Posts Categorized: General information

Forecasting Trends: USDJPY Long Term Cycles… continued

Hiya all,

For the last week we have been looking at how to apply Cycle Analysis to the USDJPY monthly chart. Our goal is being able to forecast high probability turning points, and jump in on new trends early.

We found the very long term dominate 55 month cycle.

And now here again is the USDJPY monthly, and you can see things are starting to look busy!

I have now gone and identified all the minor lows on the monthly chart, always keeping in mind to look for a pattern of similar numbers of bars apart, ensuring that the lows are ‘valid’.

Validating Lows…

Lows are bars that have bars either side with “higher lows”.  Of course we arent going to pick out every single fluctuation or dip, but we are looking for a reasonable pull back. 

Majority of the time the lows stand out like a sore thumb, but other times when the markets are quite volatile and ranging it can be a little harder to do.

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Where has the Freedom of Choice gone in the US?

Time is running out for US traders as the new CFTC regulation will be enforced by next Monday the 18th of October, capping leverage on Forex trading accounts at 50:1. 

Its is a shame that US traders are losing more choice from basic trading functionalities like;

  • leverage from 1:1 to 500:1,
  • hedging,
  • scalping,
  • straddle,
  • martingale
  • and carry trade strategies… etc.

In an upcoming blog we will provide US traders with a solution.

Changes to leverage has little affect on the way I personally trade, as I will explain to you in more detail.  But I believe if you box people in and treat them as though they’re ‘stupid’ then you actually teach them to be ‘stupid’.

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Forecasting Trends: USDJPY – Long Term Cycles

Hey traders!

Another week over…

Just look at the current markets… recently I was talking about ‘double tops and bottoms’…

This week the AUDUSD briefly broke through its old major high made in July 2008, showing a glimmer of hope for the bulls, but by end of week trading it didnt manage to ‘close’ above it… so a reversal could be imminent.

But before we jump the gun we need some sort of confirmation… next we look for a reversal bar to confirm the resistance, like that perfect ‘doji’ candle prior to the market reversing at the July 2008 high; a classic reversal bar forcing the market down.

The USDCHF is nudging a previous major ‘low’… during the week it also broke through the old low price, but finally closed almost smack on that previous low… the bulls may come in soon to turn this market around.

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Forecasting Trends: USDJPY Reversal…

Hello traders!

Previously we’ve been looking at the USDJPY chart… quickly before I continue my write up on Cycle Analysis I want to bring your attention to some relevant market action in the USDJPY as I speak…

Currently the Dollar-Yen is around 260 pips away from a potential ‘double bottom’ with a previous ‘major low’ (all time low) made back in April 1995, 15 years ago.

Double tops and bottoms are ‘support and resistance’ levels where high probability reversals occur… the interesting thing is that the further apart in time these major highs/lows are, the more significant the reversal.

This potential reversal in the USDJPY could be a very long term cycle coming to its end… and out of these long term cycles come the best trading opportunities as the new cycle begins.

I have so much to share with you about Cycle analysis, so we had better get stuck into it.

First I want to briefly look at the ‘cycle’ phenomenon that is found within every living and breathing thing; humans, plants and animals all grow and die with cycles. Time is manmade – so cycles are natures own rhythm of time.

An example is the human ‘life’ cycle.

The main cycle spans approximately 70-80 odd years, then there are smaller cycles within that larger one, like; childhood, young adulthood, parenthood, retirement years, etc. And within each of those are even smaller cycles, all with many rises and falls.

If you were to chart the significant up and down events over a person’s lifetime it would look very similar to the movements of financial market charts; the great ‘optimistic peaks’ would be things like high school graduation, marriage, children, career, retirement.

Whereas, the large ‘negative dips’ would be things like teenage dramas, divorce or relationship breakdowns, midlife crisis and major sickness.

The financial markets are really a ‘derivative’ of human emotions on mass and therefore reflect cycles of psychology. Business cycles are the same, periods of recession and recovery, growth and decline.

So what does this all mean?

And importantly where do we start?

In my last post I mentioned our aim was to find turning points in the market, as these are the start and end of trends. Knowing how to predict and confirm these market reversals steps up your trading results big time.

First you need to identify the larger, longer term cycles. This is because the longer term cycles are dominant to the smaller cycles within.

To find the longer term cycles we look at a monthly chart, (later we will look to the weekly and finally to the daily chart where our entry is found).

Going back to the USDJPY monthly chart where I already identified the major lows… I mentioned, there is an exact method in choosing the lows that I did.

Typically you can start by identifying all the major lows, moving on the monthly chart from the left to right. The important criteria is that between each of the major lows, there is no lower low.

So in a rising market there cannot be a low lower than the start price, and in a falling market there cannot be a lower price than the end price of the cycle.

In the image below, between point A and point B there is a lower low (black line low), so that is NOT a valid cycle.

In the next image you can see 2 full cycles (red lines) and at no time is there a lower price than the start for the rising market and the end for the falling market.

• Cycle 1 (point A to C) – B is not lower than A.
• Cycle 2 (point C to E) – D is not lower than E.

OK below is a Check List that summaries all we have gone over…

Check List

  • Start on the Monthly chart (larger cycles dominate smaller cycles).
  • Identify all significant/major ‘Lows’ in a market.
  • Rising markets = lowest point must be cycle start.
  • Falling markets = lowest point must be cycle finish. 

Right signing off for now…

All the best

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Forecasting Trends: Early Trend Detection and Entry

Each day thousands of traders struggle with incessant thoughts.

Mind churning decisions like, “When should I enter the market?” …. “Is now the right time?”… or “Is now even too late?”

Im sure most feel so ambivalent they think they’re going mad.

So what about you? When do you think is the best time to enter the market?

The best and most logical answer would be… “At the beginning of a new trend”.

Of course that sounds so simple, especially on paper. But in reality, for most traders, getting a good entry point is a whole new ball game.

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