Time
cycles are different study within Technical
analysis that helps to understand the overall maturity of trend along with key
reversal days. It focuses on timing the market can also be used for price
projections.
Like any other indicators we use Time cycles as a secondary confirmation
to prices. The reason being Time is a challenging element and is more accurate
capturing lows rather than tops. Nevertheless, it still gives us some sense of
indication if we are within the topping zone.
For price forecasting we rely largely on Neo wave concepts – Advanced Elliott wave. If the
pattern under formation is clear then it is thrilling experience to see each
and every movement as per the assumed pattern. The challenge arises when prices
start deviating from the assumed pattern hinting that some other structure is
probably forming. It is during this time we have to fall back upon the
classical technical analysis methods and trend following systems like Bar techniques, RSI and Moving averages.
Now
look at below chart for understanding Time cycles:
Nifty
Neo wave plot:
The first chart
shows bottoming Hurst’s Time cycles.
This cycle has worked very well capturing important lows. We try to use this
cycle to look at the tops occasionally but unless there is price confirmation
capturing a top in a trending market can be tricky. Nevertheless, cycles
normally enters into topping zone in their second half. This cycle has now
entered into its second half zone so we are not complacent like majority but
alert. This does not mean one should go on shorting the market but it is just
helping us to stay aware so that there are no negative surprises.
Neo wave plot: Now this is
important chart shown above which is plotted as per Neo wave. Please note the
time scale is missing because the plot is different than normal Line charts or Bar charts. The internal
counts are marked on this chart with Diametric
pattern followed by wave x then a Zigzag
again wave x (refer Fractal Nature for wave x)
and now again a Diametric pattern is assumed. In case prices start deviating
from the expected outcome we will then have to look at other possible patterns
but until then we will assume this is the structure under formation. Also these
counts are in sync with the Time cycles shown above.
Price and Time confirmation is the key to trading
success! Majority of the traders try to pre-empt
the moves even before confirmation and then they point towards inefficiency of
the theory. Please understand when the structure is unfolding we are assuming
and identifying it with a pattern that looks probable. Therefore we have to
wait for break of support or resistance levels along with Moving averages and Bar
techniques before finally pulling the trigger on the short or long side. Detailed
discussion on key reversal areas with levels that will determine the medium
term trend are mentioned in our daily research report – The Financial Waves short term update
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