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Forex Trading Strategy: Profits from Following the Calendar Patterns

Traders, in general, have understood the seasonal patterns, which is usually associated with commodities trading. The simple fact that many novice currency traders doesn’t know is that the foreign exchange market also has such calendar patterns. The patterns influence trading significantly, and just like in commodities trading, forex traders can take advantage of the calendar patterns to improve their success and profits.

Monthly patterns

Almost all currency pairs have at least one month, in which they have a directional tendency. There are exactly three pairs which have traded in the same trading direction during a certain month for at least seven years in a row: AUD/JPY has risen in January, USD/CAD has gone downward in June, and USD/JPY has declined in August. In those, the moves have been significant and can be benefited from by traders.

Let us take USD/JPY as an example.

On average, USD/JPY has fallen over 325 points each year since 1999 in August (a 2.80% drop.) While the percentage of the decline doesn’t seem huge, when you consider leveraging it, you can have an opportunity to score big. If a trader has invested 100,000 USD/JPY at the start of each August and closed the position at the end of August, the total profits would be $20,000 (excluding interests.) What an outstanding return, and it doesn’t even consider the compounding effect of your investment!

Weekday patterns

If you are a day trader (short-term trader, if you will,) there are also behavioral patterns based on weekdays. As in stock trading, this is a little bit more complicated. Combined with the monthly patterns, the result is patterns occur on certain weekdays, in a given month.

For example, let us take GBP/USD on Mondays in December.

The GBP has risen 73% on Monday during December since 1999. The average move: 4 pips. With the assumption of a 5 pip spread, a trader who was following this pattern for 7 years from 1999 would have made more than 1000 pips in profits, equaling to more than $10,000 if he or she took positions of 100,000 GBP/USD every time.

Using the patterns

The examples above are just a couple of the patterns can be discovered in the foreign exchange market. You could definitely follow the enter-and-hold trading based on the patterns, but you must take into consideration that despite the calendar patterns are somewhat predictable, the market will always move and new trends will rise and the patterns will change, somehow.

A trader who is looking to employ the calendar patterns must do his/her due diligence (e.g. risk procedures) as something needs to be done regardless of the trading strategy he/she employed.

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