When to Use Momentum with Seasonals

We have been asked many time if our High-Odds Seasonal Trades should be corroborated with our other methods of technical analysis before entering or exiting on the given key-dates. Just like with our methods such as MAC, momentum divergence, and Inside Bar, we generally advise not make comparisons (whether between indicator, timeframe, or related symbols). However, there is one major exception to this rule.

High-Odds seasonal trades come in two flavors, those below 80% accuracy, and those above 80% accuracy. The rule holds for those above 80%. We do not require, nor do we recommend, using any other timing triggers, setups, or indicators to “verify” a trend before entry or exit of such seasonal trades. However, those below 80% are an exception. In this case, we use a momentum indicator.

The momentum indicator acts as the setup, and the momentum is set to the same length as the trade itself. So, for a 20-day bullish trade, we use momentum 20. If momentum 20 is above 0, that serves as the buy setup. The buy trigger is simply the close of trading on the entry date of the trade. Say we have a 12-day bearish trade, we use momentum 12. A moment 12 below 0 serves as the sell setup, and the sell is triggered at close of trading on the entry date of the trade.

Generally, there are very few trades that we recommend below 80%, and we never recommend seasonals with lower than 75% accuracy. However, it’s important to know these rules for the few cases in which we recommend, or you end up finding via our tools like seasonaltrader.com, trades with this range of historical accuracies.