Currencies and Seasonal Tendencies

Expert:  Carley Garner, Partner and Senior Analyst of Alaron's Las Vegas Division 
Start:    March 6, 2006 - 16:30GMT 11:30EST 
End:     approx. 17:30GMT 12:30EST 

   
Topics that will be covered for above session are: 

• Financials markets have distinctive reoccurring patterns
• Successful traders understand that seasonal moves

Who is Carley Garner?

Carley Garner is a Magna Cum Laude graduate of the University of Las Vegas Nevada, from which she earned a B.S. in Finance & Accounting. At UNLV she was a Dean’s List scholar and was elected to the Golden Key International Honor Society. In 2003 she was one of only 1200 collegians nationwide named to the National Society of Collegiate Scholars. Long fascinated by money and the markets, she previously worked for a stock brokerage, honing her skills at technical analysis. Although relatively new to the industry, Carley has been featured in several national publications including Futures Magazine, Active Trader and Stocks and Commodities.

Speech Material:

The Financials markets have distinctive reoccurring patterns due to annual events and transactions among participants
In some cases, seasonal tendencies are apparent even if there is no obvious catalyst.
Successful traders understand that seasonal moves should be considered when analyzing a market.
However, these seasonal tendencies should be seen as a guideline rather than the definitive decision maker.  Although seasonal patterns usually occur, they might be early, late or muted.  Some seasonal moves to be aware of:

The Euro tends to peak against the dollar in mid to late January.  From there the currency tends to drift lower going into the summer months.

From a seasonal standpoint, the Japanese Yen tends to be at its strongest vs. the U.S. dollar in late October to Mid November.  Like the Euro, the Yen weakens throughout the spring and into mid summer. Like the Yen and the Euro, the Canadian Dollar tends to peak in January and trade weaker going into the summer months.  However, the Canadian typically forges an impressive rally in late May.

While it is imprudent to trade solely on seasonal tendencies, it is also imprudent to ignore them.

Successful traders realize that the only way to consistently make profitable trades is to put the odds in their favor.

Session Transcript:

FXstreet Moderator (Mar 6, 2006 11:29:26 AM)
Today I am delighted to welcome our guest speaker Carley Garner Partner and Senior Analyst of Alaron's Las Vegas Division

Carley Garner (Mar 6, 2006 11:29:58 AM)
hello everybody!

Carley Garner (Mar 6, 2006 11:30:02 AM)
Thanks for coming

Carley Garner (Mar 6, 2006 11:30:42 AM)
let's get started, shall we?

Carley Garner (Mar 6, 2006 11:30:54 AM)
Firs question:

Carley Garner (Mar 6, 2006 11:32:19 AM)
How can i define trends? what key points should I look for in a trend? what do u recommend for a first time client in forex?

Carley Garner (Mar 6, 2006 11:33:25 AM)
This is a very arbitrary question.

Carley Garner (Mar 6, 2006 11:33:39 AM)
I guess, there really isn't a great answer.

Carley Garner (Mar 6, 2006 11:33:59 AM)
I can tell you what we look at, and what we use.

Carley Garner (Mar 6, 2006 11:34:20 AM)
We utilize both a trend trading method and a swing trading method.

Carley Garner (Mar 6, 2006 11:34:30 AM)
Both are based on simple moving average crossovers,

Carley Garner (Mar 6, 2006 11:34:47 AM)
Boring...I know. I bet you were expecting something much more insightful.

Carley Garner (Mar 6, 2006 11:34:55 AM)
However, if boring works..so be it.

Carley Garner (Mar 6, 2006 11:35:16 AM)
The period that you use to trade will have to be a trial and error event.

Carley Garner (Mar 6, 2006 11:35:37 AM)
Everyone is comfortable with different parameters.

Carley Garner (Mar 6, 2006 11:36:25 AM)
For example a trader with relatively deep pockets might choose to use slower averages, while a scalper might use a much shorter time frame.

Carley Garner (Mar 6, 2006 11:37:30 AM)
For trend trading we use a combo of a 4,9,18 SMA

Carley Garner (Mar 6, 2006 11:38:22 AM)
If the markets are trending well, it works great.

Carley Garner (Mar 6, 2006 11:38:44 AM)
But if the markets are choppy, you could be in store for some significant losses.

Carley Garner (Mar 6, 2006 11:39:31 AM)
Let's move on...

Carley Garner (Mar 6, 2006 11:39:42 AM)
best one indicator to use to recognize a change from sideways trading to a trend. I am using multiple indicators and things get jumbled and all of a sudden i am in the wrong way and take a huge loss. Thinking of just using a channel or trend line and nothing else? .... thx

Carley Garner (Mar 6, 2006 11:40:09 AM)
As you probably know, most markets spend 80% of the time trading in a range (or sideways).

