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TIMING IS EVERYTHING

And the use of time cycles can greatly improve the accuracy and success of your trading and/or system.

There is no magic oscillator or indicator that will bring you success in the markets. Knowledge of trading techniques and tools to improve TIMING and determine TREND is the key to low risk high probability trades that can bring you success.

Knowledge, self-discipline and persistence are the true keys to success in trading. Over time you will develop a trading style that fits your personality and trading skills. There are many tools to help improve your trading, but only cycles will allow you to add the element of TIME into your trading.

Simple buy and sell signals do not consider the whole picture. By combining mechanical trading signals with daily and weekly cycles (or two intra-day time periods and cycles, such as a 45- minute and 180-minute, or a 5-minutes and 20-minute), retracements, trend Indicators and trendlines into Cycle Trading Patterns, you can greatly improve your accuracy and odds of making money on a trade or with a system. The following charts and trading concepts are based on trading the long side of a market. The same techniques and concepts work in mirror image fashion for trading the short side

IDENTIFYING CYCLE TOPS AND BOTTOMS USING OSCILLATORS

Chart 1 - This chart shows the ebb and flow of prices, but identification of the Trading Cycle bottoms and tops requires a little effort to be visible to the untrained eye.

Chart 2 - Cycles are measured from bottom to bottom. Every time frame of every market has a dominant Trading Cycle averaging from 14 to 25 bars as measured in weeks, days, half days, hours, minutes or ticks. Most Trading Cycles in the stock and futures markets tend to cluster in the 18 to 22 bar range, averaging 20 bars from bottom to bottom. In Chart 2, T-Bonds exhibits a daily trading cycle of 21 days from bottom to bottom. The trading cycle tops and bottoms are indicated by the arrows.

DETRENDING TAKES THE MYSTERY OUT OF CYCLES

Historical cycles show great potential for low risk trades. But to make cycles tradable it is necessary to define the tops and bottoms so they can be identified and traded with mechanical buy and sell signals.

Chart 3 Centered Detrend -Trading Cycle tops and bottoms are easy to see in the centered detrend.

For over 50 years the non-profit Foundation for the Study of Cycles has been using a simple procedure called centered detrending to identify cycle lengths in all natural phenomena, including economic activity. The advantage of centered detrending over Fourier analysis and Spectral analysis is that you can visibly observe the historical cycle bottoms and tops. This takes the “mystery” out of cycle trading and analysis. When you can look back over 20 years of price history and actually see the consistency and tradability of cycles, it is easy to have the confidence to trade them. After all, if you cannot see cycles in price activity how can you put your money on the line to buy a bottom or sell a top. We are not looking to trade the big bottoms and tops that occur as the trend reverses, but the bottoms and tops of the shorter-term cycles occurring in the direction of TREND.