48-ICT Mentorship Core Content - Month 5 - How To Use Bullish Seasonal Tendencies In HTF Analysis

Last modified by Drunk Monkey on 2022-09-17 07:51
1 00:00:14,070 --> 00:00:22,440 ICT: Welcome back, folks, this is lesson 4.1. Implementing macro analysis. We're gonna be teaching applying seasonal tendencies to higher timeframe analysis.
2 00:00:26,220 --> 00:00:38,190 This module can be teaching both seasonals in higher timeframe analysis. Can you probably seen this chart before I've made available a few of these templates
3 00:00:38,760 --> 00:00:48,780 over the years, but we're gonna be teaching specifically only on the buy side for seasonal tendencies in this teaching. And we're using the Canadian dollar to
4 00:00:48,780 --> 00:01:00,570 begin with. And what this is, is it's a 40 year seasonal tendency, where the price on bullish shears and bearish years have been compiled and compressed into
5 00:01:00,570 --> 00:01:11,280 a file, where the output gives us a tendency for what price usually does for each contract delivery month. And we get into that in a minute. Before we get
6 00:01:11,280 --> 00:01:20,340 into deeper, let's bring up some points here. The seasonal tendencies are merely a proverbial roadmap of past performance. And they are not to be viewed as a
7 00:01:20,340 --> 00:01:30,270 panacea or a be all end all concept. Despite what you may see in this teaching, and the subsequent teaching and 4.2, please let me remind you that simply
8 00:01:30,270 --> 00:01:38,910 because it's done something in the past does that in any way guarantee is going to do the same thing in the future. This is just one more tool to add a
9 00:01:39,210 --> 00:01:44,310 confluence of things that would already lead you to an expectation that the market should go higher or lower.
10 00:01:49,980 --> 00:01:58,530 Okay, folks, this is the Canadian dollar 40 year seasonal tendency is the expanded view the same chart you just saw. And I want you to take a look at
11 00:01:58,530 --> 00:02:08,580 something real quick. Up here we have it says March abbreviation, June abbreviation, September's abbreviation, December, and then back to march again.
12 00:02:09,360 --> 00:02:18,630 What this is delineating is the contract delivery months for the Canadian dollar. Now currencies, they deliver on March, June, September and December
13 00:02:18,630 --> 00:02:33,600 every single year, these months expire. These charts that I'm sharing with you are a compilation of data over all the delivery months price action for the last
14 00:02:33,600 --> 00:02:46,230 40 plus years, beginning in 1976. Now, this data is only compiled up to 2015. But I can tell you that output is hardly changed at all. If you're concerned
15 00:02:46,230 --> 00:02:55,680 about it being 2017. Is there anything? Is there any deviation? Now, there's not any deviation at all. So how do we look at these things? And what benefit does
16 00:02:55,680 --> 00:03:06,750 it give us? Well, let me ask you a question. If you were to, if you were to ask the average trader that just now getting into trading, maybe it's not Forex,
17 00:03:06,750 --> 00:03:19,020 maybe it's stocks or, or commodities. And you ask them hey, look, if I were to ask you today, is the markets manipulated to the degree where well before price
18 00:03:19,020 --> 00:03:29,040 ever starts to trade? A specific time of year? Would it be inclined to go higher or lower based on some underlying influence that repeats itself? As a new
19 00:03:29,040 --> 00:03:37,590 trader? I could tell you, I would have never answered that question with you, I could probably agree to that. It felt like a random thing to me. And one of the
20 00:03:37,590 --> 00:03:46,830 things that I like about seasonal tendencies, is it gave a characteristic to price that proved to me that there is a rhyme and reason behind everything that
21 00:03:46,830 --> 00:03:58,770 goes on. If there's something that's measured, and again, this is 40 years worth of data, okay, 40 years worth of data. In the blue line, the red line is a 15
22 00:03:58,770 --> 00:04:07,020 year average. So you can see between looking at 40 years worth of data and 15 years worth of data, there's very little discrepancy in terms of what the
23 00:04:07,020 --> 00:04:15,630 overall strong seasonal tendencies are for this particular currency. Now, since we're primarily dealing with bullish seasonal tendencies and higher timeframe
24 00:04:15,630 --> 00:04:27,060 analysis, for this module, we're going to not focus on bearish patterns, but we're going to be looking for tendencies that lend well to being a buyer and if
25 00:04:27,060 --> 00:04:34,200 we're gonna be doing higher timeframe analysis and we want to be buying on these higher timeframe charts, and using it for ideas for being positioned trader.
