Getting Started

Welcome to Time Price Analysis. Our service is focused on our members making trading profits. We believe that all technical analysis should be undertaken from the perspective of identifying low risk, high probability profit opportunities: “Trading Analysis For Traders”.

We cover a wide range of financial instruments including Major Market Indices, Commodities, Precious Metals & Miners, Currency Pairs, ETF’s and Stocks. We also interact directly with our members in our Forum and Live Trading Room in addition to our Daily & Weekly Market Video Updates.

If you are a new member or considering joining our service we invite you to take a guided tour of Time Price Analysis by watching the video below.

We look forward to welcoming you to our service and seeing you in our Forum & Live Trading room.


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Welcome to TimePrice Analysis.



The analysis of the various markets covered here is achieved by using a combination of tools. By combining the predictive powers of Elliott Wave, Fibonacci Levels & Hurst Cycles together with Multiple Time Frame Technical Indicators we are able to provide detailed accurate analysis of likely market movements.

This powerful multi disciplined approach to market analysis enables us to forecast probable future market price levels at specific times thus identifying high probability low risk trade entries and exits. Primarily we rely on the Elliott Wave Principle introduced by R N Elliott in his seminal work published in August 1938, “ The Wave Principle”

Ralph Nelson Elliott was an American accountant and author, whose study of stock market data led him to develop the Wave Principle, a form of technical analysis that identifies trends in the financial markets. He proposed that market prices unfold in specific patterns, which today we refer to as Elliott waves.

Elliott stated that, while stock market prices may appear random and unpredictable, they actually follow predictable, natural laws and can be measured and forecast using Fibonacci numbers. Soon after the publication of The Wave Principle, Financial World magazine commissioned Elliott to write twelve articles (under the same title as his book) describing his new method of market forecasting. In the years after Elliott's death, other practitioners (including Charles Collins, Hamilton Bolton, Richard Russell and A.J. Frost) continued to use the wave principle and provide forecasts to investors.

Frost and Robert Prechter wrote “Elliott Wave Principle”, published in 1978. This work is considered the de facto guide to R.N Elliott’s theory and indeed Robert Prechters prominence as a forecaster during the bull market of the 1980s helped bring Elliott's wave principle back to market analysts attention during that time.

R. N. Elliott's analysis of the mathematical properties of waves and patterns eventually led him to conclude that "The Fibonacci Summation Series is the basis of The Wave Principle”. Numbers from the Fibonacci sequence surface repeatedly in Elliott wave structures. Elliott actually developed his market model before he realised that it reflects the Fibonacci sequence. The Fibonacci sequence is also closely connected to the Golden ratio (1.618).

R. N. Elliott stated that in order to analyse market behaviour it was necessary to understand Pattern, Price and Time.

We use The Elliott Wave Principle to ascertain defined patterns of trend in markets and the associated Fibonacci projections and retracements to determine likely areas of future price. We also utilise a number of key technical indicators in order to identify areas where trends are likely to either reverse or accelerate.

Elliotts Wave Principle does not provide methods for forecasting future points in time where market peaks and troughs are likely to occur. For this we rely on the work of J M Hurst and specifically “Hursts Cyclic Theory” as presented in his Cycles Course.

Hurst published two seminal works: a book called The Profit Magic of Stock Transaction Timing, followed a few years later by a workshop-style course which was called the Cyclitec Cycles Course (later published as JM Hurst’s Cycles Course – currently not in print).

This theory isn’t that well known and is not widely used by technical analysts, probably for two reasons:

Firstly, Hurst’s Cyclic Theory is not “easy”. While it is beautifully simple and elegant in its essence, it is not a simple theory to understand or to apply. The Cycles Course is over 1,500 pages long, and most people take several months to work through it.

Secondly, although the theory presented in both the Profit Magic book and the Cycles Course is the same, there is a vitally important distinction between the analysis processes presented in the two. Hurst claimed his success on the basis of the process presented in the Cycles Course, whereas many people read the Profit Magic book and go no further, with the consequence that they never discover the more effective process presented in the Cycles Course.

Hurst’s Cyclic Theory, as presented in the Cycles Course is a very powerful analytical tool that can lead to consistently profitable trading decisions. We use a software application (Sentient Trader) which enables us to provide cycles analysis based on Hursts Cyclic Theory as presented in his Cycles Course. Due to the work by David Hickson at Sentient Trader we are also able to now analyse cycles of much smaller degree than the 5 Day Cycle which was the shortest cycle studied in Hursts original work.

