar by using fundamental or technical analysis or a combination of both. However, few traders realize that the annual time frame can also play a role in how the US dollar is behaving against many other currencies.
Most traders may also not realize that there is no clearer way to analyze past price behavior than to see the price activity itself without the intervention of the indicator.
If you only see the price, you may see a pattern known as the seasonal trend in the forex market. Seasonality is a predictable change that repeats every year in the same period in time. For example, you may not realize that in eight of the last 10 years, the US dollar fell in May against the Canadian dollar. Or in eight of the last 10 years, the US dollar fell against the Japanese yen in August.
There is no guarantee that historical patterns will repeat exactly but every time a pattern repeats 80-90% of a given time frame, it becomes statistically significant. This can be very valuable information.
As a trader, you will have many ways of applying seasonal trend knowledge to improve and improve your trading. For example, if you are trading GBP / USD in September, as a long-term trader you can look for opportunities using fundamental or technical to buy GBP / USD or to suit the direction of seasonal trends. As a short-term trader, you can reduce your floating period if you are trading in opposite directions with seasonal trends.
Although the seasonal pattern does not duplicate itself 100%, following a seasonal trend rather than fighting it surely it can improve your ability to find trading positions with high probability.