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  Bucking The Trend!

Trader's who consider themselves "Technical Trader's" or "Chart Technicians" use technical analysis to help them understand the markets directional tendencies. Of course this is done by analyzing historical chart patterns, then using that information to try and predict whether the market is going to react similarly to the way it reacted last time this pattern was experienced. Of course, the more times a pattern has repeated itself in the same manner, the more reliable a pattern becomes.

For example, the narrow sideways channel is one of the most popular trading indicators, because it reacts the same or very similarly a large percentage of the time. The 123 Top and Bottom formation is also one of these very popular trend indicating tools. But, one of the most important trend indicating tools that most technical traders or chart technicians fail to recognize is the seasonal tendency of a specific market.

For example, let's say we are looking at the Corn markets, and during the past 15 years, Corn has rallied 12 times during some particular month, therefore if you were seeing a 1-2-3 top formation during that month, I would seriously hesitate to place a short order on that 1-2-3 top formation. You see, that's what knowing the seasonal market tendencies can do for you, even when you consider yourself to be a "Technical Trader".

Now we have purists in both regards. Purist technical traders will tell you that seasonal information is already built into the movement and formations of the charts. Seasonal purists don't pay any attention to the technical trends at all, they will say that if Corn rallied 12 times out of the past 15 years during that month, then why even look at a technical indicator what-so-ever.

Of course, now here comes my opinion. I consider myself a technical trader who pays serious attention to the seasonal tendencies. I like to see what the market has done in the past, using both technical trading trends AND seasonal trading trends. Therefore, the number one rule I live by regarding seasonal vs. technical is this: When a technical trend "bucks the seasonal trend", I don't trade it.

Now, it is easy for you to find out what the technical trend is, there are a lot of books written on the subject, and of course Gecko-Charts does a fantastic job of allowing you to practice trading the technical trends and to highlight them with a series of technical drawing tools and indicators. But finding a reliable and effective source for seasonal tendencies is much more difficult, and it is for that reason that I want to introduce you to one of my best friends in the industry, Scott Barrie who's publications are fast becoming the defacto standard for seasonal analysis.

Scott is the author of two books where you can find seasonal tendency information, one is "Seasonal Strategies" and the other is "The Grain Trader's Almanac". Both of which, I would never consider placing an order without first referencing. You can find both of these books in The PitMaster's Bookstore, or you can swing by these two web sites to find out more information on seasonal strategies. http://www.grainguide.com/ and http://www.commodityseasonals.com/.

I hope you will enjoy trading the futures market with much more confidence now that your eyes have been opened to the seasonal tendencies and strategies of the futures markets.

Good luck and enjoy!
Lan Turner, a.k.a. The PitMaster

P.S. For those of you who are not aware of our two day seminar in Las Vegas on February 10th and 11th, we still have seats available. Check out the web site, and sign up now. Scott Barrie is going to be attending and speaking during the majority of the first day's event. Talk to the master himself of seasonal strategies.

Remember, hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not actually been executed, the results may have over or under compensated for impact, if any, of certain market factors, such as lack of liquidity. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. The risk of loss in trading futures and options can be substantial; therefore only genuine "risk" funds should be used in such trading. Futures and options may not be suitable investments for all individuals and individuals should carefully consider their financial condition in deciding whether to trade. Option traders should be aware that the exercise of a long option would result in a futures position.