We encourage members to study the basic concepts of each of the modalities we use at Time Price Analysis in the series of video tutorial we have provided here in the Education Section of this site in order to better understand and benefit from the analysis we provide.

Please watch the introduction tutorial below first that provides a guide as to how to read and interpret the various annotations on our charts.
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Elliott Wave Principle



Ralph Nelson Elliott (1871–1948), a professional accountant proposed that market prices unfold in specific patterns, which practitioners today call "Elliott waves”. Elliott published his theory of market behaviour in the book The Wave Principle in 1938.

Elliott stated that, while stock market prices may appear random and unpredictable, they actually follow predictable, natural laws and can be measured and forecast using Fibonacci numbers. Soon after the publication of The Wave Principle, Financial World magazine commissioned Elliott to write twelve articles (under the same title as his book) describing his new method of market forecasting. In the years after Elliott's death, other practitioners (including Charles Collins, Hamilton Bolton, Richard Russell and A.J. Frost) continued to use the wave principle and provide forecasts to investors.

Frost and Robert Prechter wrote “Elliott Wave Principle”, published in 1978. This work is considered the de facto guide to R.N Elliott’s theory and indeed Robert Prechter's prominence as a forecaster during the bull market of the 1980s helped bring Elliott's wave principle back to market analysts attention during that time.

Elliott Wave Rules and Guidelines

A correct Elliott wave count must observe three rules:

  • Wave 2 never retraces more than 100% of wave 1.
  • Wave 3 cannot be the shortest of the three impulse waves, namely waves 1, 3 and 5.
  • Wave 4 does not overlap with the price territory of wave 1, except in the rare case of a diagonal triangle formation.
A common guideline called "alternation" observes that in a five-wave pattern, waves 2 and

4 often take alternate forms; a simple sharp move in wave 2, for example, suggests a complex mild move in wave 4. Corrective wave patterns unfold in forms known as zigzags, flats, or triangles. In turn these corrective patterns can come together to form more complex corrections.[3] Similarly, a triangular corrective pattern is formed usually in wave 4, but very rarely in wave 2, and is the indication of the end of a correction.

The Elliott Wave Principle suggests that collective investor psychology, or crowd psychology, moves between optimism and pessimism in natural sequences. These mood swings create patterns evidenced in the price movements of markets at every degree of trend or time scale.
In Elliott's model, market prices alternate between an impulsive, or motive phase, and a corrective phase on all time scales of trend, as the illustration shows. Impulses are always subdivided into a set of 5 lower-degree waves, alternating again between motive and corrective character, so that waves 1, 3, and 5 are impulses, and waves 2 and 4 are smaller retraces of waves 1 and 3. Corrective waves subdivide into 3 smaller-degree waves starting with a five-wave counter-trend impulse, a retrace, and another impulse. In a bear market the dominant trend is downward, so the pattern is reversed—five waves down and three up. Motive waves always move with the trend, while corrective waves move against it.

Wave Degree

The patterns link to form five and three-wave structures which themselves underlie self- similar wave structures of increasing size or higher degree. Note the lowermost of the three idealised cycles. In the first small five-wave sequence, waves 1, 3 and 5 are motive, while waves 2 and 4 are corrective. This signals that the movement of the wave one degree higher is upward. It also signals the start of the first small three-wave corrective sequence. After the initial five waves up and three waves down, the sequence begins again and the self-similar fractal geometry begins to unfold according to the five and three- wave structure which it underlies one degree higher. The completed motive pattern includes 89 waves, followed by a completed corrective pattern of 55 waves.
Each degree of a pattern in a financial market has a name. Practitioners use symbols for each wave to indicate both function and degree—numbers for motive waves, letters for corrective waves (shown in the highest of the three idealised series of wave structures or degrees). Degrees are relative; they are defined by form, not by absolute size or duration. Waves of the same degree may be of very different size and/or duration.

