The Market You Trade Is Not Random
Cycle Perspective by Market Participants: Cycles, also known as waves, are observed almost everywhere including nature. Ancient civilizations designed calendars and time measurements around cycles. This has created the standard measurements we all live by and track on a regular basis. The length of day, year, seasonal changes and even the phases of the moon and stars. These are just time-based cycles but the same type of thing carries across noise like musical notes, light spectrums and in liquids like waves in the ocean.
Philosophical Cycle Foundation: The financial markets are truly efficient and follow "random walk" principle. The fact that so many including Larry Williams and Paul Tudor Jones along with many other long-term consistent traders pull money from the financial markets proves this if a more detailed analysis of the random walk theory is applied you will see some interesting results through cycle analysis.
Understanding cycles as well as tracking where they are in their current phase give you a pretty good idea where the financial market is headed for a short distance into the future, with a high level of accuracy.
Understanding Cycles and Automated Trading System ImplementationThe stock market or any financial instrument chart is similar to an aerial photo of a river. There are times (sections) where the price movements appear random while other sections have distinctive cyclical pattern (waves or a snake-like pattern). No matter how good a trader or investor you are, trading the markets requires us to take a leap of faith along with many assumptions to follow our trading system, whether it is an automated trading system or not. Understanding cycles is just a piece of the overall puzzle, although I would account for it to be a third of my analysis for timing and position management of my automatic investing system.
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