**Trading cycle**

Once identified and understood, cycles can add significant
value to the technical analysis toolbox. However, they are not perfect. Some
will miss, some will disappear and some will provide a direct hit. This is why
it is important to use cycles in conjunction with other aspects of technical
analysis. Trend establishes direction, oscillators define momentum and cycles
anticipate turning points. Look for confirmation with support or resistance on
the price chart or a turn in a key momentum oscillator. It can also help to
combine cycles. For example, the stock market is known to have 10-week,
20-week, and 40-week cycles. These cycles can be combined with the Six Month
Cycle and Presidential Cycle for added value. Signals are enhanced when multiple
cycles nest at a cycle low.

A cycle is an event, such as a price high or low, which
repeats itself on a regular basis. Cycles exist in the economy, in nature and
in financial markets. The basic business cycle encompasses an economic
downturn, bottom, economic upturn, and top. Cycles in nature include the four
seasons and solar activity (11 years). Cycles are also part of technical
analysis of the financial markets. Cycle theory asserts that cyclical forces,
both long and short, drive price movements in the financial markets.

Price and time cycles are used to anticipate turning points.
Lows are normally used to define cycle length and then project future cycle
lows. Even though there is evidence that cycles do indeed exist, they tend to
change over time and can even disappear for a while. While this may sound
discouraging, trend is the same way. There is indeed evidence that markets
trend, but not all the time. Trend disappears when markets move into a trading
range and reverses when prices change direction. Cycles can also disappear and
even invert. Do not expect cycle analysis to pinpoint reaction highs or lows.
Instead, cycle analysis should be used in conjunction with other aspects of
technical analysis to anticipate turning points.

The Perfect Cycle and stock signals

The image below shows a perfect cycle with a length of 100
days. The first peak is at 25 days and the second peak is at 125 days (125 - 25
= 100). The first cycle low is at 75 days and the second cycle low is at 175
days (also 100 days later). Notice that the cycle crosses the X-axis at 50, 100
and 150, which is every 50 points or half a cycle.

Chart 1 - Cycles

Crest: Cycle high

Trough: Cycle low

Phase: Position of the cycle at a particular point in time
(the example cycle is at .95 on day 20)

Inflection Point: This is where the cycle line crosses the
X-axis

Amplitude: Height of the cycle from X-axis to peak or trough

Length: Distance between cycle highs or cycle lows

Observe that this is merely a blueprint for the ideal cycle;
most cycles are not this well-defined.

Cycle Characteristics

Forex trading Signals

Cycle Length: Lows are usually used to define the length of
a cycle and project the cycle into the future. A cycle high can be expected
somewhere between the cycle lows.

Translation: Cycles almost never peak at the exact midpoint
nor trough at the expected cycle low. Most often, peaks occur before or after the
midpoint of the cycle. Right translation is the tendency of prices to peak in
the latter part of the cycle during bull markets. Conversely, left translation
is the tendency of prices to peak in the front half of the cycle during bear
markets. Prices tend to peak later in bull markets and earlier in bear markets.

Harmonics: Larger cycles can be broken down into smaller,
and equal, cycles. A 40-week cycle divides into two 20-week cycles. A 20-week
cycle divides into two 10-week cycles. Sometimes a larger cycle can divide into
three or more parts. The inverse is also true. Small cycles can multiply into
larger cycles. A 10-week cycle can be part of a larger 20-week cycle and an
even larger 40-week cycle.

Nesting: forex
signals
A cycle low is reinforced when several cycles signal a trough at the same time.
The 10-week, 20-week, and 40-week cycles are nesting when they all trough at
the same time.

Inversions: Sometimes a cycle high occurs when there should
be a cycle low and vice versa. This can happen when a cycle high or low is
skipped or is minimal. A cycle low may be short or almost non-existent in a
strong uptrend. Similarly, markets can fall fast and skip a cycle high during
sharp declines. Inversions are more prominent with shorter cycles and less
common with longer cycles. For instance, one could expect more inversions with
a 10-week cycle than a 40-week cycle. Read more on https://www.gold-pattern.com/en