. This does not mean that they are the perfectway to trade or that they will always work. We need a trigger and a follow-through method.
The seasonals I recommend that you use are key date seasonals. These
seasonal setups provide the following information:
(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)
The commodity and contract month, or the stock tradeWhether to buy or sellThe percentage historical accuracyThe stop-loss in % of entry price (close only stop)The average proﬁt per tradeThe average loss per tradeThe yearly proﬁt or lossThe cumulative proﬁt or lossThe proﬁt/loss ratio
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Having information places you above 95 percent of other traders interms of their knowledge. Best of all, the information is purely objectiveand not a theory or a matter of opinion. It is a matter of fact based onhistory. There is no interpretation.
It is my opinion that interpretation in trading will open the door to
subjective opinions, which will only increase your losses!
FINDING KEY DATE SEASONALS
There are several ways to ﬁnd key date seasonals. You can write your ownseasonal search program and ﬁnd them or you can use my seasonal Website, High Odds Seasonal Trades (HOST) at http://www.seasonaltrader.com/,where I have done all of the hard work for you. As part of this course, I willgive you free access to this location for one month and show you how to useit. This information appears below. First, however, in the following tables,are examples of seasonals based on speciﬁc search criteria. These criteriaare as follows:
(cid:2)(cid:2)
(cid:2)
Setups that have been correct 75 percent of the time or more.Setups that have had a proﬁt/loss ratio of 4 or higher. This means that insum total the proﬁts have been 4 times or more larger than the losses.Setups that last 25 calendar days or less since I believe that these areamong the most reliable and consistent.
Using these criteria, I selected the setups for July shown in Table 3.1.
Due to limitations of space, I have not included all of the setups.
This seasonal setup shows the historical record of buying Jly Hogs onthe close of trading July 2 and exiting July 6 with a 1 percent stop-lossclose only, over a period of 35 years. As you can see, the performance wasimpressive, with over 77 percent accuracy. But remember that this is only aseasonal setup. A trigger is required. The seasonal trigger will be discussedin Lesson 4.
The seasonal setup in Table 3.2 shows the historical record of buyingSep Heating Oil on the close of trading 7/25 and exiting on the close oftrading 8/13 with a 4 percent stop-loss close only over a period of 25 years.The setup in Table 3.3 shows a sell seasonal in Sep Soybeans from theentry date of 7/14 to the exit date of 7/30 with a 5 percent stop-loss close onlyover a 36-year period. As you can see, the accuracy has been over 77 percentwith a large average proﬁt per trade.
This setup shows a short sell seasonal in the Sep Canadian Dollar overthe last 28 years from 7/17 to 7/24 with a 1 percent stop-loss close only. Therecord here is also impressive with over 82 percent accuracy.
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TABLE 3.1 The High-Odds Seasonal Trade in July Hog Futures
Long JlyLean Hogs
Enter:7/2
Exit:7/6
Stop %:1.00
P/L Ratio:11.1
Trade#119061106
ContractYear
Date In Price In
Date Out Price Out Proﬁt/Loss Total
19701971197219731974197519761977197819791980198119821983198419851986198719881989199019911992199319941995199619971998199920002001200220032004
