Predicting by time cycles in markets

  • by Amir El Araby
  • January 15, 2019, 13:3 AM
 388       16      


One of the most modern studies that started to attract the technical analysts nowadays is the time cycles and the role it plays in the financial markets. 

Indeed, time is one of the most important factors in defining the movements of the market as when you study the past of specific equity you will find the evidence for the famous speech "History repeats itself".

My dear reader believe me, studying the past can help you predicate the future as this the most valuable principle, which the technical analyst should accept to get more and more experience. 

Studying the time cycles could teach you why peaks and troughs are placed at specific times and also you will learn why resistance levels or support levels are stronger than you expect at certain times. 

Let us interpret this introduction within a short sentence as follows:

There is a relation between time and price behaviors.

Major Time Cycles

As a matter of natural law as Newton clarified, every action should have a reaction and that is why everything moves in cycles. Actually, you can make money when fluctuations and fast moves occur and as we will discuss below this kind of price behaviors occurs at the end of major cycles.

1-Ten year cycles: 

When you open your own chart, you will discover that extremely high or low is placed every 10 years after extraordinary fluctuation. Sometimes, these tops or bottoms come out ten and a half or eleven years.

We can divide the range of 10-year cycle- equals 120 months- as same as we divide the range between bottoms and tops to get resistance and support levels. Consequently, one half of the cycle will be 5 years and whilst one fourth will be 2 and a half years and one eighth will be 15 months etc.

These aforesaid time periods offer the change in trends.

2- Seven-year cycles:

This cycle consists of 84 months and if we watched 7 years from any important top or bottom we will find that the fluctuation and may be another important high or low occur around the last month of those 7 years.

The same case occurs around the 42nd months to 44th months (one half of the cycle) .

You will find many bottoms and tops also around the 21st month to the 23rd- one-fourth of the cycle.

Sometimes, market makes bottoms or tops 10 to 11 months from a previous top or bottom. This is due to the fact that this period is one-eighth of the 7-year cycle.

3- Five-year cycles:

This is the smallest complete cycle and as we discussed earlier, its importance comes from the role it plays as one half of the 10-year cycle.

4- Minor cycles:

Minor cycles are 3 years and 2 years, while the smallest cycle is one year which often shows a change in trend in the 10th or 11th month.

Rules for future cycles:

* We should begin with extreme or historical tops and extreme bottoms to determine all cycles either major or minor.

* Prices move in 10-year cycles and they are divided into 5 years cycle up and it is followed by 5 years cycle down.

* The 5 years upside cycle runs as follows: 2 years up, 1 year down and 2 years up.

* A bear cycle often runs 5 years down as follows: 2 years down and 2 years up and I year down.

* The end of 5 years comes in the 59th or 60th month.

Amir El Araby

Financial advisor with 20 years’ experience in the technical analysis studies for FOREX, Commodities, and Indices. Amir El-Araby worked as a mentor for many companies and institutes, where he presented new methods for trading in the financial market. Amir is a member of the Egyptian Society of Technical Analysts (ESTA)

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