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SEASONALITY--HOW IT APPLIES TO THE FX MARKET

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SEASONALITY-HOW IT APPLIES TO THE FX MARKET Most traders attempt to analyze the future direction of currencies by using either fundamental or technical analysis—or if they’re feeling particularly crafty, a combination of both. However, many traders may not realize that the clearest way to analyze past price behavior may be to look at the price activity itself, without the noise of the indicators. One way to do this is through seasonality. Stock traders may be very familiar with the concept of seasonality, because one of the most famous cases of seasonality is the January effect in equities. First identified in 1942, it was publicized by Robert A. Haugen and Josef Lakonishok in 1992 through their book The Incredible January Effect: The Stock Market’s Unsolved Mystery (Irwin Professional Pub., 1987). The theory behind the January effect is that stocks perform particularly well in the period between the last day of December and the fifth trading day of January. The reason fo