I can feel the changing of the seasons in the breeze outside.

Time to put the beach ball away (when was the last time you actually SAW a beach ball at the beach?

I’m getting so old) and get ready for what I call “business season”.

Yes, Fall is almost here again, and I’m starting to get excited.

Not because I like cooler weather and less time in the sun, but because Fall brings great forex trading usually!

After a sometimes very frustrating Summer of ranges and moves that sputter out, we can potentially start shifting gears this week as the door opens to bigger markets and better trading.

Trading the currency market can be a remarkably seasonal venture in many respects.  Each time of year brings with it nuances that need to be recognized in order to get the most from your efforts in the market.  From my experience in forex, there are distinct “seasons” within the year that affect trading in many respect.  As we just saw, Summer usually brings with it rangy markets, limited participation with so many traders being on holiday, and many moves that die out as quickly as they began.

You see, politicians like their summers too and we often see a dearth of important news drip out throughout the hotter part of the year (for the northern hemisphere at least), which although tends to cause spikes, usually doesn’t lead to major breakouts into new trading territory.  As Fall descends on us, we see the politicians get back “on the clock” and many bigger traders get back to work.  From about the middle to the end of September, we see market participation increase back to some of the highest levels of the year.

Why is it important to us??

1. Higher Liquidity Means Potentially Better Moves:  As we get many more people actively trading the market, this gives us the momentum to finally get price on many pairs to make substantial movement rather than just sputtering out.  This can lead to extended moves which travel much further than the couple-hundred pip ranges we have seen week-in and week-out.
2. Politicians Get Active:  Holidays are over and time to start creating much more substantial “catastrophes”.  In addition to the increased participation from traders themselves, Fall usually brings with us a bigger helping of important news and decisions from the ruling class.  The spikes we see from news during the Summer, become potentially BIG moves from news during the Fall.  Politicians seem to make many important decisions after they get back from their holidays and often time, elections are held during this part of the year, which can dramatically effect the way the market views different players in the market.
3. Hooray Bigger Daily Ranges:  Fall also seems to expand daily ranges of pairs from higher participation, and more direction in the market.   It is much easier to pull 50 pips out of a 200 pip daily range than it is a 60 pip daily range.
4. Trading Style Shift:  Rather than aggressively moving our stops all the time to make sure we don’t get caught up in small-market chop, we can start thinking about being a little more conservative in our order management.  Along with bigger daily ranges, comes the necessity for patience in moving stops to ensure we capture the big moves that potentially lay ahead.  We start looking for bigger targets and breakouts instead of bounces off of the ranges.

So we have much to look forward to, but don’t get ahead of the market.  We must first see currency pairs “wake up” and shake off Summer before we go assuming Fall is in full swing.  Keep an eye on daily ranges.  We should start to see the 5-day range break upwards first, followed by the 10-day and finally the 30-day avg.  A good indication Fall is upon us will be a breakout of an area that has held strong for the last few months.  I’m sure we all have our “usual suspects” like the 1.3400 area on the Eur/Usd, the .9300 area on the Aud/Usd or the 132.50 area on the Eur/Jpy.  Patience pays my friends.  Let’s see the volumes and the movement before we get to involved in trying to catch bigger moves.  There are no guarantees we will see anything I have mentioned above, but from a probability standpoint, we have a much better chance of seeing more desirable markets very soon.

Author: Omar Eltoukhy