The classification of a wave at any particular degree can vary, though practitioners generally agree on the standard order of degrees (approximate durations given):

  • Grand Super Cycle: multi-century
  • Super Cycle: multi-decade (about 40–70 years)
  • Cycle: one year to several years (or even several decades under an Elliott Extension)
  • Primary: a few months to a couple of years
  • Intermediate: weeks to months
  • Minor: weeks
  • Minute: days
  • Minuette: hours
  • Subminuette: minutes
Wave Labelling (Nomenclature)

The following table shows the commonly accepted labelling of the Elliott Waves at each degree. We use this labelling on all of our charts with the addition of the colour coding shown in the right hand column. Fibonacci Extensions shown on our charts are also colour coded such that each set of extensions is coloured to reflect the associated wave degree being analysed.

The illustration Below you depicts the general pattern that markets follow. The trend moves up in 5 waves and then corrects in 3–labeled A-B-C. But remember, this is happening on all time frames at the same time, from a tick chart all the way up to yearly and decade charts (and longer).

The opposite is also true in a down trend, where the market moves down in 5 waves and

then corrects upwards in 3.

This next illustration shows how this plays out:

A 5 wave pattern creates Wave 1 on a larger time frame. This is followed by a 3-wave correction which creates Wave 2 on that larger time frame, and so on. The 5-3 patterns on a shorter time frame are the building blocks for longer-term 5-3 patterns.

Elliott Wave Characteristics

Elliott wave analysis dictates that each individual wave has its own characteristics which typically reflects the physiology of the moment. Understanding those personalities is key to the application of the Wave Principle; they are defined below. (Definitions assume a bull market in equities; the characteristics apply in reverse in bear markets.)

Five wave pattern (dominant trend)
Three wave pattern (corrective trend)

Wave 1: Wave one is rarely obvious at its inception. When the first wave of a new bull market begins, the fundamental news is almost universally negative. The previous trend is considered still strongly in force. Fundamental analysts continue to revise their earnings estimates lower; the economy probably does not look strong. Sentiment surveys are decidedly bearish, put options are in vogue, and implied volatility in the options market is high. Volume might increase a bit as prices rise, but not by enough to alert many technical analysts.

Wave A: Corrections are typically harder to identify than impulse moves. In wave A of a bear market, the fundamental news is usually still positive. Most analysts see the drop as a correction in a still-active bull market. Some technical indicators that accompany wave A include increased volume, rising implied volatility in the options markets and possibly a turn higher in open interest in related futures markets.

Wave 2: Wave two corrects wave one, but can never extend beyond the starting point of wave one. Typically, the news is still bad. As prices retest the prior low, bearish sentiment quickly builds, and "the crowd" haughtily reminds all that the bear market is still deeply ensconced. Still, some positive signs appear for those who are looking: volume should be lower during wave two than during wave one, prices usually do not retrace more than 61.8% (see Fibonacci section) of the wave one gains, and prices should fall in a three wave pattern.

Wave B: Prices reverse higher, which many see as a resumption of the now long-gone bull market. Those familiar with classical technical analysis may see the peak as the right shoulder of a head and shoulders reversal pattern. The volume during wave B should be lower than in wave A. By this point, fundamentals are probably no longer improving, but they most likely have not yet turned negative.

Wave 3: Wave three is usually the largest and most powerful wave in a trend (although some research suggests that in commodity markets, wave five is the largest). The news is now positive and fundamental analysts start to raise earnings estimates. Prices rise quickly, corrections are short-lived and shallow. Anyone looking to "get in on a pullback" will likely miss the boat. As wave three starts, the news is probably still bearish, and most market players remain negative; but by wave three's midpoint, "the crowd" will often join the new bullish trend. Wave three often extends wave one by a ratio of 1.618:1.

Wave C: Prices move impulsively lower in five waves. Volume picks up, and by the third leg of wave C, almost everyone realises that a bear market is firmly entrenched. Wave C is typically at least as large as wave A and often extends to 1.618 times wave A or beyond. Wave 4: Wave four is typically clearly corrective. Prices may meander sideways for an extended period, and wave four typically retraces less than 38.2% of wave three (see Fibonacci relationships below). Volume is well below than that of wave three. This is a good place to buy a pull back if you understand the potential ahead for wave 5. Still, fourth waves are often frustrating because of their lack of progress in the larger trend.

