Monthly Seasonal Indicator for Average Returns and Directional Frequency

Summary

This indicator estimates a month’s historical tendency by examining monthly open-to-close changes across a configurable number of prior years. It accumulates the price changes and counts how often the month closed above or below its open, then reports an average monthly price change and a directional frequency labeled as probability. The author uses a DAX monthly chart as an example and says the lookback defaults to eight years. The calculation could also be adapted to use the monthly high-low range or weekly observations.

The suggested use is as a filter for adjusting position quantity during months with a stronger historical tendency. The post provides code but no performance results or validation showing that the seasonal pattern persists out of sample. Its probability measure is simply the frequency of positive or negative observations, selected according to the sign of the cumulative price change; it does not model uncertainty or guarantee future direction. Users should also verify indexing, available history, and instrument-specific behavior before relying on the output.

Key ideas

• The indicator aggregates monthly open-to-close changes over a configurable number of prior years.
• It reports the average change and the frequency of positive or negative months.
• The author suggests using the historical tendency as a filter for position quantity.
• The calculation can be adapted to monthly ranges or weekly observations.
• No out-of-sample evidence is provided, and the reported frequency is not a guarantee of future results.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.