Carley Garner (Mar 6, 2006 11:41:17 AM)
Break out trading is based on the premise of only trading in markets that have penetrated the upper or lower area o the trading enevelope.

Carley Garner (Mar 6, 2006 11:41:38 AM)
This entails massive patience, which most traders have a hard time dealing with.

Carley Garner (Mar 6, 2006 11:42:47 AM)
After all, you will only have a signal 20% of the time

Carley Garner (Mar 6, 2006 11:43:07 AM)
There are alternative methods to playing the strategy.

Carley Garner (Mar 6, 2006 11:43:38 AM)
But once again, it is the boring technical analysis that performs best here.

Carley Garner (Mar 6, 2006 11:44:08 AM)
If the market closes above the resistance of the range, it is a breakout.

Carley Garner (Mar 6, 2006 11:44:16 AM)
However, I must always warn you.

Carley Garner (Mar 6, 2006 11:44:29 AM)
Because this is such a common, and "old school" method.

Carley Garner (Mar 6, 2006 11:44:39 AM)
There are many traders out there trying to capitalize.

Carley Garner (Mar 6, 2006 11:45:52 AM)
Bull traps often occur. This is where the market breaks resistence and looks to be a "break out" but it fails. Only to turn out to be a big market reversal.

Carley Garner (Mar 6, 2006 11:46:07 AM)
Another common tool, is Bollinger bands.

Carley Garner (Mar 6, 2006 11:46:32 AM)
The default setting for BB, is for the bands to be located 2 standard deviations from the mean.

Carley Garner (Mar 6, 2006 11:47:05 AM)
Some so-called break out traders, use a 1 standard deviation band and consider a close above the band to be a trend confirmation.

Carley Garner (Mar 6, 2006 11:47:14 AM)
Next question:

Carley Garner (Mar 6, 2006 11:47:27 AM)
Do you see a Global Warming affect on seasonal tendencies?

Carley Garner (Mar 6, 2006 11:47:33 AM)
Hmmm.

Carley Garner (Mar 6, 2006 11:47:42 AM)
Honestly I don't see a connection.

Carley Garner (Mar 6, 2006 11:48:07 AM)
Seasonal tendencies in currencies are based on financial events, not necessarily mother nature.

Carley Garner (Mar 6, 2006 11:48:51 AM)
But there are a million factors that influence the price of a currency, and who knows....maybe the climate does have an affect.

Carley Garner (Mar 6, 2006 11:48:58 AM)
Next question:

Carley Garner (Mar 6, 2006 11:49:06 AM)
Not that it matters too much, but why are there seasonal pattern in the currency market? I understand seasonal affects on corn, construction, gold, etc. but why currencies?

Carley Garner (Mar 6, 2006 11:49:19 AM)
That is a great question.

Carley Garner (Mar 6, 2006 11:50:07 AM)
And to be honest, most experts and economists can't produce a valid reason for most seasonal moves.

Carley Garner (Mar 6, 2006 11:51:06 AM)
For every currency analysts, there is a different theory. But there aren't any concrete reasons.

Carley Garner (Mar 6, 2006 11:51:38 AM)
As traders, we are more concerned with the pattern than what causes the pattern.

Carley Garner (Mar 6, 2006 11:52:14 AM)
It is kind of like using a computer day in and day out, but not fully understanding how it does what it does.

Carley Garner (Mar 6, 2006 11:52:40 AM)
ok, next question:

Carley Garner (Mar 6, 2006 11:52:47 AM)
Do you have a target gain in percentage for conservative/moderate/aggressive fx trading clients?

Carley Garner (Mar 6, 2006 11:53:14 AM)
Once again, this is tough question to answer because it all depends on the amoung of funding in your account.

Carley Garner (Mar 6, 2006 11:53:27 AM)
Even when you are speaking in percentage terms.

Carley Garner (Mar 6, 2006 11:54:30 AM)
the amount of risk capital makes a difference.

Carley Garner (Mar 6, 2006 11:54:48 AM)
The rule of thumb is to not risk more than 5% on any given trade

Carley Garner (Mar 6, 2006 11:56:08 AM)
However, the problem i have with this is that you are now setting stops based on your characteristics rather than the market's.

Carley Garner (Mar 6, 2006 11:56:17 AM)
This is like almost guaranteeing a loss.

Carley Garner (Mar 6, 2006 11:56:58 AM)
You want stops and limits(targets) to be based on the climate of the market, not your risk tolerance.

Carley Garner (Mar 6, 2006 11:57:27 AM)
ok, next question

Carley Garner (Mar 6, 2006 11:57:41 AM)
Do you forsee, or are you worried about, structural changes in the fx marketplace, such as increasing numbers of traders, China and other governments trying more overtly to affect the market, or some regulatory or technological development?

