If you are not new to the forex world, you would probably know that to earn profit and be consistent, you have to bit other traders and need to stay ahead of them. The foremost thing for this is to be updated with world news and events which can affect the forex market. You also have to give sufficient time and effort to analyze and understand these events that can have a significant impact on various currencies. Though with time, and experience, this task becomes easy and quick.
Experienced forex players also utilize such global events into their favor by taking thoughtful market moves. As a result, they predict any changes in the forex realm even before the news is officially announced.
Yeah, you are correct. Not every movie can be accurate, but there is no guarantee in the market, right? Financial markets are dynamic and moody. You have to understand it thoroughly to know its mood swings.
A forex calendar or an economic calendar is a schedule that shows important dates and pre-decided events that are going to happen in the year which would have a significant impact on the markets. It can impact only a few or major currency pairs or can have an impact on the entire forex market. The good news is that most trading websites provide such calendars for free. Forex calendar helps traders in being updated with the crucial news, events, and statements or reports getting released across the globe. Using a forex calendar ensures that a trader gets important information on economic and non-economic indicators and based on that can predict the market movement, current market trends, and much more with ease.
In this article, we will not discuss related to the daily economic calendar, we will analyze long term cycles, seasonality from the book Forex Calendar Trading Patterns.
Forex Calendar Trading Patterns
Forex calendar trading patterns are trading patterns, systematic movement of a security’s price during a period of time, which traders can detect using foreign exchange seasonality.
These patterns are represented in the book “Opportunities in Forex Calendar Trading Patterns” and lectures made by John Forman.
In the video below traders can watch a summary of the book :
Forex calendar trading patterns can be analyzed as seasonality by trading day, week, or month. For example, the frequency of up or down based on the day in the week is different. The beginning of the month (the first 7 days), based on range theory, is important in the determination of the whole month because if the highest high or lowest low from the monthly opening range is broken there is a high chance that the month will be bullish/bearish.
The same thing is if we analyze the yearly opening. The first several days in January can predict the whole year or the first 6 months. Of course, we are talking about a 52%-55% probability based on currency pair.
Let us see the EURUSD example. Last 25 years, if we buy EURUSD above 5 daily moving average in December and sell EURUSD below 5 daily moving average in January we can gain profit (344 pips from 1997 till 2014 by John Forman). EURUSD tends to be bullish in December and bearish in January based on seasonality analysis.
You can learn more about seasonality if you read COT reports.
Forex Calendar Trading Patterns or seasonality patterns can be used either in long term investment strategy or in swing trading. Probabilities are small but can increase the efficiency of trading performance.