Weekly Forex Forecast: 18 - 22 May (2024)

FAQs

Is May a good month to trade forex? ›

Forex Seasonality in British Pound (via GBP/USD)

May is a very bearish month for GBP/USD, from a seasonality perspective. Over the past 5-years, it has been the worst month of the year for the pair, averaging a loss of -1.22%. Over the past 10-years, it has been the worst month of the year, averaging a loss of -1.53%.

In short, Tuesday, Wednesday and Thursday are widely considered to be the three best days of the week to trade. Forex trading is best at the busiest times. This often means the best return on your investment, as well as the most profitable trades.

Forecasting in FX means predicting current and future market trends by utilising existing data and various facts. Being an analyst, one should rely on both fundamental and technical statistics in order to predict the directions of the economy, the stock market, and individual securities.

The weekly rule system is a trend-following trading system. One example of the system is the four-week rule (4WR). Traders will buy when prices reach a new four-week high or sell when prices reach a new four-week low. The weekly rule trading system was established by Richard Donchian.

Forex trading tends to be more volatile during the months of September to December, as major financial statements are released and many fiscal years end during this period.

Some traders follow something called the "10 a.m. rule." The stock market opens for trading at 9:30 a.m., and the time between 9:30 a.m. and 10 a.m. often has significant trading volume. Traders that follow the 10 a.m. rule think a stock's price trajectory is relatively set for the day by the end of that half-hour.

One of the worst times for placing trades is immediately before or after high-impact news. These events range from central bank rate decisions to non-farm payroll. By waiting for the session to close at 5 pm EST, you avoid the 'chop' that often occurs around these events.

The U.S./London markets overlap (8 a.m. to noon EST) has the heaviest volume of trading and is best for trading opportunities. The Sydney/Tokyo markets overlap (2 a.m. to 4 a.m.) is not as volatile as the U.S./London overlap, but it still offers opportunities.

Let's Understand the London Session in Forex Trading!

With 43% of all forex transactions, it is a powerhouse of opportunity. From 8:00 AM to 5:00 PM GMT, experience high liquidity, tight spreads, and significant price movements, especially in the British pound (GBP). Let's delve more into the article below!

Traders look for when the short-term moving average crosses over with the long-term average. If the short-term moving average surpasses the longer-term average then it generally suggests that exchange rates are heading higher.

How to predict forex forecast? ›

To predict forex movements, traders use two types of analysis: fundamental and technical. Fundamental analysis takes external events and policies into account, affecting currency prices. On the other hand, technical analysis relies on historical price data and patterns to predict future movements.

The head and shoulder pattern is among the most popular and reliable trading patterns. Perhaps it's the most reliable day trading pattern. It is easily recognizable and gives a reversal signal. This means that if it appears after a downtrend, the price will reverse and trend upwards.

The closest thing to a hard-and-fast rule is that the first hour and last hour of a trading day are the busiest, offering the most opportunities, while the middle of the day tends to be the calmest and most stable period of most trading days.

Swing trade positions have a better potential for larger gains and losses than day trade positions since they are generally open longer. Because each trading approach is unique, traders should select a strategy that suits their talents, interests, and lifestyle.

“Over the last 10 years, May returns have averaged 0.7%, with nine of the last 10 months posting positive results.” May historically marked the start of the S&P 500's “worst six-month stretch,” according to Turnquist, who said that performance gives “some credence to the 'Sell in May and Go Away' adage.”

"Sell in May and go away" is an old market adage, popularized by the Stock Trader's Almanac, revealing the best six months of the year for stocks (they used the Dow Index) occurred from November through April. It suggested investors should sell in May and wait until November to buy back into the markets.

The U.S./London markets overlap (8 a.m. to noon EST) has the heaviest volume of trading and is best for trading opportunities. The Sydney/Tokyo markets overlap (2 a.m. to 4 a.m.) is not as volatile as the U.S./London overlap, but it still offers opportunities.