Now of course there are other factors too numerous to list that can affect the futures markets , but certain conditions and events reoccur at annual intervals and help traders anticipate where the market is headed. The annual cycle from warm to cold weather and then back again affects all the agricultural commodity markets as their supply and demand coincides with the planting and harvesting seasons. However, the annual weather pattern can stretch its power to all the commodities. For example, demand for heating oil typically rises as cold weather approaches but subsides as inventory is filled and decreases even more as the summer months get closer.
The calendar not only gives us climate related seasons, but also the annual passing of important dates that then creates 'seasons' of its own. The due date for filing U. Monetary liquidity may decline as taxes are paid, but rise as the Federal Reserve recirculates funds. These annual cycles in supply and demand give rise to the seasonal price phenomena or what we would simply call seasonality. This annual pattern of changing conditions may cause a more or less well-defined annual pattern of price responses.
Trading Spreads and Seasonals by Joe Ross, Other Format | Barnes & Noble®
Seasonality, then, may be defined as a market's natural rhythm-an established tendency for prices to move in the same direction around similar time most years. In a market strongly influenced by annual cycles, seasonal price movement tendencies may become more than just an effect of seasonal cause. It can become so ingrained as to become nearly a fundamental condition in its own right - almost as if the market had a memory of its own.
Once consumers, producers, traders, and the like fall into a particular pattern, they tend to rely on it-almost to the point of becoming dependent on it. This dependency can be tricky as such trading patterns do not repeat without fail. The seasonal methodology, as does any other, has its own inherent limitations. For instance, some summers are hotter and dryer than others thus leading to less of a supply than what was predicted for the fall.
Recommendations for Spread/Seasonal Futures Trading Books
Even trends of exceptional seasonal consistency are best traded with common sense and caution. A basic familiarity with current seasonality fundamentals and a simple technical indicator will help enhance selectivity and timing of entries and exits. The Moore Research Center MRCI is one of the leaders in assessing these seasons and has evaluated up to 55 years of history against the market behaviour of current contracts. MRCI presents a list of fifteen seasonal futures spread trading ideas each month, covering all commodity sectors: grains, energies, currencies, livestock, etc.
Every spread they present has shown at least an 80 percent historic reliability over 15 years when available and Moore Research provides detailed statistical data for every year the individual spread has been tracked.
Their spread trading cycles last anywhere from a week or so up to around 3 months. Most of them average about weeks.
Each spread has a pre-determined entry and exit date along with a pre-calculated point at which the spread would be exited if it became a loser. Every spread is updated each day on their web site from the day it goes on to the day it comes off and their results are recorded. No representation is being made that any account has in the past, or will in the futures, achieve profits using these recommendations.
No representation is being made that price patterns will recur in the future. Each investor must consider whether this is a suitable investment.
All funds committed should be risk capital. Past performance is not necessarily indicative of future results. Moore Research Center, Inc.
By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. We do not guarantee that such information is accurate or complete and it should not be relied upon as such.
What is a Futures Spread?
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