Cyclic proponents are convinced that the entire answer to trading is in cycle analysis.  Theory is as follows:

  • There is an infinite number of cycles in operation with a few dominant ones that are harmonic in nature.
  • Tops and bottoms occur when a predominant number of these cycles peak or bottom at about the same time.

This approach is another tool that can be useful at times.  Blindly using this approach can lead to unpleasant results.  The methods found useful are as follows:

1.  Bottom to Bottom Cycles

cyclic1

B distance should equal time A.  C should equal the average of A & B.

EXAMPLE – Nominal 18 – 21 day cycle in Plywoodcyclic4

2.  Top to Top Cycles

cyclic2

B distance should equal time A.  C should equal the average of A & B.

EXAMPLE – Nominal 33 days

cyclic5

3.  Time Up (A) equals Time Down (B)

cyclic3

This one can only be used as a very rough guide.  The peak seldom occurs at the mid-point of a cycle.

EXAMPLE

cyclic6

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