Question originally asked on Quora (click here) – response below:
I hear some people say: “because traders etc. are off on holiday (school summer holidays too etc.) from July – August and then September everyone is back on it”…
I’m not sure what markets you are referring to in your question, but lets have a crude look at EURUSD price data to substantiate whether September is more “volatile” in comparison to the rest of the months in the year:
What I’ve done is downloaded (relatively high quality data too) EURUSD H1 time frame data from 2001–2016 Sep (which is 93,000 rows of data in excel).
I’ve then done the Log returns of the close prices (excel =LN(p/p-1) – where “p” is the period) and then got the Std Deviation of each Log return on the H1 for the corresponding month (I also transformed the LN into a percentage with (e^ln-1)).
If you’re not into maths (or if you are, don’t get too picky with how I’ve done this crude test!), the graph above seems to prove something (albeit only one type of test!) and all the July’ and August’ since 2001 to current seem to display a lower standard deviation (measurement of volatility) than that of all the Septembers!
Unfortunately I cannot explain nor give you a fair response as to why markets are “volatile in September” just as I cannot explain to you why January, June, October, November and December are more volatile than September (at least on EURUSD).
Either way, as traders we need volatility else if it were a flat-line, there is no money to be made. So the more volatile, the better (but in the right context)! August is certainly a very boring and low volatility month.