2-Jul2-Jul3-Jul2-Jul2-Jul2-Jul2-Jul5-Jul3-Jul2-Jul2-Jul2-Jul2-Jul5-Jul2-Jul2-Jul2-Jul2-Jul5-Jul3-Jul2-Jul2-Jul2-Jul2-Jul5-Jul3-Jul2-Jul2-Jul2-Jul2-Jul3-Jul2-Jul2-Jul2-Jul2-Jul
26.3521.7530.443.4736.9553.6750.0548.1247.2740.242.7553.4760.0245.7754.749.6759.6760.144.0747.1761.2753.7546.7249.2744.6245.957.3283.2557.641.7570.3573.5552.364.1579.12
6-Jul6-Jul6-Jul6-Jul8-Jul7-Jul6-Jul6-Jul6-Jul6-Jul7-Jul6-Jul6-Jul6-Jul6-Jul8-Jul7-Jul6-Jul6-Jul6-Jul6-Jul8-Jul6-Jul6-Jul6-Jul6-Jul8-Jul7-Jul6-Jul6-Jul6-Jul6-Jul8-Jul7-Jul6-Jul
26.421.7530.2243.638.9755.749.0248.5748.1741.3742.553.9560.1246.2255.1249.9761.5560.5744.5746.7761.654.8546.6549.1244.846.7259.6583.257.9542.5771.1574.5554.965.8579.37
0.050−0.180.132.022.03−1.030.450.91.17−0.250.480.10.450.420.31.880.470.5−0.4
0.331.1−0.07−0.150.180.822.33−0.050.350.820.812.61.70.25
0.050.05−0.1302.024.053.023.474.375.545.295.775.876.326.747.048.929.399.899.499.8210.9210.8510.710.8811.714.0313.9814.3315.1515.9516.9519.5521.2521.5
Trades:35Avg. Proﬁt:0.8751
Losers:Winners:278Avg. Loss: % Avg. Proﬁt:−0.2662
1.69
Daily PF:0.2187
% Winners:77.14% Avg. Loss: Bottom of−0.57
Form
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TABLE 3.2 The Seasonal Trade in September Heating Oil Futures
Long Sep Htg Oil
Enter:7/25
Exit:8/13
Stop %:4.00
P/L Ratio:6.2
Trade#111253528
ContractYear
Date In
Price In
Date Out Price Out Proﬁt/Loss Total
1980198119821983198419851986198719881989199019911992199319941995199619971998199920002001200220032004
25-Jul27-Jul26-Jul25-Jul25-Jul25-Jul25-Jul27-Jul25-Jul25-Jul25-Jul25-Jul27-Jul26-Jul25-Jul25-Jul25-Jul25-Jul27-Jul26-Jul25-Jul25-Jul25-Jul25-Jul26-Jul
0.7820.94710.87010.83020.73770.71260.32660.5380.44670.50010.57940.59450.62910.51320.50710.47030.56420.54640.3760.51920.75890.71270.68370.78341.1233
8-Aug13-Aug13-Aug15-Aug13-Aug13-Aug13-Aug13-Aug4-Aug14-Aug13-Aug13-Aug3-Aug13-Aug12-Aug14-Aug13-Aug13-Aug3-Aug13-Aug14-Aug13-Aug13-Aug13-Aug13-Aug
0.750.95160.89140.8610.75830.73540.42250.54170.42460.50040.75050.59770.5980.5360.48570.48770.60010.56040.35810.55690.87340.74190.69420.8071.2145
−0.032
0.00450.02130.03080.02060.02280.09590.0037−0.02210.00030.17110.0032−0.03110.0228−0.02140.01740.03590.014−0.01790.03770.11450.02920.01050.02360.0912
−0.032−0.0275−0.00620.02460.04520.0680.16390.16760.14550.14580.31690.32010.2890.31180.29040.30780.34370.35770.33980.37750.4920.52120.53170.55530.6465
Trades:25Avg. Proﬁt:0.0385
Losers:Winners:205Avg. Loss: % Avg. Proﬁt:−0.0249
6.44
Daily PF:0.002
% Winners:80% Avg. Loss: Bottom of−4.59
Form
S-T-F: APPLICATION
The next step I recommend is to evaluate each setup on the basis of ﬁvefactors:
1. Accuracy 75 percent or higher.
2. P/L ratio 4 or higher.
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TABLE 3.3 The Seasonal Trade in September Soybean Futures
Short SepSoybeans
Enter:7/14
Exit:7/30
Stop%:5.00
P/L Ratio:4.0
Trade#110339480
ContractYear
Date In Price In
Date Out Price Out Proﬁt/Loss Total
196919701971197219731974197519761977197819791980198119821983198419851986198719881989199019911992199319941995199619971998199920002001200220032004
14-Jul14-Jul14-Jul14-Jul16-Jul15-Jul14-Jul14-Jul14-Jul14-Jul16-Jul14-Jul14-Jul14-Jul14-Jul16-Jul15-Jul14-Jul14-Jul14-Jul14-Jul16-Jul15-Jul14-Jul14-Jul14-Jul14-Jul15-Jul14-Jul14-Jul14-Jul14-Jul16-Jul15-Jul14-Jul14-Jul
246.5294.5342336.38760661.5550.25738626.5628.5763788.5750.75621.75643.75661570.25491528.25956.5669.5606.25528.75573.25709.25590.25625822.25674596.25419.25450.25509.75547.5555.5681.5
30-Jul30-Jul30-Jul31-Jul17-Jul18-Jul25-Jul30-Jul
1-Aug
