Today I decided to share a completely different perspective of mine on FX:GBPUSD, by using something called Time Cycles. I have been doing some good amounts of reading on this particular concept and have tried to understand as much as possible about it. Before going into more detail about Time Cycles, I just wanted to point out that I have added 2 types of Time Cycles on the chart above, one is the Sine Cycle and the other one is the Cycle Arcs. In my opinion both types of Time Cycles roughly give us the same idea in the end. Also keep in mind that these types of Time Cycles are mostly used for ONLY determining the direction of a particular currency, as well as when a direction reversal is most likely to occur.
So let's get started by first explaining the concept behind Sine Cycles: In the Sine Cycle the bottoms are called troughs while the tops are referred to as crests. Usually cyclist analysts prefer to measure cycle lengths from low to low. Thus, the common practice is to measure the beginning and end of a cyclic wave at a low point. These types of waves tend to repeat themselves cycle after cycle. As a result, once the wave is identified, its value can be determined at any past or future time. This is the characteristic of waves that provides a degree of predictability for price action. The importance of trend direction is also very critical in cycles. The trend of each cycle is determined by the direction of its next longer cycle. In other words, once the trend of a longer cycle is established, the trend of the next shorter cycle can be easily known.
Moving on to the Cycle Arcs: As mentioned earlier, Cycle Arcs are very similar to Sine Cycles, in a sense that both essentially provide the same type of view. The main idea here is to constantly shift the arcs until their lows coincide with a number of reaction lows on the price chart above. The bigger the cycle arc, the stronger the force will be. It is wise to stay away from cycle arcs lower than DAILY time frame, since the intra-day cycle arcs will be overwhelmed by weekly and monthly cycle arcs.
So by using either Sine Cycles or Cycle Arcs or using both at the same time, one can estimate where and when a major cycle low is likely to occur.
This is my very first time using this Time Cycle approach to analyze the market, so please feel free to point out any types of errors that I may have made, by leaving a comment below.
NOTE: For some reason the labelling of the amplitude (height) for Cycle Arc got messed up on the chart above, 1x, 2x, and 4x. All I wanted to show there was that, the amplitude (height) of each bigger Cycle Arc is twice as much as the previous smaller Cycle Arc.
Please feel free to AGREE or DISAGREE with this idea by leaving a comment below. Hit that thumbs up button (top left corner of this chart) if you like the idea. Thank you everyone for all the SUPPORT that you have given me so far, I truly appreciate it. Good luck everyone :)
Comment
⋅
UPDATE #1: Currently the analysis is working out quiet well. Be careful if you are shorting now, since we are close to the weekly lows (looking left). We will be getting a good buying opportunity but there is still more selling to happen :)
Hehe yeah mate, we probably going to roll hard on this. Let's make good amount of pips on this one :)
FullTimeTrader
⋅
Hello, congratulations on this work, very interesting. Just like EW this techniques are useful because they give us the direction of the market. Its interesting that coincides with most EW projections: USD will rally until middle of 2016 aprox. and then will have a strong decline. So everything is pointing at rate hike will occur sooner or later, most probably on december. Regards.
IvanLabrie
⋅
Constance Brown's book "Technical analysis for the technical professional" 2nd edition covers this and many other fascinating subjects. Stopped by to mention that one, in case you guys didn't read it.
Looks interesting @moneymaking, nice chart.
moneymaking
⋅
Hey mate, Thank you for sharing the book's title, I'll make sure to read it. Appreciate the kind words mate, let's see how it goes :)
IvanLabrie
⋅
Tomorrow and Friday, BIG decision time.
moneymaking
⋅
Totally agree, the next two days, contain huge amounts of firepower. Let's make sure to take advantage of this and end this week with some extra pips :)
moneymaking
⋅
Hey mate, Thank you for the kind words. I have done some good amounts of reading on EW, but I'm just unable to get it through my head. I understand the concepts of different types of wave patterns, but when I go onto a blank chart and try to apply what I've just read, it just seems impossible to me. I get confused very easily with EW. I agree with you on the rate hike, it does look like the rate hike is very much likely to be pushed towards december, but we shouldn't underestimate the Fed's either :)