To know when you should be trading in the market, I’m not only covering the best time of the year, but also the best days of the week and month, and explain why volatility is so important to figure this information out. I’m also going to dig into why the summer is such a drag when it comes to the Foreign Exchange market.
From late Sunday to Monday, the market shows a history of very slow development. Then, the market typically picks up the pace and also peaks on Tuesday, with a minor decrease of activity on Wednesday, with another increase on Thursday. Thursday is the highest day for volatility followed by Friday.
We all know that Friday is the day the market closes for the weekend, so all activity closes and goes into sleep mode. So, the best days to trade throughout the week are midweek days. Now, the best months to trade are January, February, March, April, and May. After these months, volatility usually slows down for the summer months of June, July, and August.
The second good trading period of the year to trade occurs in Autumn and is the most volatile part of the year you will see. September, October, and November, but when it comes to December, it's considered a generally good month for trading. However, there's always a noticeable decrease in activity in general with the holidays in tow. Just so you’re prepared, any time a holiday is coming up, there's typically a drop in market activity. After the holiday period ends, however, you will notice a pick-up in market activity because I like to think people have spent money for the holidays and are trying to put some money back into their bank accounts.
There’s a saying amongst Forex traders, and they call the months you should be focusing on for trading the Autumn boom, Christmas freeze, and Spring marathon.
The Autumn boom, for example, relates to the majority of traders that are returning to the markets after the summer holidays have passed, and business activity in other industries pick up around this time. This makes Autumn months the best time of year to be trading in the Foreign Exchange market.
Shawn Lucas encourages you to trade at all times of the year. If you're trading in the summer during downtime, and notice the lack of volatility, it's good for you to learn to read the market at times like this so you can know what to expect.