26 00:04:35,280 --> 00:04:44,100 Looking at this seasonal tendency, I'm going to ask you what time of year now time of year is going to be delineate the bottom of the chart down here you can
27 00:04:44,100 --> 00:04:53,700 see it's all dated December, November, October. This is all calendar month based. This is contract delivery months. Okay, you can see the vertical lines
28 00:04:53,700 --> 00:05:02,520 delineating when that contract March would end trading here. That will be the beginning of June's trade didn't contract, and in June would end here and they
29 00:05:02,520 --> 00:05:11,700 would pick up at September's contract. And so on going through that is his own sentence, he chart, if I were to ask you what would be your first choice in
30 00:05:11,790 --> 00:05:25,830 deciding when would be a good time to buy? Well, if you're paying attention, you can see that this is probably a really good time to be buying around mid March,
31 00:05:27,180 --> 00:05:42,780 all the way up into the May, June time period. So between March and June, there typically is a strong tendency for the Canadian dollar to rally. Now, some of
32 00:05:42,780 --> 00:05:47,970 you may think to yourself, so that's great, you know, this is the contract month for Canadian dollar.
33 00:05:49,410 --> 00:05:57,060 What does that mean, to me if I'm not really a futures trader? Well, the main thing is, is this is the seasonal tendency that you would expect Canadian dollar
34 00:05:57,060 --> 00:06:04,410 futures to rally now, it does not mean that it's going to rally every single year, March to June doesn't mean that it just means that there's a strong
35 00:06:04,410 --> 00:06:14,490 probability that historically looking back over 40 years with the data, and comparing it against 15 years worth of data, there is a strong underlying of
36 00:06:14,490 --> 00:06:23,820 dare I say it element of truth to the fact that there is a tendency for this to rally problem is, if you're not a futures contract trader, this doesn't do
37 00:06:23,820 --> 00:06:34,050 anything for you. Or does it. If we are trading foreign exchange, we have to remember that the Canadian dollar is paired with the dollar index. Now the
38 00:06:34,050 --> 00:06:44,970 dollar index is the first and then in the pairs name. So that means if we're bearish on Canadian dollar, the US CAD is going to go up. If we're bullish on
39 00:06:44,970 --> 00:06:55,440 Canadian dollar, that means the US CAD pair is going to go down. That means Canadian dollars and polish while that would suppress the US Dollar index. So
40 00:06:55,440 --> 00:07:06,210 since the pairs name begins with US dollar, opposite would be seen in what we expect to see in the futures contract. So what we have to do is focus in on a
41 00:07:06,210 --> 00:07:14,340 seasonal tendency on the futures contract that shows us a bearish tone in the marketplace. So you can see we're here between September and around Christmas
42 00:07:14,340 --> 00:07:25,920 time in December, there typically is a strong tendency for the Canadian dollar to decline and in the underlying futures contract. So we have to take this into
43 00:07:25,920 --> 00:07:33,630 account when we're looking at foreign exchange because the US CAD pair is an inversion of what the futures contract shows for Canadian dollar futures price.
44 00:07:34,380 --> 00:07:45,510 So if there's a strong tendency for September, October, November and December, to have a decline in the Canadian dollar, that should be a bullish scenario for
45 00:07:45,510 --> 00:07:59,700 us CAD. Let's take this over to the charts and see if this in fact, has any validity to it. Okay, we're focusing on the bullish seasonal tendencies, we have
46 00:07:59,700 --> 00:08:12,960 our US CAD chart, this is a weekly chart, and I went back to 2008. Just to give you my sample size of data, and I started the wind at the beginning of
47 00:08:12,960 --> 00:08:26,670 September, and I carried it out in time to about midpoint of December. You can see that shaded area all the way to the left here. This is when we'd expect to
48 00:08:26,670 --> 00:08:38,070 see the Canadian dollar to be bearish on the futures underlying contract price. But because we're foreign exchange traders, we have to be looking at it to be
49 00:08:38,070 --> 00:08:46,650 reversed or inverted. So that means it would be bullish for the US CAD pair because this is how we're trading the major US against the cat. So this is the
50 00:08:46,650 --> 00:08:54,810 buying opportunity that would be presented and look at the look at the performance here on us CAD as a relationship to the seasonal tendency. Look how
51 00:08:54,810 --> 00:09:06,240 strong that buy was, look how many pips it moved. Notice also in here, this is the next time period the very next year and 2009 This is a time when the season
52 00:09:06,240 --> 00:09:14,460 tennis should should take place and that means the Canadian dollar should be bearish on the underlying futures contract but that would be an inversion on us
53 00:09:14,460 --> 00:09:20,790 CAD pairs that means we would expect bullishness in here now while we didn't press up to make new higher highs, there was a nice little pop nice little rally
54 00:09:20,790 --> 00:09:29,160 in here. But overall the direction was down so you can see how that seasonal tendency really wasn't much help in terms of seeing much like this. Higher
55 00:09:29,160 --> 00:09:40,020 prices. Very next year. Same thing very weak it was lower. Now I'm going to ask you a question. Look at these last two years. What was the underlying price
56 00:09:40,020 --> 00:09:52,530 direction on the weekly chart? Was it bullish or bearish. Bearish has been going lower. So would you be focusing on buying that time of year versus looking for
57 00:09:52,530 --> 00:10:03,210 opportunity to be a seller? Here's a hint for the next tutorial. We're going to go into 2011, we can see that the seasonal tendency had a really nice effect
58 00:10:03,210 --> 00:10:12,600 here, after we made a nice low and market structure shift to the bullish side. Institutional flow is now bullish. And during a time of year when the underlying
59 00:10:12,600 --> 00:10:22,440 futures contract for Canadian prices should be going lower, that's bullish for us cat. So for a foreign exchange trader, we're looking for buys, we had to look
60 00:10:22,440 --> 00:10:30,000 for weakness in the underlying futures contract that the Canadian dollar that would propel price higher at a time of the year, when we would expect prices to
61 00:10:30,000 --> 00:10:40,140 come in. Same thing here, the very next year 2012, we can see price again, rallied up during this time of the year. And now we're still bullish. Now. Look
62 00:10:40,140 --> 00:10:44,670 at the effects of the seasonal tendency, again, we have a low and it starts rallying up again.
