seasonal patterns in forex - actual edge or just pathological data mining
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been reading about forex seasonal patterns - things like the january effect, year-end dollar weakness, summer low volatility. some of it seems statistically grounded but i'm skeptical because it feels like the kind of thing that gets data-mined into significance.
do seasonal patterns have genuine predictive value in forex, or is this mostly cherry-picked historical data?
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some seasonal effects are grounded in structural reasons which makes them more robust. calendar year-end dollar flows are real because multinationals repatriate foreign earnings in december. q1 japanese fiscal year-end creates yen repatriation flows every march. these have structural causes and show up consistently enough to be worth tracking. purely data-mined 'august is bearish for cable' type patterns are much weaker.
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the structural seasonal effects are the right ones to focus on. to the list above add: cad tends to see strength into opec meetings if oil is in focus, major emerging market central bank calendar events create seasonal fx volatility windows, and summer (june-august) across all majors tends to see lower volatility and thinner liquidity. these have market microstructure reasons behind them.
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even the structural seasonals only manifest when the structural driver is dominant. every other macro factor can override them. a 'seasonal dollar weakness in december' argument is worthless if the fed just hiked rates. you end up with a framework that's always true except when it's not, which is not a framework.
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the troll is right that macro overrides seasonals. the proper use is as a tiebreaker or additional confluence rather than a primary signal. if you have a setup you like and seasonal flows support the same direction, that's a small positive. if seasonals oppose your primary setup, it's a mild negative. it's one input in a multi-factor read, not a standalone reason to trade.
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i use a simple seasonal calendar - just the structural ones with clear reasons. japanese fiscal year end march 31, mbs rebalancing mid-month flows, quarter-end rebalancing flows. when those windows approach i'm more alert to the direction they suggest and lighter on trading against that direction. it costs me almost nothing and occasionally gives me a small tailwind.
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