31-Jul30-Jul30-Jul30-Jul30-Jul19-Jul30-Jul30-Jul16-Jul30-Jul
1-Aug
31-Jul30-Jul23-Jul30-Jul30-Jul
1-Aug
31-Jul30-Jul30-Jul30-Jul21-Jul31-Jul30-Jul30-Jul30-Jul30-Jul
246.75283.25330.13334.5800716.5592.25608.5547.5621.75711753.75729.5600.75676.75609.5519.25516.75523.5823.5588593.75562.5560.75686.5571.5606744.75670575.25451.25444.5504531.5526.75574.5
Trades:36Avg. Proﬁt:37.2232
Losers:Winners:828Avg. Loss: % Avg. Proﬁt:−32.7187 5.48
−0.2511.2511.881.88
−40−55−42129.579
6.75
5234.7521.2521−33
51.551−25.754.75
133
81.512.5−33.7512.522.7518.751977.5421−32
5.755.75
1628.75
107
−0.251122.8824.75−15.25−70.25−112.2517.2596.25
103155189.75211232199250.5301.5275.75280.5413.5495507.5473.75486.25509527.75546.75624.25628.25649.25617.25623628.75644.75673.5780.5
Daily PF:2.3264
% Winners:77.78% Avg. Loss: Bottom of−5.71
Form
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TABLE 3.4 The Seasonal Trade in September Canadian Dollar Futures
Short SepCanada $
Enter:7/17
Exit:7/24
Stop %:1.00
P/LRatio:5.6
Trade#107869168
ContractYear
Date In Price In
Date Out Price Out Proﬁt/Loss Total
1977197819791980198119821983198419851986198719881989199019911992199319941995199619971998199920002001200220032004
18-Jul17-Jul17-Jul17-Jul17-Jul19-Jul18-Jul17-Jul17-Jul17-Jul17-Jul18-Jul17-Jul17-Jul17-Jul17-Jul19-Jul18-Jul17-Jul17-Jul17-Jul17-Jul19-Jul17-Jul17-Jul17-Jul17-Jul19-Jul
0.9420.89030.85980.86650.82830.79210.8120.75090.73990.72510.75640.82660.83520.85870.86720.8380.78080.72470.73710.72910.72840.67230.67170.67610.64870.64750.71410.7634
25-Jul24-Jul24-Jul24-Jul24-Jul26-Jul25-Jul24-Jul24-Jul24-Jul24-Jul25-Jul24-Jul24-Jul24-Jul24-Jul26-Jul25-Jul24-Jul24-Jul24-Jul24-Jul26-Jul24-Jul24-Jul24-Jul24-Jul26-Jul
0.93990.88990.8570.86420.81950.78750.81160.75750.73830.71770.74550.81910.8370.85780.86370.83670.78020.72420.73640.73010.7260.66770.66290.68380.64890.63540.71340.7507
0.00210.00040.00280.00230.00880.00460.0004−0.00660.00160.00740.01090.0075−0.00180.00090.00350.00130.00060.00050.0007
−0.001
0.00240.00460.0088−0.0077−0.00020.01210.00070.0127
0.00210.00250.00530.00760.01640.0210.02140.01480.01640.02380.03470.04220.04040.04130.04480.04610.04670.04720.04790.04690.04930.05390.06270.0550.05480.06690.06760.0803
Trades:28Avg Prof:0.0042
Losers:Winners:235Avg Loss: % Avg Prof:−0.0034
0.56
% Winners:82.14% Avg Loss:−0.47
Daily PF:0.0006Bottom ofForm
3. No more than two consecutive losses as shown in the Proﬁt/Loss Ratio
columns in Tables 3.1 through 3.4).
4. Average proﬁt of $400 or more as shown in the cell of each table thatis labeled Avg. Proﬁt. This is the average proﬁt in points. It must beconverted to dollars using the appropriate tick value for the given market.
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5. A positive growth trend. This is the ﬁgure that appears in the CumulativeProﬁt column of each table. We want the most recent cumulative proﬁt,in this case for the year 2004 to be higher than it was 10 years ago.
Any setup that passes 4 of these 5 tests is kept as a valid setup and the
next step, the trigger, is applied. This step will be discussed in Lesson 4.
LOGGING INTOWWW.SEASONALTRADER.COM
You can ﬁnd setups like these yourself by going to www.seasonaltrader.com,where you can sign up for a free trial (follow the links to sign up for the freetrial to HOST Online). Once you’re logged in, visit the FAQs page and readthe simple Quick Start Guide.
You are now ready to practice ﬁnding trades with the rules that I gaveyou. Practice and get ready for Lesson 4: The Seasonal Trigger and Follow-through.
