Do You Understand Seasonality ?

Do You Understand Seasonality ?
Do You Understand Seasonality ?

What do traders mean when they talk about seasonality and its effects on commodity prices? The definition of seasonality states that a characteristic of a certain time when the data experiences regular and predictable changes which occur every calendar year and in a time series that reoccurs or repeats over one year can be said to be seasonal.

An example of seasonality is the grain market were generally prices head higher in spring and early summer on concerns of a drought or a poor crop, it also happens in the energy sector in the summer months when demand for unleaded gasoline is at its peak and then generally declines going into winter. Seasonality also affects the grains in the month of October when historically prices decline during that period due to the fact that harvest is occurring which puts pressure on prices due to the crop being harvested.

Traders try to use seasonality to predict or take advantage of prices in a certain month or season with many of the agricultural commodities.