The markets and individual securities routinely fall into cycles that are measurable and predictable. Socioeconomic and market conditions may themselves change but the cycles still tend to prevail, especially for the duration of the trend. Traders who can identify both the cycle and the current location of price in that cycle are more likely to be successful in timing their entries and exits.
In traditional technical analysis there are a lot of long term established cycles that influence the broad markets. However, as traders, we want to focus on the shorter time frame cycles that will influence our securities while we are in positions.
A cycle is measured by the distance between lows. This is also referred to as the frequency of the cycle. In trader terms, the frequency will tell you when to expect lows or moves to the downside in price. Once you identify the stock’s cycle, you have a higher probability for trading in the right direction.
As I previously mentioned, cycles are measured from the lows. There is a cycle tool on some trading platforms that will allow you to line up vertical lines with the lows on your price chart. Don’t worry if the lines do not match every low, as there are multiple cycles affecting the price at any time. You want to locate the dominant one that you can trade with. That will be the one that contains the majority of the lows.
We can do this study on any stock and for any timeframe.
The cycles will be more stable on longer term charts, but knowing the cycle can assist you in your trading. If you see price approaching a supply or demand level but the cycle is not indicating a top or bottom, the level may have a higher probability of breaking. But if the cycle top or bottom is near, the levels are more likely to hold.
Online Trading Academy’s Core Strategy partly relies on using multiple time frames for proper analysis. When we look at the higher timeframes, the cycle lends itself to assist the trader in deciding which direction they should trade in. When the trader then drops down to a lower timeframe to identify entries and exits, the cycle can be used as an odds enhancer for seeing whether the demand and supply zones are more or less likely to hold.
If the trading platform you use does not have the cycle tool, you can still easily locate the cycle of your security. Start by marking the lows and then count the number of candles in between those lows. They should be relatively similar. You can then take the average between those lows as your stock’s or market’s cycle.
So while it is not a perfect indicator, (there is no perfect indicator, decisions should be made from price) the cycle of a security can be a good odds enhancer when you are trading. To greatly improve your chances for success in trading the markets, visit your local Online Trading Academy Center today and enroll in a course.
Neither Freedom Management Partners nor any of its personnel are registered broker-dealers or investment advisers. I will mention that I consider certain securities or positions to be good candidates for the types of strategies we are discussing or illustrating. Because I consider the securities or positions appropriate to the discussion or for illustration purposes does not mean that I am telling you to trade the strategies or securities. Keep in mind that we are not providing you with recommendations or personalized advice about your trading activities. The information we are providing is not tailored to any individual. Any mention of a particular security is not a recommendation to buy, sell, or hold that or any other security or a suggestion that it is suitable for any specific person. Keep in mind that all trading involves a risk of loss, and this will always be the situation, regardless of whether we are discussing strategies that are intended to limit risk. Also, Freedom Management Partners’ personnel are not subject to trading restrictions. I and others at Freedom Management Partners could have a position in a security or initiate a position in a security at any time.
Editors’ Picks
EUR/USD holds above 1.0700 ahead of key US data
EUR/USD trades in a tight range above 1.0700 in the early European session on Friday. The US Dollar struggles to gather strength ahead of key PCE Price Index data, the Fed's preferred gauge of inflation, and helps the pair hold its ground.
USD/JPY jumps above 156.00 on BoJ's steady policy
USD/JPY has come under intense buying pressure, surging past 156.00 after the Bank of Japan kept the key rate unchanged but tweaked its policy statement. The BoJ maintained its fiscal year 2024 and 2025 core inflation forecasts, disappointing the Japanese Yen buyers.
Gold price flatlines as traders look to US PCE Price Index for some meaningful impetus
Gold price lacks any firm intraday direction and is influenced by a combination of diverging forces. The weaker US GDP print and a rise in US inflation benefit the metal amid subdued USD demand. Hawkish Fed expectations cap the upside as traders await the release of the US PCE Price Index.
Sei Price Prediction: SEI is in the zone of interest after a 10% leap
Sei price has been in recovery mode for almost ten days now, following a fall of almost 65% beginning in mid-March. While the SEI bulls continue to show strength, the uptrend could prove premature as massive bearish sentiment hovers above the altcoin’s price.
US core PCE inflation set to signal firm price pressures as markets delay Federal Reserve rate cut bets
The core PCE Price Index, which excludes volatile food and energy prices, is seen as the more influential measure of inflation in terms of Fed positioning. The index is forecast to rise 0.3% on a monthly basis in March, matching February’s increase.
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