Question: How reliable is seasonal data? Is making money from it all that simple?
Answer: To answer the second question first – no it’s not always simple. Anyone that tells you they have a trading method that is foolproof is either a fool or a liar. This is why you need to get good information.
There are times when any trading method works well and other times when it does not. Seasonal trading is no different. 2008 was a great year for seasonal trading. 2007 was not so good for seasonal trading but 2006, 2008, 2009 and 2010 have been terrific.
So, how reliable is seasonal data? The data I use goes back as far as 25 years and looks for high correlation patterns – patterns that appear to be reliable. In fact normally I look for trades that show a strike rate of at least 80%. Sometimes the trades I look at have a historical strike rate of 100%. But that is the past. That is no guarantee that the trade will work tomorrow. What is guaranteed is that all trades are based upon sound historical data and reasoning that offer a higher probability of success.
Pick up Market Wizards or any other similar book and the traders will tell you short term trading success ebbs and flows, but the key is to have a sound trading method with respect for risk as this will win in the long run.