August worst month for Trading? And why? *We just used DXY as the example. This is true across the board!
The Big Drought
A 10-year analysis on the S&P shows that the markets remain the poorest in the three summer months – June, July and August. Most traders tend to sell their positions in May, and try to reinvest in a fresh positions once the summer is over.
August Is the Worst Summer Month
Most investors and Forex traders in Europe and the North America go on holidays during the month of August. This leads to lower trading volume and significant price actions. Just for example: August 2008 was misleadingly good for the S&P, advancing 1%. However, August 2010 was completely miserable for the S&P, dipping 4.5%, and August 2011 was also miserable for the S&P 500, plunging almost 10%. The month is characterized by sideways trends and momentum swings. However, the trend typically breaks right after the Labor Day holiday in the U.S., and most traders returns to active trading once again.
Post-Summer Months (September-December)
A surge in trading activity usually occurs just after the end of summer, and traders invest in fresh portfolios and positions. These three months therefore represent the best three months to trade in the year.
Another Vacation Spot during the Second Half of December
Forex traders once again stay away from the market in the second half of the December, and celebrate the Christmas Day and the New Year’s Day.
Winter-Spring Action Still Better
The January-May period returned a mediocre 3% on average for the last 10 years, and therefore still does better than the summer months, providing excellent opportunities for traders, continuously for the first four months of the year.
Thee THREE worst months (Summer): June, July, and particularly, August.
The FOUR best months (Autumn): September, October, November, and December.
The FIVE good Months (Winter-Spring): January, February, March, April, and May
What Is The Reason For This Divide?
Any vacation period represents drying up trading volume, and the months following these vacations represent a refreshing return to trading, like rain after a drought.
