Forex Cycles

  • Mar 12 2021
  • by
  • Analyst AZA
Forex Cycles

Forex Cycles

The cyclical nature of market cycles helps predict price movements to make money in Forex.
 
An ordinary person who does not have a special understanding of trading in the forex market, looking at the charts of exchange rates, will think to himself that this is full-fledged chaos, which is unrealistic to understand.
But in reality, market fluctuations are quite easy to explain: for example, there are patterns and certain rules based on which we perform market analysis and form forex forecasts.
Graphic, technical and wave analysis methods are based on the hypothesis that the actions of the exchange players are standard - typical for specific market situations.
But most importantly, they have the properties of repeating, with a certain period, which means that it is possible to consider and highlight such an important concept as Forex cycles.
This model exists not only in financial markets but also in other spheres of life.
Our knowledge and theoretical component enables us to find extrema - local highs and lows, and predict the duration of the trend.
Let's consider the cyclicality in more detail.
1. Advantages of cyclicality in terms of analysis
The strategies and techniques that are present in the market and are used to predict the market situation have their pros and cons.
This, whatever one may say, pushes the player to search: he tries to find the most acceptable solutions for himself.
Despite all the advantages of technical analysis on Forex, a trader is faced with the fact that he cannot determine the exact time: when exactly important events on the exchange will be formed.
When viewed from this angle, indicators and other tools also stand out with some disadvantages:
1) moving averages - lag.
2) oscillators: current events and trend are reflected at a given moment in time;
3) figures (patterns), with all the dependence on the term of cyclicity, have one-sidedness.
The theory of cyclicality, and in general the concept of a cycle, enables us to determine the key moment in trading - the duration of the trend that has formed.
Four key principles need to be used to analyze and view the classic cycle-based pricing model:
1) the summation method;
2) the principle of harmony;
3) proportionality factor;
4) synchronicity.
The basic concept of summation is that the current price movement can be presented in several cycles.
The presented cycles will have a different period.
If we select them and then combine them (into one whole), then we can calculate the time of the creation of local lows and highs of the future trend.
Next, we should consider cyclicality and synchronicity: we analyze these concepts together.
The output cycle includes two dependent quantities.
They are both harmonious - their periods are proportional, as well as synchronous since the minimums coincide (if you visualize the analysis and present it in the form of charts).
The proportionality model unites - connects the amplitudes and periods of the cycles.
As for the options for forex cycles, they are as follows:
1) long-term.
For example, Kondratyev's schedule, with a period of one year.
It is with the help of it that one can assess the world economy for 10 or 20 years ahead.
Despite the idealization, based on the graph, you can make a forecast.
2) seasonal cycles.
This type is characterized by a change in market characteristics, such as volatility, price jumps. In this case, it is the factor of seasonality that is taken into account.
3) monthly cycles
This group of cycles is based on the current laws of the market - the laws of supply and demand.
If large exchange players prefer to trade at the same time, which is convenient for them, this will be reflected in the course.
4) weekly
Weekly cycles are responsible for moods - they characterize the activity of exchange participants during the week.
It is logical that it slowly increases, starting on Monday, and reaches its maximum before the weekend - on Friday.
5) daytime - demonstrate the situation with the course during the working day.
From practice, it is obvious that its indicators fall on Friday.
6) short-term
These cycles are liked by scalpers and supporters of short-term tactics, executors of instant deals.
But even taking into account the theory, its concepts, and fundamental components, the cycles themselves will not act as fixed processes.
In the cycles, one way or another, significant market events are reflected.
However, they form a kind of beacon - a landmark that greatly facilitates the analysis and the process of making the right decisions in trading.

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Despite all the advantages of technical analysis on Forex, a trader is faced with the fact that he cannot determine the exact time: when exactly important events on the exchange will be formed.

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