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SR stands for Seasonality Research. This tool created by a client and programmed for him by SignalWorks, is based on the premise that market prices don’t move randomly but are subject to causality. Causality is the phenomenon that market prices can show repeatedly the same price pattern when an outside event occurs. For example, economic data, quarterly company results, the weather and the changing of the seasons can all lead to repetitive price patterns.
The SR-Tool quickly and easily detects such repetitive price patterns and highlights the patterns in the chart.
The advantages of the SR-Tool:
The pack can be used in both NanoTrader Free and NanoTrader Full.
The SR-Tool can be used on weekly and daily charts. At least five years of data are needed to find price patterns, which occur every year. The strength of the SR-Tool lies in the fact that it ‘converts’ the chart of every calendar year one chart, which can easily be compared. This is called the seasonal chart.
The seasonal chart is green for a bullish pattern and red for a bearish pattern. Blue implies there is no pattern. The longer the seasonal chart retains its green or red colour without interruption, the more pronounced the movement for rising or falling prices was in the past. Note: The big drops in the chart are simply to connect the years. They do not represent a price movement.
This example shows the SR-Tool’s seasonal chart for the DAX future over the last five years. Every year a bullish phase in the DAX occurs between the second week of April and the first week of May.
This example shows the DAX chart with the seasonal chart below the main chart.
The SR-Tool does not imply that the price movements are 100% identical every year. What it implies is that every year, in the same period, very similar price movements occur. The trader knows the direction of the price movement, when it is likely to start and what its approximate size will be. These elements give the trader a statistical advantage.
It is evident that annually recurring price patterns are fairly rare for every instrument. Traders should therefore use it to monitor a selection of instruments and not just one. The trader should not change the SR-Tools default settings.
This example shows the weekly seasonal chart for Gold. An annually recurring bearish price pattern occurs every year in the four weeks of November.