Approximately all financial instruments are subject to seasonal tendencies. Some trading instruments exhibit more vulnerability towards seasonal impacts whereas others exhibit less openness to seasonal factors. Most of the inexperienced traders fail to realize the importance of cycle of analysis for trading and they ignore the fact that it is crucial to evaluate the best season for Forex trading. Summer is considered to be a holiday season where a number of trading parties take break, government operations are also supposed to be more or less inactive during this time. As summer is vacation period therefore it affects the volume of Forex market.
The core reason behind the slow down impact on forex trading during summer time is that a lot of people take summer vacation during this time, those people include professionals that are directly or indirectly associated with forex trading. But it is a matter of known fact that it is not necessary that a market with thin liquidity would record les profits. In fact if successful trading techniques are followed, a market with the feature of thin liquidity can generate good profits. As during summer time forex market volume lowers down, therefore market becomes thin on liquidity, at this time traders have to be more alert to the market changes. The impact of summer time on forex trading is obvious, that is the volume of trade is going to be lower but it does not necessarily affects the volatility of the forex trading. The effect of low market volume can be seen with regard to its impact on the currency value of GBP/USD currency pair. During summer time though the market volume lowers down but still there are a lot of opportunities for traders to trade successfully. The best way to avail opportunities out of this scenario is to treat summer time as normal time.
It is also important to know that though during summer time the volume of market is low, but on other hand it provides opportunities for the small number of traders to bring remarkable changes on some specific currency rates. Such unexpected moves from small number of traders can unexpectedly break certain technical barriers that resist trading during summer time. Such moves from small number of traders can eventually trigger trading activities. As this is not the normal trading period therefore such steps also have short term impact over forex trading, on other hand if similar actions would have been followed by traders during normal trading conditions, it would have lead to long term movements.
As a Forex trader if you are willing to earn profits you need to understand the critical seasonal impact over forex trading activities. You need to understand the possible movements in the currency during different forex trading seasons. A currency will record less movements and profits if it typically remains quiet during a specific period. So before actually investing on a particular currency follow the currency changes for a certain period of time and notice its volatility during different seasonal times. This will help you to understand that whether it is the perfect season to invest or not.