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TheStreet Open House

The Market You Trade Is Not Random

NEW YORK (TheGoldAndOilGuy.com) -- The use of cycles is perhaps the most misunderstood area of technical analysis, and is widely misused within automated trading systems. This is because there are a wide variety of approaches ranging from magnetic to astrology to time-based cycles.

The purpose of this tutorial on cycle analysis and implementation into automated trading systems is to present a logical perspective on what cycles are and how they enhance your technical analysis studies.

Originally I was attracted to cycle analysis back in 2001. Back then, there was very little information about cycle analysis and even less on how to identify them within financial instruments. Cycles can be somewhat measured using conventional indicators such as RSI, stochastics and moving averages. But, better yet is a custom cycle analyzer indicator I created to make cycle identification and implementation automatic within my trading strategies and my fully automated trading system.

Here is how the moving average can help spot cycles but keep in mind they are lagging indicators. The lower indicator shows the long-term cycle and swing trading cycle I focus on. Remember, cycle lengths change over time, which is why I automated the indicator and have it run within my automated trading system. But you should get the gist of how cycles look and function. "

I am going to touch quickly on a few areas of cycle analysis which I hope you find somewhat interesting.

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