Cycles and Their Impact on Market Trends
2024-10-11

Cycles are a powerful tool to integrate into your trading awareness. Plotting from bottom to bottom is the most straightforward way to visualize cycles. The concept of Hurst cycles comes into play here—they highlight the importance of understanding periodicity in market behavior. Hurst cycles focus on the timing of market movements and how price tends to repeat over consistent intervals, giving traders insight into potential future price action. They’re particularly useful for spotting turning points and understanding the rhythm of the market.

In this chart, I’ve drawn several green semicircles to illustrate cycles of varying lengths, from larger to smaller. While these cycles don’t always align perfectly, they offer a useful framework. It’s crucial to remember that when multiple cycles end or begin simultaneously, the resulting move (whether up or down) tends to be much stronger than when a single, smaller cycle completes on its own. What goes up must come down, and vice versa, but these fluctuations don’t change the overall degree of trend.

By acknowledging these cycles, you gain a better understanding of how market fluctuations occur. You can also backtest historical data and project forward to identify likely peaks and troughs in future trends. However, it’s important not to rely solely on cycle analysis. Combine it with your cocktail of methods—whether that’s Elliott Wave, Fibonacci, or other technical indicators—and look for patterns or signals that align across multiple strategies. The goal is to find where your methods “jive” and provide you with the most confidence in your market outlook.