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Cycle Analysis... a way of looking at price action.
No matter what time of day you trade you will be somewhere inside the 24 Hr Cycle rotation. Understanding how to find your place inside that rotation is necessary to ensuring that money is likely to flow into... instead of out of.... your trading account.
On the backside of the 24 Hr rotation I will always look to sell 6 Hr resistance. For reasons that should be obvious, I refer to the 6 Hr as the Session Cycle.
As of this post, price got a bounce off the Monthly Pivot but is experiencing resistance at the underside of the 24 Hr Globex Pivot... behavior that is characteristic of price being on the backside of the Multi-Day rotation. So, what will make this day complicated is that even if the 24 Hr Cycle is rotating lower and the Multi-Day is in the process of rolling over and adding to the downward pressure, the Multi-Week rotation and as speculated the Multi-Month rotation are likely to be still pushing higher.
Choppy waters.
This MD correction could build out into a flag as the combined buying of the MW and MM upside absorbs the combined selling of the 24 Hr and MD Cycle corrections. Accordingly, how this MD Cycle works through its rotation will reveal what the Higher Time Frame Cycles are doing.
Ask questions, Get answers.
"If you don't want random outcomes, don't make random decisions."
The bounce off the Monthly Pivot is to be expected. That price pushed back above the just broken areas of 24 Hr support call into question the status of the Multi-Day Rotation. On your charts you will see that despite this strong push higher price is stalling at the Overnight High, the High of the prior 24 Hr Cycle.
As was mentioned in this morning's earlier post showing the rotations of the Multi-Year Cycle:
"When Higher Time Frame Cycles turn the Minor / Component Cycle will experience increased volatility as the range narrows the buyers and sellers contest control over price movement. Think of any consolidation period where there are sudden and frequent up and down moves."
Is that what we are seeing here?
If price rolls over from here and puts in a Double Top with yesterday's High I'll be pointing at it and saying: " Look... a Multi-Day High !!! " This Low that came out of the test of the Monthly Pivot is now marked as a 24 Hr Low... price took out the prior 360 Min Low and reversed higher to take out the prior 360 Min High.
Might this also be a new MD Cycle Low? No. Price has not yet broken 24 Hr support and seen it turn into resistance, the backside of the MD Cycle. Until that happens and as long as 24 Hr Support holds then the MD Cycle is still looking for its High.
Could this area of overhead resistance be putting in the MD High. Yes. But, as how price behaves reveals what the Dominant Cycle is doing, a 24 Hr Double Top or a Lower 24 Hr High ( so far this bar is lower by 2 ticks ) is necessary to argue that the MD High is in place.
Could it go Higher from here to find the MD High?
In shoving matches the Higher Time Frame always prevails.
"If you don't want random outcomes, don't make random decisions."
"But perfection is illusive and it is also not necessary in order to extract money out of the markets."
An elaboration on this morning's trade.
The shortest time frame cycle that I find useful is 90 Sec. This 1.5 Min rotation is the Minor / Component Cycle that is gives the structure to the moves between the Lows and Highs of the 5 Min bars. On this 15 Sec chart the blocks are the 5 Min bars and if you look closely at these 15 Sec candles you can count out the @ 6 bar rotation. It is understanding and accepting the validity of this most Minor Cycle that gave the when and the where to place the sell order. The Sienna horizontal is the 6 Hr Pivot and as you can see on the initial test it clearly was demonstrating resistance to price. Because the expectation was that a test of Session Cycle resistance would hold, the focus shifted to trying to catch the turn of the 5 Min Candle. If the 5 Min rotation is constructed out of the 90 Sec Cycles then a lower 90 Sec High would argue the 5 Min High was in place and that 90 Sec support.... the white ma.... would break. The order was placed when price was testing 90 Sec support and expecting the SC Pivot to hold, it was placed 1 tick below that Pivot. Five bars after the 5 Min High and 2 bars after the order was placed, price pushed up to a Lower 90 Sec Cycle High and the order was filled.
Boxes within boxes.
The logic behind how the Dominant / Minor relationships should play out is identical across the time frames. The process of figuring out what price is likely to do on this 15 Sec. time frame that is laid out above is the same process used to find out where you are in the 24 Hr, Multi-Day or Multi-Week rotations. If you look through this tread and the longer 6E thread over in Currencies with this in mind, you will notice that the language used and the basic " if/then" reasoning applied remains the same regardless of which Dominant / Minor pair is under discussion.
The fractal nature of price movement.
Despite how I interpret the larger story, I restrict the duration of any trade to riding up or down the Hourly Cycle rotation. In the ES this is usually a $1,000 - $2000 / contract trade when taken in the direction of the 24 Hr rotation.
Ask questions, Get Answers.
"If you don't want random outcomes, don't make random decisions."
The downside of discussing and illustrating Cycle Analysis is that because the narrative repeats with each and every rotation across the time frames, a point is reached where everything that can be said by way of explanation has been said.... multiple times. Without feedback there is no way to know how effectively this subject is being conveyed, or if it is being understood at all.
That is disappointingly true of this thread as it was during the six months of effort put into the 6E Currency thread.
If there are no questions then my job here is done.
Good luck and be careful.
"If you don't want random outcomes, don't make random decisions."
I think you did a good job of laying out the concepts and your implementation of them.
I would not be discouraged about the response. I check the daily/weekly stats, and this thread was often in the top 3 threads in terms of readership, rather consistently. It was being read.
