Market structure
Seasonality
Recurring calendar tendencies in prices driven by weather, demand cycles, and market structure.
What it is
Seasonality refers to recurring patterns in asset prices that occur at specific times of the year. These patterns are driven by factors like weather cycles (for agricultural commodities), demand seasons (like heating oil in winter), fiscal cycles, or market structure factors.
Why it matters
Seasonal patterns can provide context for price movements and help identify favorable times to enter or exit positions. While not guarantees, seasonal tendencies have statistical backing and can improve trading odds when combined with other signals.
How traders use it
Use seasonality as one input in your analysis. If an asset typically performs well in a certain month, combine that with other bullish signals (like COT positioning or price action) for higher probability setups. Don't trade seasonality alone - it's a tendency, not a guarantee.
Example
Gold often shows strength in January and September due to various factors including jewelry demand, central bank buying patterns, and fiscal year cycles. However, this doesn't guarantee gains every year.
Deeper context
Good seasonal work uses long histories, consistent contracts or continuous series, and honesty about sample size. A “strong September” based on ten years is weaker evidence than one based on thirty. PositionAlpha treats seasonality as a primary confluence factor alongside COT: when both lean the same way, Today’s Focus may feature the asset. When they disagree, the tier is mixed — a cue to slow down, not to force a trade.
Common mistakes
Curve-fitting short windows; ignoring regime breaks (policy changes, structural demand shifts); treating average returns as destiny for the current year.
Related terms
Market Regime, Technical Analysis, Fundamental Analysis, Today's Focus