Identifying Cycles

Technical analysis as a science deals with both forecasting the price of a certain security/currency pair, etc. and the time that specific price is about to happen. It is worth noting that if history serves as a good indicator for future price movements, than forecasting WHEN a certain price comes has been viewed even more important some times than the ACTUAL price target itself. And how better to look at the past for forecasting the future if not taking into consideration the fact that markets move in cycles. The idea behind the concept of a cycle in trading is that a trading security/stock/currency pair moves as a result of cyclical forces.

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You are all familiar with the terms bull and bear markets, so at one point it can be said that when a bull market ends, the bullish cycle ends, or when a bear market ends, a bearish cycle ends. Depending of the nature of the trading security/stock/currency pair you are actually trading, a deep look into the history of that specific security/stock/currency pair will give you clues about past bullish/bearish cycles, their nature, length, repetitiveness, etc. You might even know in advance that if the market is about to enter a new cycle, regardless if bullish or bearish, than in average, based on past observations, it takes a certain amount of time to complete, having different characteristics and amplitude of the move, etc. The angle the price rises in a bull market it is always different than the angle the price falls in a bearish market. In the first instance when price rises it might be associated with euphoria, and in the second one with panic. And panic is always steeper. So you might end up having two different cycles, based on two different markets, with different characteristics and interpretation. However, both cycles, up and down, make the movement of that specific market you are analyzing. And this is why cycles are important in trading.

This chapter will have three recordings, one showing you a specific example on how to identify bullish/bearish cycles on the eurusd monthly time frame, the second one going through the details on what to look for when looking in the history of a security/stock/currency pair and how to interpret the result, and the third one deals with modern cycle indicators that can be used in trading, what brokers are offering them, how to interpret, on what time frames, etc.

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