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Cycles Can Leapfrog Your Trading Success

Stop Following the Crowd Mentality and Succeed!

Much has been written over the years on Cycle Analysis for the purpose of market timing, and for good reason. While most ignore the basic fact that price action is the reflection of cycles at work, those who have embraced cycles as a means of market timing are greatly rewarded.

As a trader for over 25 years now, I have applied many methods towards market timing. The result of all has led me, many years ago, to follow the course of market cycles which are based on natural laws. This decision has paid off and continues to do so in my trading today.

In its simplest form, you can liken market timing using Cycle Analysis much like watching your kid jumping on a trampoline. Watch for just a few moments and you can quickly anticipate the next time the child's feet will touch the trampoline with precision.

As analysis in trading is considered divided into two camps, Fundamentals and Technicals, Cycle Analysis is considered a subset of Technical Analysis.

 


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In conventional technical analysis we usually look for the breaking of a trendline or the crossing of moving averages, oscillators or other types of indicators in order to tell us that something has changed. However, this indication of change is telling us that the event has already happened. In other words, it is "after-the-fact".

The beauty of cycle analysis is that we can often pinpoint possible tops and bottoms well ahead of time. The implications of this should be obvious to any trader who has experienced great risk and loss due to being too early or too late entering a trade.

Now I'm not going to get into the details as to why cycles exist and how they are related to price action. There is much written on this to fill all your quiet nights in reading for decades. If you spend just a little bit of time watching a MACD or Stochastic indicator on a price chart, you should already be convinced that cycles are at work behind the scenes. Just watch as they swing up and down between extremes (overbought and oversold zones) to get a 'feel' for the cycle ebb and flow of price action.

Michael S. Jenkins, in his book "The Geometry of Stock Market Profits" (page 16) makes the statement that "The solution to the stock market strategy...to develop a rational plan...in buying and selling...CYCLES ARE THE KEY." He links cycle analysis to gaining mastery over the hardest part of professional trading for a living...pulling the trigger with a cool head and extreme confidence.

This has definitely been the case for my own trading. Once I came to realize the power of trading based on cycles, my trading successes jumped leaps and bounds. In any given month I average a high percentage of winning trades against losing trades, with the few losing trades resulting in ridiculously little capital loss. Timing trades with pinpoint accuracy is empowering, only leaving ones internal psychological and emotional baggage to be the only thing that can sabotage success. The method itself is pure.

My intention of writing this article is not to parade around my own personal successes in trading. Rather, as an analyst and teacher in the subject, my agenda is to cut through the fallacy of investing or trading based on the conventional norms and wake up the minds of those who desire better to know they can in fact achieve better if they stop following the methods used by the crowd.

If you read some of the testimonials on my website (amazingaccuracy.com), you will find comments from some who talk about their friends or brokers as looking at them as being crazy for trading based on cycles. Yet, here they are winning trade after trade right before the eyes of their brokers and friends! It is like they exist in a state of denial, and that would be a correct assessment.

Pythagoras (6th century BC) described TIME and space as being connected in terms of numbers. His contributions to Geometry is legendary, and the relationships found between nature, music, harmonics (cycles), and time. You can really get deep with this stuff.

Fortunately you do not need to get down to the nitty-gritty of 'why' cycles exist in order to take advantage of them. What it takes is that you put in some time and effort toward applying simple methods.

W. D. Gann taught a subject called "Time and Price Squaring". This is one simple method of determining market cycles. Another is to get as many years of price data as you can and note the time between major tops and bottoms. You will be surprised to find how they tend to repeat, such as every 60-years, 30-years, 15-years, 10-years, 5-years, etc.

There is little time or room to discuss in detail all the available methods there are in determining market cycles. I've spent decades on this subject and have simplified much of my analysis by way of software, since regular analysis can be quite time consuming without the aid of computers. But if this article helps you to see that trading without the use of cycle timing may be hindering your trading progress, I have done my job.

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