Predicting Market Movements via Time Cycles

s Amir El Araby  |   3 mins read February 15, 2022 | 216 eye icon

Introduction:
A significant development in modern studies that have attracted techno financial analysts is the time cycle and the role it plays in financial markets.

Indeed, time is one of the most important factors that can define the movements of the market, as when you study the past of a specific instrument, you will find the evidence of the famous saying "History repeats itself"!

I do believe that by studying the past, you can predict the future as it is the most valuable principle dominating our life. It is also the principle that should be accepted and applied on charts by a technical analyst in order to gather more experience.

Studying the time cycles could teach you why peaks and troughs take place at specific times; additionally, 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 behavior!

Major Time Cycles
As per Newton's perception of natural law, every action has a reaction and that is why everything moves in cycles. You can make money when fluctuations and fast moves occur and as we will see below, this kind of price behavior occurs at the end of major cycles.

1-Ten-year cycles:
If you are investing and trading in the financial market, you will discover that extreme highs or lows are placed every ten years after an extraordinary fluctuation. Sometimes, these tops or bottoms come out after ten and a half or eleven years.

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

These aforesaid periods offer a change in trends, so please open any chart of any instrument and check the price movements every ten years!

2- Seven-year cycle:
This cycle consists of 84 months and if we observe a period of 7 years from any top or bottom, we will find that the fluctuation and maybe another important high or low is placed around the last month of those 7 years.

The same case occurs around month number 42 and month number 44 - one half of the cycle-. 

Many bottoms and tops also around the 21st month to the 23rd- one-fourth of the cycle -.
Sometimes, the market prints bottoms or tops 10 to 11 months from a previous top or bottom. This is since this period is one-eighth of the 7-year cycle!


Diagram

Description automatically generated

3- Five-year cycle:
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.



A picture containing chart

Description automatically generated

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.
 



Bar chart

Description automatically generated

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 years cycles and they are divided into 5 years cycle up and it is followed by 5 years cycle down.
  • The 5 years upcycle 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.

Written by: Amir El Araby

Graphical user interface, application

Description automatically generated

Amir El Araby
Head of Trading and Financial Advisory
Sky Option
United Arab Emirates
Master of Business Administration - Blockchain Management
Batch 2022

COMMENTS(0)

Restricted HTML

  • Allowed HTML tags: <a href hreflang> <em> <strong> <cite> <blockquote cite> <code> <ul type> <ol start type> <li> <dl> <dt> <dd> <h2 id> <h3 id> <h4 id> <h5 id> <h6 id>
  • Lines and paragraphs break automatically.
  • Web page addresses and email addresses turn into links automatically.
Latest Insights From UniAthena
Our Popular Courses

MBA in General Management- FastTrack

Guglielmo Marconi University, Italy

Learn More

VIEW ALL COURSE

Get in Touch

Fill your details in the form below and we will be in touch to discuss your learning needs

Do you want to hear about the latest insights, Newsletters and professional networking events that are relevant to you?