Wave 5: Wave five is the final leg in the direction of the dominant trend. The news is almost universally positive and everyone is bullish. Unfortunately, this is when many average investors finally buy in, right before the top. Volume is often lower in wave five than in wave three, and many momentum indicators start to show divergences (prices reach a new high but the indicators do not reach a new peak). At the end of a major bull market, bears may very well be ridiculed.

We would encourage members to also watch the series of video tutorials inn this section on the Elliott Wave Principle to further enhance your understanding, For those also wanting to study the theory in greater depth we recommend the following reading:

The Elliott Wave Principle Frost & Prechter
Five Waves to Financial Freedom - Ramki N. Ramakrishnan
Mastering Elliott Wave Principle - Constance Brown

Fibonacci Analysis



Elliott referred to three important aspects of price movement in his theory: pattern, ratio and time. As described in previous sections we use Elliott Wave Theory to determine the price pattern of markets at all degrees of a trend.

Elliott's analysis of the mathematical properties of waves and patterns eventually led him to conclude that "The Fibonacci Summation Series is the basis of The Wave Principle”. Numbers from the Fibonacci sequence surface repeatedly in Elliott wave structures. Elliott actually developed his market model before he realised that it reflects the Fibonacci sequence. The Fibonacci sequence is also closely connected to the Golden ratio (1.618).

Fibonacci Series

Fibonacci numbers provide the mathematical foundation for the Elliott Wave Theory.

The Fibonacci number sequence is made by simply starting at 1 and adding the previous number to arrive at the new number:

0+1=1, 1+1=2, 2+1=3, 3+2=5, 5+3=8, 8+5=13, 13+8=21, 21+13=34, 34+21=55, 55+34=89,…

This series has numerous interesting properties:

  • The ratio of any number to the next number in the series approaches 0.618 or 61.8% (the golden ratio) after the first 4 numbers. For example: 34/55 = 0.618
  • The ratio of any number to the number that is found two places to the right approaches 0.382 or 38.2%. For example: 34/89 = 0.382
  • The ratio of any number to the number that is found three places to the right approaches 0.236 or 23.6%. For example: 21/89 = 0.236

These relationships between every number in the series are the foundation of the common ratios used to determine price retracements and price extensions during a trend.

Elliott Wave Fibonacci Levels:

Wave Ratios and Measurements

Lengths

The price distance of each wave is measured as a vertical distance from the beginning of the wave to the end of the wave. The length is measured in price.

The first wave in an Elliott sequence is Wave 1. The measurement of Wave 1 is used to find ratios for other waves. These ratios are not rules, but guidelines in estimating the lengths of different waves.

Fibonacci Ratios for Wave 2

Wave 2 is always related to Wave 1.
Wave 2: Should commonly retrace between 38.2% and 78.6 % of Wave 1

Fibonacci Ratios for Wave 3

Wave 3 is related to Wave 1 by one of the following:

Wave 3 = either 1.618 x length of Wave 1
or 2.62 x length of Wave 1
or 4.25 x length of Wave 1

We find that the most common multiples are 1.618, 1.764, and 2.00 However, if the 3rd Wave is an extended wave, then 2.62 and 4.25 ratios may be seen.

Fibonacci Ratios for Wave 4

Wave 4 is related to Wave 3 by one of the following:

Wave 4 = either 23.6% of Wave 3, 38.2% of Wave3 or 50% of Wave 3

The 23.6% and 38.2% retracement levels are the most common ratios for Wave 4.

Wave 4 will also terminate within the range of the 76.4 and 1.00 Fibonacci Extension of Wave 1 from the bottom of Wave 2 and reside within the region of the Wave 4 (IV) of one lesser degree (ie Wave IV of Wave III of the Wave 3).

Fibonacci Ratios for Wave 5

Wave 5 has two different relationships:

If Wave 3 is greater than or equal to 1.618 or extended, then Wave 5 ratios are as follows:

Wave 5 either= Wave 1 or = 1.618 x Wave 1 or = 2.62 x Wave 1

When Wave 3 is less than 1.618, the 5th Wave often extends. The ratio of Wave 5 will often then be based on the entire length from the beginning of Wave 1 to the top of Wave 3.

Extended Wave 5 = either 0.62 x length (beginning of Wave 1 to top of Wave 3)

OR = length of(beginning of Wave 1 to top of Wave 3)
OR = 1.62 x length of (beginning of Wave 1 to top of Wave 3)

Corrective Waves

While we have provided expectations for the Fibonacci levels of the corrective waves (Wave 2 & Wave 4), there are also further common Fibonacci relationships between the internal waves (Waves A, B & C) that make up those larger degree correctives.

