Trading During the Autumn

Below, Dominic Picarda looks at what Autumn means for traders.

Autumn is called “fall” in America because it’s the season when the trees shed their leaves.

However, it’s not just foliage that gets blustered around in this period… many financial markets also have a tendency to drop in September and October.

This volatility is nerve-wracking for many traditional investors, but can provide excellent opportunities for nimble spread bettors.

Autumn – A History of Decline

September and October are most famous for hosting some of history’s most terrifying blow-outs. Double-digit declines followed the near-collapse of a big hedge fund in September 1998, the attack on New York in 2001, and Lehman Brothers’ bankruptcy last year. And the Wall Street Crash of 1929 and the Black Monday Crash of 1987 both took place in October.

Looking beyond such spectacular events, these two months do seem to have a special significance. Going as far back as 1820 in the UK stock market, October has produced the worst average returns of any month. And around one-third of major highs and lows in the FTSE 100 have occurred in these two months, twice the frequency we would expect if returns were simply random.

Applying Time Cycles

While it is useful to know that important turning-points and movements are more likely in September and October, you really need to narrow it down if you want to use it for trading.

One way of doing this is to look for specific time-cycle dates that arise in these months. This simply involves spotting highs and lows that have occurred at regular intervals in the recent past.



The accompanying chart shows the FTSE 100 index back in 2007. The arrows mark time-cycle turning-points at eight-week intervals. This pattern had been in evidence for several years, giving traders plenty of advance warning.

The fact that the FTSE rallied strongly into this period and was close to a multi-year high was a great clue that a short-selling opportunity was in the pipeline.