Lecture Notes: Seasonal Tendencies in Dollar Index Trading

Key Concepts

• Seasonal Tendencies: Patterns observed in markets over a specific period.
  • Not foolproof but serve as a useful guide.
  • The Dollar Index often forms a low during the last week of September and the first week of October.

Dollar Index Seasonal Patterns

• 15-Year vs. 33-Year Patterns: Comparing long-term seasonal trends.
  • Strong correlation between 15-year and 33-year averages signifies a noteworthy pattern.
• Timing of Seasonal Lows
  • Bullish years may see lows as early as September 21.
  • Weaker years might see this in mid-October.
  • Specific dates are less critical than identifying the window for opportunities.

Real-World Example: Swiss Franc

• Seasonal Tendencies
  • Highs typically form in late September or early October.
  • Seasonal analysis suggests a weak Swiss Franc and strong Dollar during this period.

Using COT Data

• Commitment of Traders (COT) Data
  • Focus on commercials' positions over small specs and large funds.
  • Commercials are accurate in predicting tops and bottoms.
• Analyzing COT Data
  • Key to understanding commercial trading behavior over 12-month and 6-month ranges.

Technical Analysis

• Market Maker Buy Model
  • Focus on using historical data to predict buy opportunities.
• Factors to Consider
  • Look for confirmations from technical indicators.
  • Use data from COT and seasonal tendencies to corroborate trades.
  • Identify points of high commercial activity.

Trading Strategy

• Framing Trades
  • Use the seasonal tendency as a backdrop.
  • Align technical signs, such as order blocks and liquidity pools.
• Example: Dollar Swiss Pair
  • Look for buy opportunities when below seasonal lows.
  • Anticipate buying pressure around specific price levels.
• Position Management
  • Adjust stop losses based on trading range.

Practical Trading Steps

• Using Online Tools
  • Tools like barchart.com can be used to track COT data.
  • Technical indicators should be added to charts for deeper insights.

Conclusion

• Combining Multiple Elements
  • Effective trading involves blending seasonal tendencies, COT data, and technical analysis.
  • Recognize the significance of commercial trading patterns in establishing market direction.
  • Be patient and wait for high-probability setups based on data alignment.