A1 Trading Company

January 11, 2024

Market Seasonality: What Seasonality Can Tell You About The Markets

A1 Trading

Understanding market seasonality will help you improve your win rate when trading forex, stocks, futures, etc. The market is known to outperform while other months the market is known to underperform. Understanding these changes in seasonality will help you understand why a market and give you insight of how it may perform in future months.

What is Seasonality?

Seasonality is how markets historically perform month to month. For example, you could look at how SPX500 trends in January over the last 10 years. Referring to the chart below, you can see that historically speaking, SPX500's best performing month is November. November is election month in the United States which may explain why November is historically SPX500's best month.

SPX500 Seasonality Data using the EdgeFinder's Seasonality Scanner

How to Use the EdgeFinder's Seasonality Scanner

The EdgeFinder takes the 10 year average of different assets and portrays this data into monthly and weekly charts. According to the data in the image below, you can see that the current week, as well as the next week, are historically good weeks for the VIX. Additionally, the month data shows that the current month is a great month for the VIX historically.

How Seasonality Data Compares to the Charts

Looking at SPX500's performance in 2023, you can see that price was steadily increasing until around September where it saw a decline. In November, SPX500 took off continuing to increase into December. If you compare this to the seasonality data, this aligns almost perfectly. The seasonality data shows that September is historically the worst performing month while November is historically the best performing month.

While seasonality is not the holy grail of trading, it can be very powerful when used in confluence with other fundamental data and technical analysis.

More resources for traders

How to read seasonality data on the EdgeFinder

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DISCLAIMER: All comments made by TraderNick’s Forex Group, LLC are for educational and informational purposes only. All comments should not be construed as investment advice regarding the purchase or sale of any securities or financial instrument of any kind. Please consult with your financial adviser before making an investment decision regarding any securities or financial instruments mentioned by TraderNick’s Forex Group, LLC. TraderNick’s Forex Group, LLC assumes no responsibility for your trading and investment results. All information on any of the platforms utilized by TraderNick’s Forex Group, LLC was obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. TraderNick’s Forex Group, LLC, its employees, representatives, and affiliated individuals may have a position or effect transactions in the securities and financial instruments herein and or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies. Trading of any type involves very high risk and may not be suitable for all investors. TraderNick’s Forex Group, LLC, its subsidiaries and all affiliated individuals assume no responsibility for your trading and investment result. Read our full disclaimer here
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