What is seasonal trading?

Question: What is seasonal data?

Answer: The ProTrader Digest uses seasonal data in every trade selection.

Seasonality refers to a pattern that depends on, or is controlled by, the time of the year. Seasonality appears in many places. For example, sales of Christmas cards logically peak before Christmas. Accounting business peaks around end of the financial year. Sales of red roses peak just before 14th February. Many businesses, products and statistics are subject to seasonal variations. For the trader, it can mean opportunity.

Consider the demand for beef. In any economy, demand is greatest when the weather is the coolest. Logically more people eat roast dinners in the winter than they do in the summer. While demand for beef is high during BBQ season it tends to be less than good old home cooked dinner demand. On the supply side, during winter, weight gain in Live Cattle is low. So during the US winter, demand is high and supply is tight. This translates to a seasonal variation in price. With a well timed trade, you can make money from this seasonal pattern.

From the above reasoning, you could say seasonal analysis is a style of fundamental analysis since it considers supply and demand factors. However, it is also technical in that it follows price patterns. Anyone who has studied statistics or economics knows seasonal analysis is common place. Things like retail sales numbers are often adjusted for seasonal variations.

There are seasonal influences in many markets. Herein lays the trading opportunity. A seasonal trader needs to be aware of these seasonal influences either by studying the fundamentals or the technicals (or both) to take advantage of these patterns.

I use several databases of seasonal data stretching back up to 25 years. I essentially take the available technical information and attempt to filter it down into selected profitable trading ideas.

-Guy Bower