63 00:10:46,049 --> 00:10:58,109 Again, same time a year, September to almost Christmas, seasonal tendency rallies again, again, same time period here rallies again. And again, 2016. Just
64 00:10:58,109 --> 00:11:06,089 past, we have a nice rally up here as well, seasonal tendency coming in, once again, strong. Now looking at this again, and they remind you what we're looking
65 00:11:06,089 --> 00:11:15,659 at is underlying weakness in the futures contract. So its underlying weakness in the futures contract for the Canadian dollar, the inversion puts it to a bullish
66 00:11:15,659 --> 00:11:23,669 stance for us CAD. So it's very important. That's why I taught this one, specifically, because I'm showing you how we get to take the seasonal tendency
67 00:11:23,669 --> 00:11:30,209 from the futures contract. Some of the majors that are paired with $1, their currency start with us CAD, so it's going to be an inversion. So what you would
68 00:11:30,209 --> 00:11:40,199 expect to see in the futures contract has to be reversed in some of the currencies that are paired up with the dollar. So now, by itself doesn't mean
69 00:11:40,199 --> 00:11:52,079 anything. But a coupled with other things. Like quarterly shifts. Remember that every three to four months, there's going to be a move on a higher timeframe.
70 00:11:52,919 --> 00:12:01,739 Now we're adding another dimension to that. It's one thing to expect a move every three to four months. But where is that move going? What What should we be
71 00:12:01,739 --> 00:12:12,569 focusing on? Should we be buying? Or should we be selling seasonal tendencies give us a roadmap to help build the idea that, okay, there's certain quarters of
72 00:12:12,569 --> 00:12:21,989 the year that we want to be a buyer and there's certain quarters of the year that we want to be a seller. And we anticipate this year in and year out. The
73 00:12:21,989 --> 00:12:29,549 only difference is, is we're going to be looking for markets that already predisposed to go higher, and then coupling that with the bullishness of
74 00:12:29,549 --> 00:12:38,849 seasonal tendencies. If we're looking at the Canadian dollar, we'd have to reverse it. Look for weakness and a seasonal tendencies on the underlying
75 00:12:38,849 --> 00:12:48,959 futures contract. And then apply it to us cat as bullishness because it's an inversion of futures contract prices for Canadian dollar. If we see times when
76 00:12:48,959 --> 00:12:59,759 the Canadian dollar is bullish underlying us CAD pair and this seasonal tendency September to almost Christmas every single year, there's a strong tendency for
77 00:12:59,759 --> 00:13:11,339 it to be bullish between that time period. That means there's many weeks where you can be a bullish us CAD trader, if the underlying pair of us CAD is bullish.
78 00:13:11,669 --> 00:13:19,499 This is going back several years. And I'm only gave you this sample size because if I'll give you any more data, it'll ruin all discoveries if you go back and
79 00:13:19,499 --> 00:13:30,089 study for yourself. But you can see here clearly, many instances when the underlying market moves are in line with the macro trend. Seasonal tendencies
80 00:13:30,089 --> 00:13:39,509 are absolutely a barnburner for delivering what you should be doing for each quarter of the year. In this case, you have a loaded deal. If you're looking for
81 00:13:39,599 --> 00:13:48,719 a buying opportunity for us CAD it's between September and getting close to Christmas every single year when the markets predisposed to go higher. What
82 00:13:48,719 --> 00:13:52,469 quarterly shifts are you gonna be looking for now? Looking for Long's.
83 00:13:57,540 --> 00:14:06,570 Okay, so now we're gonna look at a market it's closely related to Canadian dollar. Its number one export is crude oil. And here we have another example.
