Seasonal analysis

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jross

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Post Number: 6
Registered: 03-2004

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Wednesday, March 24, 2004 - 03:17 am:

Seasonal analysis provides knowledge ahead of time as to what kind of market behavior to anticipate. It also indicates when such behavior will take place. A cool, calm trader can then choose his own opportunities on his own terms.

Traders with no idea of what to expect instead react – often excitedly to the latest hot tip or rumor. A primary function of any market is to anticipate the future. Traders constantly bombarded by frequently conflicting – and, to the market, old – news can be whipsawed emotionally and financially. Most give up and quit, a few learn and adapt.

Many who survive eventually become more familiar with market fundamentals. But no one can ever know everything at all times about any market, let alone several. Even good fundamental analysis too often lacks an element crucial for futures trading – market timing.

For timing, many traders turn to technical analysis. But pure technical analysis can be subject to false signals, changing conditions, and inconsistency (in both indicators and application). Even a good technical analyst can too easily misinterpret or change his opinion of market direction.

Seasonal analysis certainly has its own inherent limitations. If used in a vacuum, relying solely on the past to anticipate the future ignores the present at some risk. Seasonal research identifies the “norm,” which almost by definition does not always exist. Even when basic conditions are normal, the timing of a market's response can vary with short-term fundamentals.

But a trader familiar with normal market direction and timing can better read the current market. Identifying a market performing contrary to the norm can be just as valuable as finding those that are behaving normally. In providing context, seasonal analysis puts the current market in better perspective.

Since not everyone has time to do extensive seasonal analysis – we are among those who don’t – we are happy to make use of Moore’s Research for gathering such information. At Moore’s Research not only can you find long-proven seasonal trades, but you can also find charts showing whether or not a particular market is behaving seasonally.

This article was contributed by JOE ROSS (TE)}}