But you also should realize that the cyclical concepts are unusual, even foreign to many or most traders, and that your charts, although I'm sure they have been crafted to serve your purposes over the years, are complex and quite unlike what most traders are used to. Also, even the well-established trading journals seldom get more than a few "thanks" or comments, and that is usually from the same followers. It is just in the nature of things that traders will be looking for what they think they can use, or that they can understand, or that is similar to what they know, so something may attract attention but often without much buy-in or feedback.
I read most of your posts, but to be honest I couldn't always make the effort to work with or follow them closely. I have only so much time to devote to reading futures.io (it's actually not a job, it just takes as much time as one), and I often overstay my available time anyway, to the detriment of my trading and the rest of the things in life. And while I don't trade cycles, I am relatively familiar with the basics, up to a point, and am not put off by the unusualness of it. I have Hurst's book on my shelf, which I bought when it was relatively new, and I have put it to use in the past. I have moved in my own direction as I learned and tried different things, as we all do.
In fact, one of the things that I have learned from futures.io is that traders generally end up with a method that they have put together mostly on their own, from their own experiences and from ideas they have picked up here and there from many sources. This is true even of traders who strongly believe they are practicing the "x" method (whatever it may be) in its purest form. It's never pure, it's always someone's own take on it, and everyone else is doing something similar, with whatever they have been attracted to. Sometimes, something that someone else says will open up a new train of thought, which is what we can do for each other.
I am trying to say don't be discouraged by the response. You did well, and there is no way to know if it will bear fruit with some now-struggling trader who has an "ah ha!" moment and takes something from it and puts it to their own use. I thought there were many potential "ah ha's" in these posts, for someone who is open to them.
I think this is about all anyone can expect, frankly.
So, good job. Feel free to do, or not do, whatever gives you satisfaction in your posting going forward. It is definitely contributory.
Bob.
When one door closes, another opens.
-- Cervantes, Don Quixote
Thank you Bob for your kind comments. I agree with much of what you have said.
Something we have discussed before is my thought that if becoming a consistently profitable trader is an extremely difficult goal to achieve, then the solution to achieving that goal is not going to be an easy one to discover. If it were then becoming successful at trading would not be a difficult challenge.
This thread is titled: Cycle Analysis... a way of looking at price action. There is not a "best way", or "only way" and for that matter, when it comes to trading, there are no universal truths or absolutes. There are many " price action is random and unpredictable", or "prime number" or "fib" people out there that declare these concepts as absolutes when this is only their opinion based on their experience. This does not allow for the possibility that as individual traders, our experiences will not be the same as everyone else's. In fact, my recommendation is that one needs to question all accepted orthodox trading approaches as that is what most traders will be using. And as the stats indicate, most traders will not last very long.
For those viewers of this thread who want to continue, this pix is the Hurst book Bob referenced and what started me down this road. I got it more than 40 yrs ago for $7.95 and the last time I looked, a used copy was available on Amazon for more than $700.
(Edit.) Just did a search for the book and an Amazon link came back with this : >>The Profit Magic of Stock Transaction Timing Jan 1, 1970. by J. M Hurst Hardcover. $632.53 <<
Followed the link and a used hard cover was listed for $60. Buy it.
There is a version available on Scribd.com as a PDF but it is a poor page by page scan... but it is better than nothing.
" Much of the resistance in the trading community for resurrecting Hurst’s original work was due to its foreboding length and complexity. His book can be hard to follow, and his 1,500+ pages of training materials do not easily reveal his secrets. As with Elliott and Gann, one must invest the time to become accomplished in this art form. If you are looking for a “quick fix”, go elsewhere. "
"If you don't want random outcomes, don't make random decisions."
I do. It isn't easy reading but that's only because what he shares needs to be assimilated and thought through. It took me a while to get through the book because I took notes on the important things, which meant I was taking notes just about every page! His understanding of how price moves was super insightful and answered questions I had of why price behaves the way it does. The section on seeing cycles with moving averages I read while experimenting with placing them on my charts as he described. It is my favorite chapter.
From what I know of your work I think Hurst's theories will resonate.
What motivated his research was this observation:
"At any given moment of time, the earnings and earning potentials for the various issues of the S&P 500 are in all possible states. Some of the issues comprising this broad average have extremely good fundamental situations, some have extremely bad ones, and others exhibit all possible variations in between. If these considerations truly were the basis of price change, we would expect an average of some 500 resulting prices to show no coherency and order at all. In fact, we would expect the resulting price average would be quite smooth, with price variations do to all different fundamental situations averaged out. On the contrary, we now see that the average has a spectral signature with all the precise order shown for the DJIA!"
An aerospace engineer with a background in physics and a career focus on electronic system design, techniques for extracting information from time-series signals in underwater communication between submarines as well as space and missile systems analysis, one day decides to look at stock market prices and he sees things that no one else sees.
Think Russell Crowe in " A Beautiful Mind".
You can look forward to gems like this:
The Implications of Fourier Analysis of Stock Prices.
Course Frequency Structure
Amplitude-Frequency Relationships
Best Estimate of Spectral Line Spacing
Response of the Inverse Centered Moving Average
Parabolic Interpolation
Trigonometric Curve Fitting
Ask questions, Get answers.
"If you don't want random outcomes, don't make random decisions."
His understanding of how price moves was super insightful and answered questions I had of why price behaves the way it does. The section on seeing cycles with moving averages I read while experimenting with placing them on my charts as he described. It is my favorite chapter.