Market Cycle
No matter what strategy you use, understand market-cycles in different time-frames. At Market
Open, check the Moving Average wave or Trendline: Accumulation / Distribution (----), Uptrend (/), or Downtrend
(\).
It is not easy to identify Trading Cycles because they rarely form perfect symmetrical
shapes. It helps, therefore, if the characteristic components of the trading cycle is broken down. Study
these, so you can recognise at what stage of the cycle is the market in.
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During the Accumulation/Distribution stage of the cycle, market is narrow, ranging or
moving sideways. An example would be the rectangle or triangle pattern. Prices move within a tight
range indicating the market is anticipating a serious move (eg. 5-6 hours prior to an expected
intraday news release).
Play this cycle of the market by trading breakouts or breakdowns.
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Trading the 5mins using the Cycle:
- A trader using the 5mins chart may see 4 or more complete cycles per day. (By comparison, a real estate
investor sees a cycle that last 18-20 years).
- To trade the 5mins, it must be in an Uptrend or Downtrend cycle.
- In an Uptrend, enter when price retraces to 34EMA Low.
- In a Downtrend, enter when price retraces to 34EMA High.
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Long trades are best entered at the accumulation when the area is breached.
Best exits from longs come when selling into a crowd just as upward price action
approaches resistance.
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Market Cycle translated in a 5mins GBP/USD chart. |
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