P1: PIC/PIC c05
August 18, 2008
Printer: Yet to come
Beyond Traditional Cycles
In this chapter, you will learn how to project in advance very narrow range time targets for support, resistance and trend reversal for any market condition. The Dynamic Time Strategies you learn will put you miles ahead of traditional cycle analysis with timing tools for practical trade strategies.
hen most traders think of market timing, they think of traditional cycle strategies. Traditional cycle strategies project a low or a high based on an average length of low-low or high-high cycles of past data. This type of cycle analysis makes assumptions that usually prove to not hold up in reality. Traditional cycles are based on an average cycle length. An average cycle length is usually pretty useless because it does not consider how tight or widespread are the range of numbers used that make the average. If most of the cycle repetitions that were used to come up with the average cycle were tightly grouped, the average would be useful. Unfortunately, an average can be made of any series of numbers which may be widely dispersed. The average may be meaningless to predict the next repetition. Traditional market cycle analysis also assumes a cycle length is static and the static cycle will continue indefinitely into the future. It just doesnâ€™t work that way. Price and volatility cycles change over time. What might have been a fairly regular cycle in the past may no longer be evident in recent market activity. Cycles are not static, but dynamic. The typical L-L or H-H cycle length are generally different for bull and bear markets and will fluctuate over time as volatility and price cycles fluctuate. Plus, markets generally make their highs and lows at dynamic proportions of past trends and countertrends. Just as you discovered in Chapter 4 that most trend and corrective highs and lows are made at or very near proportions of recent sections of the trend or correction, a similar approach to dynamic time proportion will help identify time targets for reversal. In this chapter you will learn a logical and practical approach to time target analysis