Sunday, November 23, 2008

What is Market Cycle?

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A cycle is simply a regularly occurring sequence of events. The sun rising every morning and setting in the evening is a cycle. The four seasons are one cycle. In forex market, a cycle is loosely defined as price movement of a market from a local bottom to a local top and back again.

Cycles, just like price trends, can be long, short or intermediate in length. A specific market may have a 20 day, 52 week and 5 year cycle, all acting together to describe price activity. By adding the cycles together, the actual price activity can be forecast.

Market cycle analysis attempts to find recurring major and minor peaks and troughs in price movement for better trade timing. Here are some examples of forex market cycles.

  • The 30-day cycles in the EURUSD daily chart

  • The 25-week cycles in the AUDUSD weekly chart

  • The 200-hour cycles in the AUDUSD 8H chart

How to use MetaTrader to find market cycle

Price movement is a series of tops and bottoms, the price runs from one bottom/top to another is called a cycle and each cycle has the similar length. MetaTrader has an excellent tool to help you identify the market cycles.

Now we use EURUSD 4 hours chart to explain how to find the market cycle bottom.
  • Step 1 : Run MetaTrader, look at the EURUSD chart and mark up the important bottoms.

  • Step 2 : Press the “cycle line” button on the tool bar to draw a series of vertical line. Make sure every vertical line is near to the import bottoms.

Sources :
  1. : What is Market Cycle?
  2. Blog : How to use MetaTrader to find market cycle

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