84 00:14:07,350 --> 00:14:17,820 Just as a supporting idea. If you looked at this market over here, you would expect to see bullish prices or a rally in the crude oil market and that rally
85 00:14:17,820 --> 00:14:29,670 comes in around coming in about mid February going into March and carrying into May June time period. So we're expecting bullishness in the crude oil market and
86 00:14:29,670 --> 00:14:42,540 since Canadian dollar generally moves almost in tandem with oil, the strong tendency for the Canadian dollar to rally and the crude oil market to rally at
87 00:14:42,540 --> 00:14:54,660 this time of year. That means we have a March to June, basically a bullish effect for Canadian dollar and crittall coupled together. So that's a strong
88 00:14:54,660 --> 00:15:06,480 tendency. But again, because we're looking at Canadian dollar in foreign exchange market, this would have to be reversed. So, we'll say that study for
89 00:15:06,480 --> 00:15:16,440 you, in addition to what's already been presented here, but I want to show you the futures contract price for crude oil between around March to June time
90 00:15:16,440 --> 00:15:32,310 period. Okay, here's the crude oil markets the weekly chart and went back to January 14 2014. And obviously, you can see here, this is a bearish market here.
91 00:15:32,310 --> 00:15:39,810 It's been in a long term downtrend when the collapse of the oil market from around them 105 level. But let's take a look at the bullishness of that seasonal
92 00:15:39,810 --> 00:15:49,830 tendency, again, looking for that March to June time period. Okay, so here's March, all the way through to June. And you can see that rally in the crude oil
93 00:15:49,830 --> 00:16:01,740 market rate when it made its high in the 2014 time period. And the next year, we'll be looking forward to seeing seasonal tendency between March and June a
94 00:16:01,740 --> 00:16:11,250 little sensitive first July. We can see it again here rallies once more even in a bear market. It's still there. We don't force the trades. But I'm just showing
95 00:16:11,250 --> 00:16:18,750 you that seasonal tendency that's existing in the marketplace, that should convince you that there is an absolute program to everything that goes on
96 00:16:19,020 --> 00:16:29,880 despite supply and demand factors. There are very routine things that take place, and they repeat themselves over and over again. And again, in 2016. We
97 00:16:29,880 --> 00:16:38,790 have march to the first of July, and competently in the whole month of June. You see that rally again comes in for crude oil. Now my question to you is this if
98 00:16:38,790 --> 00:16:50,130 you can see these opportunities, repeating themselves based on the data that I'm sharing with these reports and seasonal tendency charts. Is it hard not to feel
99 00:16:50,130 --> 00:16:58,230 like they're treasure maps, because that's exactly what it felt like for me as a young man when I was in my 20s. And I saw these seasonal tendency charts. And I
100 00:16:58,800 --> 00:17:07,830 immediately pushed them aside for a first couple months. And then finally I got into the study of seasonal tendencies. And I realized that quickly right away
101 00:17:07,860 --> 00:17:14,610 that there is something to them. Now admittedly, I've lost money trading them in the beginning, I had no idea what I was doing, I just thought every time it
102 00:17:14,610 --> 00:17:22,350 would work. So therefore I loaded up the boat and traded way too many things, and too many times got burned doing it. So put it on the back burner until I
103 00:17:22,350 --> 00:17:31,920 realized there's this quarterly shift that takes place in the marketplace. And I've matured now. And I can look back and I can pick out where the highest
104 00:17:31,920 --> 00:17:42,090 probability seasonal tendencies are, for certain times of the year, certain markets have really strong seasonal tendencies to move a specific three to four
105 00:17:42,090 --> 00:17:51,900 month cycle every single year when it's bullish. And when it's bearish. If we can focus in on those quarters on those particular currency pairs, or those
106 00:17:51,900 --> 00:18:00,210 asset classes, we have a loaded deal in the form of odds, it doesn't mean that it's going to be profitable every time it doesn't mean it's a guaranteed it's
107 00:18:00,210 --> 00:18:11,400 going to be accurate, it just means that we have a high odds probability that our prognostication will lead us to a successful outcome. This is just one
108 00:18:11,400 --> 00:18:22,530 example of how correlated pairs between Canadian dollar and crude oil both can lean well with one another in terms of seasonal tendencies. And even in the
109 00:18:22,530 --> 00:18:31,890 bearish market, the crude oil market has been in you can see the nice big rallies that's occurred, happened to script with a seasonal tendency. We're
110 00:18:31,890 --> 00:18:39,000 going to teach more about this in module 4.2. And we're gonna talk about the bearishness as well. And in that module, I'm actually going to share all of the
111 00:18:39,000 --> 00:18:44,340 seasonal tendencies I have for all the currencies. And until next time, I wish you good luck and good trading