Many markets exhibit a typical pattern over the course of the year from which investors can benefit. What needs to be considered is discussed in this episode on technical analysis.
When observing the financial markets more closely over a long period of time, typical price developments within the annual cycle are noticeable in various markets. These seasonal trends can in part be attributed to clearly identifiable recurring fundamental drivers. This is very obvious and has been known for centuries in the area of agricultural commodities. The periods in which the harvest is sold or bought and the periods in which there is a risk of frost or drought play an important role there. However, seasonal patterns can also be found in other commodities, interest rate markets, foreign exchange markets and stock markets. For the most part, there are plausible explanations for these typical price developments, but in other cases the causes are unclear or disputed. Some investors who incorporate seasonal analysis into their arsenal of decision-making tools use it only in markets where, from their perspective, the root cause of the patterns is sufficiently understood. Other traders, on the other hand, proceed pragmatically and do not question the causes as long as there is at least a historically obvious pattern.