REVIEW
In this lesson, I showed you how to ﬁnd seasonal setups with the highestodds of success. You learned the correct ﬁlters for these setups and youwere given some examples of trades and their historical records. You weregiven instructions on how to log into the High Odds Seasonal Trades Website along with your password and login name.
After you have practiced ﬁnding seasonal setups at the HOST Web site,you will be ready to learn the seasonal triggers and follow-through methods.The key to effective application of this method is practice and a thoroughunderstanding and application of the rules. Lesson 4 teaches you the triggerand follow-through methods for this approach.
LESSON 3 QUIZ
Instructions: Circle the correct answers.
1. Seasonal trade patterns are based on weather:
A. Correct.B. Incorrect.
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C. In some cases.
D. Only when the weather destroys crops.
2. Seasonality:
A. Is the “holy grail” of futures and stock trading.
B. Is used by farmers when they market their crops.
C. Can only be used in conjunction with government crop reports.
D. Is only one part of a complete approach to trading.
3. There are several types of seasonal trade setups:
A. True only in commodities.B. True only in stocks.C. Always true.D. Never true.
4. Preholiday seasonal patterns (select all that apply):
A. Are patterns that occur on the day prior to major holidays.B. Are caused by traders going on vacations.C. Are triggers.D. Are a form of seasonality.
5. A key date seasonal setup (select all that apply):
A. Tells you the exact entry and exit date for a trade.B. Gives you a speciﬁc stop-loss.C. Is based on a vast amount of historical dataD. Is the ﬁrst step in a total approach using setup, trigger, and follow-
through.
6. Interpretation of trading indicators:
A. Is the correct thing to do at all times.
B. Is best used for day trading.C. Can help you develop excellent trading strategies.D. Will often open the door to subjective opinions thereby increasing
losses.
7. Choose all that apply:
A. Seasonality is a follow-through method.B. Weekly seasonals are only used by hedge fund managers.
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C. Stocks and futures have seasonal patterns.
D. No interpretation is needed with seasonals.
8. Seasonal patterns can be found in:
A. Stocks.
B. Futures.
C. Spreads.
D. All of the above.
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L E S S O N 4, D A Y 4
The SeasonalTrigger
INTRODUCTION
As you know from Lessons 1 through 3, a trigger is necessary even if wehave a highly reliable setup. In the previous lesson, I showed how to ﬁndvalid setups and how to ﬁlter them using ﬁve criteria. Now comes the nextstep in the process—the trigger.
For my work, a trigger is what most other traders call a “timing signal.”Based on my extensive research and experience, I believe that if you com-bine a valid setup with an effective trigger, then a winning combination isthe result. Just as a carpenter or mechanic must select the right tool for theright job, a trader must select the right trigger for a setup. A hammer cannotdo a job that calls for a wrench. Lest I continue to overstate the obvious,my message should be clear. I have found that the preferred trigger for myseasonals is the stochastic indicator (SI). However, I do not use the SI inthe way that most traders do.
STOCHASTIC K 14 AND 5
Using the SI as a trigger with seasonal setups involves the following rulesof application:
(cid:2)
Use a 14-period slow stochastic %K with 5-bar smoothing—and do notuse %D. The stochastic %K conﬁguration should be readily available
31
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CC-200509: Cocoa NYBT Sep 2005 (Daily bars)
www.GenesisFT.com07/19/2005 = 1425 (-14)
1600
Buy trigger
Sell trigger
1575
1550
1525
1500
1475
1450
14251425
1400
1375
100
90
80
70
60
50
40
30
23.8220
10
0
StochK (14,5)
05/25/05
06/09/05
06/23/05
07/08/05
07/22/05
FIGURE 4.1 The buy and sell triggers for seasonal setups.Source: Courtesy of www.GenesisFT.com.
(cid:2)
(cid:2)
on most quality charting programs. I use, for example, the GenesisNavigatorTM program (www.genesisft.com).A buy trigger occurs when SI %K has been below 25 percent and hasgone back above it.A sell trigger occurs when SI %K has been above 75 percent and hasgone back below it.
See Figure 4.1 for a visual representation of these two conditions.Here is the procedure:
1. Once you have selected your seasonal setups, and evaluated the ﬁvefactors, arrange them in date order. At the end of the trading day, beforethe entry date for your setup, examine the stochastic to see if there hasbeen a trigger. If the trigger is consistent with the setup and it is clearthat the trigger will be maintained, then enter the order to be executedon the close of trading (MOC order).
2