Learn to Trade: What are Market Cycles?


A market cycle is price movement from a support level (floor) to a resistance level (ceiling) and back to the support level (as shown in the image below). Bear in mind that cycles can begin and end anywhere. Thus price movement from a resistance level to a support level and back is also representative of a cycle.

cycle.png

Market prices generally move from one price range to another and back, instead of moving from exact price to exact price. Thus, you never have to guess what price at which to buy or sell; you only have to figure out the range.

The most important thing to consider is that cycles occur over different periods of time. You can measure intra-day cyclical patterns, weekly, monthly, bi-annual, annual, etc. For our purposes, we'll focus on monthly cycles that include a significant reversal occurring near a specific lunar phase period. This makes cycles trading easier and more profitable.

There is another important short-term cycle that tends to influence most commodity markets-the 28-day trading." - John Murphy (charting expert, stockcharts.com founder, and author of Technical Analysis of the Futures Market)


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