Seasonality is a major force in the markets. It has been so for many years and this
is not about to change. Whether you trade stocks, commodities or commodity spreads,
the odds are that seasonal tendencies will be one of your best and most consistent
tools in the never-ending quest for trading profits.
While most everyone has an intuitive sense of what the meaning of “seasonality”
is, it’s good to have a working definition. Our definition is simple:
“A seasonal price tendency is the propensity for a given market to move in a given
direction at certain times of the year.”
Seasonal price tendencies can be found in virtually all commodity and stock markets
as well as in a variety of economic data. The cash commodity markets have exhibited
strong seasonal behavior for many decades, and there is also seasonal behavior in
Seasonality is not limited to the agricultural commodity markets since seasonality
is not only a result of weather. Seasonal behavior is caused by many factors including
demand for raw commodities which is influenced by patterns, cycles and trends in
consumption, supply and demand.
There are those who claim that seasonality does not exist or that it does not provide
us with information that can be profitable. History is the ultimate judge of which
side of this argument is correct. As you will hopefully find in these pages, there
is a plethora of highly convincing evidence that seasonality is alive and well in
Furthermore, the strength of seasonality is so profound that traders who do not
use seasonals in their work or who are not aware of major seasonal patterns are,
in our view, at a distinct disadvantage. The reliability of seasonality is so far
ahead of most other trading methods that it puts them easily to shame.
We do not always know the reasons for seasonal price movements. While, knowing ‘why’
makes some traders more secure, our concern is not with the WHY of things, but rather
with the THAT of things.
Some Words of Caution
Far too many traders in the futures markets lose their money. Why? There are many
reasons for this but among the most common are the following:
- Many traders begin with insufficient capital and overextend their margin.
- Too many traders overtrade - they end up paying out more money in commissions than
they make in profits.
- Very few traders truly understand how to play the game. They lack not only the knowledge
of trading methods but they also lack some of the basic skills such as order entry,
effective risk management, diversification of assets, and profit maximizing strategies.
Seasonals are not the 'Holy Grail' of futures trading. They are just as fallible
as any other trading method. Yet, seasonals do represent a stable and sensible approach
to trading since they are based on the well established tendency for history to
repeat. There is nothing as good as having the weight of history on your side. And
that's what seasonals can do for you. But remember, no matter WHAT the seasonals
say, you MUST exercise effective risk management if you want seasonals to work for
you. ALWAYS limit losses. If you don't then you'll ride losses which will eventually
eat up all your profits and much, much more.
Although the resources offered here at SeasonalTrader.com cannot resolve all of
the above issues, we believe that they will prove valuable in helping you move toward
the higher probability end of the spectrum. All of the recommendations on SeasonalTrader.com
have had a lengthy history of accuracy. And while “past performance does not guarantee
future results,” past performance in seasonals has shown itself to be a very reliable