Carley Garner (Mar 6, 2006 11:57:56 AM)
No this doesn't worry me at all.

Carley Garner (Mar 6, 2006 11:58:43 AM)
The FX market is the most liquid trading medium in the world. It is virtually impossible for one player (even a major country) to have long lasting impacts on currency values.

Carley Garner (Mar 6, 2006 11:59:25 AM)
While they temporarily influence the markets, it is questionable how effective they are in the long term.

Carley Garner (Mar 6, 2006 11:59:42 AM)
Next

Carley Garner (Mar 6, 2006 11:59:54 AM)
how to avoid false breakout?

Carley Garner (Mar 6, 2006 12:00:04 PM)
This is an age old question.

Carley Garner (Mar 6, 2006 12:01:16 PM)
My theory is that if markets spend most of their time trading in a range, they will likely continue to do so indefinately.

Carley Garner (Mar 6, 2006 12:02:05 PM)
In other words, I almost always assume that the market will come back into the trading range....even if it temporarily "breaks out".

Carley Garner (Mar 6, 2006 12:02:40 PM)
If a market does break resistance, that area should then become support.

Carley Garner (Mar 6, 2006 12:03:20 PM)
So it might be necessary to confirm the break out by waiting for 2 or 3 closes above the range.

Carley Garner (Mar 6, 2006 12:03:36 PM)
Of coarse, there is always a backlash.

Carley Garner (Mar 6, 2006 12:03:50 PM)
Waiting could cause you to miss a true break out.

Carley Garner (Mar 6, 2006 12:04:23 PM)
Ahhh....this is one of the reasons that most trader's lose.

Carley Garner (Mar 6, 2006 12:04:53 PM)
You often don't know that the market is truly breaking out until after it makes the move.

Carley Garner (Mar 6, 2006 12:05:43 PM)
how much interaction/fading is there between seasonal and cyclical (not yearly) moves?

Carley Garner (Mar 6, 2006 12:06:00 PM)
I am not sure that I fully understand this question. But I will do my best to give you some insight.

Carley Garner (Mar 6, 2006 12:07:32 PM)
Although there are definate seasonal patterns in the currency markets, they are not nearly as well known as those in the hard commodities such as grains, metals, etc.

Carley Garner (Mar 6, 2006 12:08:32 PM)
As a result, there really aren't a large number of traders using the patterns to their favor.

Carley Garner (Mar 6, 2006 12:08:54 PM)
Additionally, the short term nature of the market keeps traders from focusing on seasonals.

Carley Garner (Mar 6, 2006 12:09:39 PM)
After all, even most currencies tend to trade weaker during this time of year a day trader probably isn't going to let that impact trading decisions.

Carley Garner (Mar 6, 2006 12:11:04 PM)
Well, that will wrap it up for today.

Carley Garner (Mar 6, 2006 12:11:25 PM)
Should you have any questions that were not covered during this session, please email them to me at cgarner@alaron.com

Carley Garner (Mar 6, 2006 12:11:50 PM)
Don't forget to sign up for our free online webinars at http://www.fxtradingschool.com/

Carley Garner (Mar 6, 2006 12:12:17 PM)
Also, if you are interested in recieving free fx trade recommendations daily, email me at cgarner@alaron.com

Carley Garner (Mar 6, 2006 12:12:21 PM)
Thanks for coming.

Carley Garner (Mar 6, 2006 12:12:32 PM)
We hope to see you next time!!

FXstreet Moderator (Mar 6, 2006 12:13:12 PM)
Thank you so much for hosting todays session Carley

FXstreet Moderator (Mar 6, 2006 12:13:24 PM)
Thank you for attending and interacting

FXstreet Moderator (Mar 6, 2006 12:13:56 PM)
Some good new I am pleased to announce that the full transcripts are back for all who would like to enjoy their contents. Please check out our new web blog and post comments and make it a interesting educational place for traders to meet. Transcripts : http://www.fxstreet.com/chat/transcriptlist.asp

FXstreet Moderator (Mar 6, 2006 12:14:07 PM)
Availaable in 1 hour for all to read at this link

FXstreet Moderator (Mar 6, 2006 12:14:18 PM)
FEEDBACK: I cannot stress how important feedback is for the continued success of our Live Q&A sessions. PLease email me any suggestions you may have topics for speakers anything that can make these sessions better and more enjoyable for all who attend. In order for us to continue providing informative and educational Q&A Sessions, feedback is vital. Please feel free to post feedback about today's session, topic ideas, & suggestions. We would appreciate this very much. I will be logged on for a while. claire@fxstreet.com

FXstreet Moderator (Mar 6, 2006 12:14:43 PM)
Join us tomorrow for two more sessions