Analysts have described August as a historically challenging month. The risks are amplified this year as stocks are #trading @ multiyear highs & overvalued levels.
For eg. Looking at historical data of #DXY we can see that in last 15 years Dollar has been strong in Month of May 80% of times . hence we can avoid selling USD specially in month of May as 80% of market bets will be against us .
Best Months - Mid september to Mid December
Good Months - Mid January to Mid June
Normal Month - Jun- Jul
Risky Month - August
Why is August trading so slow?
It is the large institutions that move the market, and not the individual trader, but if the employees who have the authority and resources to enter large trades are on vacation, this can cause a decrease in large trades during August and a general drop in market liquidity.
Also many other traders too decide to go on vacation knowing that as usual, there is sparse economic data releases this month and not a lot to move the market.
Also concept of “Sell in May and Go Away” of equity market starts weighing on forex market during August
The big market movers have to protect their portfolios and returns, which leads to:
1) Long-term traders closing their trades over the summer
2) A return of trade action when the the autumn comes
: Experienced Forex traders know they can’t force a market to react when the market itself is reluctant to make any major moves :
Effects of Slow Trading in August :-
The effect of the slow market movement in August is that trends tend to be smaller and less explosive.
It is common to see false breakouts in August as the markets try to emerge past an established level but doesn’t have the legs to follow through.
This is no doubt because usually breakouts require large trading volumes, but the market in August usually doesn’t have enough conviction to get us there
We can already see Bear trap in EURUSD ,
Stay on High Alert When Trading in August
Not everything is as it seems, so just because there is less trading in August doesn’t mean traders can sit back and relax. A lack of volume can trigger heavy volatility in the market which may result in false volatile moves triggering stoplosses , choppy movements & false trading patterns , price may not respect support/resistance levels .