Wave A is always the first wave in any correction. The measurement of Wave A is used to find ratios for other waves. Again, these ratios are not rules, but guidelines in estimating the lengths of different waves.

Wave B will most commonly retrace 38.2% to 78.6% of Wave A

If Wave B extends beyond the start of Wave A in an expanded corrective wave then Wave B is most commonly 1.272 X or 1.382 X the length of Wave A

Wave C will most commonly be 1.00 X the length of Wave A.

If Wave C extends beyond the length of Wave A the the length of Wave C will most likely be 1.382 or 1.618 X the length of Wave A.

By mapping out all of the above potential Fibonacci levels on our charts in conjunction with the prospective Elliott Wave Structures we are able to provide a potential road map for future market price action together with support, resistance and invalidation levels.

There are a good number of additional Fibonacci levels that we look for when constructing our analysis and these are all covered in detail within the series of Educational Videos on this subject below. Again, members to also watch the series of video tutorials in this section.

For those wanting to study Fibonacci Analysis in greater depth we recommend the following reading:

Fibonacci Analysis Constance Brown
Fibonacci Trading Carolyn Boroden (AKA The Fib Queen)

Technical Indicators



In and of themselves most technical indicators are of little use in predicting future police movement. This is due to the fact that they are “lagging” and therefore simply “follow” the actual price movement. The only two exceptions to this are price itself and volume.

We use volume climaxes at points of price resistance and support to provide clues as to whether those support and resistance levels are likely to remain intact or if price is going to trade past them and go on to higher/lower areas.

The only oscillator that we use is the Moving Average Convergence/Divergence (MACD). Specifically we are looking for divergences showing up in this indicator to assist in determining potential turning points at market lows and highs.


In the 4 Hour Chart of SPX above we can clearly see the expected positive divergence in the MACD between the low made by the A wave of the Intermediate Degree Wave (IV) and the final low for that wave (IV) by the C Wave.

Similar negative divergences generally occur in this indicator between the highs seen in the Wave iii of 3 and V of 3, and then between the tops of third and 5th Waves of the same degree.

The Squeeze Indicator

The Squeeze indicator attempts to identify periods of consolidation in a market. In general the market is either in a period of quiet consolidation or vertical price discovery. By identifying these calm periods, we have a better opportunity of getting into trades with the potential for larger moves.

Once a market enters into a “squeeze”, we watch the overall market momentum to help forecast the market direction and await a release of market energy.

The Squeeze indicator was built from 3 components. The first two are Bollinger Bands and Keltner Channels. These are what trigger the red and green dots. When the Bollinger Bands (below in cyan) go inside of the Keltner Channel (below in red), the market is said to be in a squeeze. The dots across the zero line of the Squeeze indicator will turn RED, signifying this period market compression. Once the Bollinger Bands expand and again move outside the Keltner Channel, the dots will turn GREEN, signifying that the squeeze has “fired”.

The final component of the Squeeze indicator is a momentum indicator. Once the Bollinger Bands move outside of the Keltner Channel, a Squeeze has “fired”. In order to determine the direction of the move, we then look to the momentum. If it is above zero, the squeeze has fired long. Inversely, a short squeeze would be signified by negative momentum.

Consider the 4 hour chart for the SPX seen below.


In early November 2016 we were expecting to see a significant market low. From our Elliott Wave Analysis we were looking for the bottom of a Minute Degree Wave ii and considering long entries to profit from the potential of the expected Minute Degree Wave iii.

Our Hurst Cycle Analysis suggested that the low was likely on or around the 8th November 2016 and that it would be followed by a strong, sustained move up in SPX through to at least March 2017.


Now lets look at the additional information and long entry signals obtained by utilising the Daily Squeeze Indicator since early November 2016. Clearly this indictor allowed us to be long the SPX and capture each of the accelerated parts of the overall move up while avoiding the periods of retirement and consolidation.

Combined Squeeze’s

The series of red and green dots seen below the actual Squeeze Indicator for the charted instrument above are the Squeeze Indicator Fire Lines for a choice of related markets and instruments. Obviously when trading the indices it is preferable when the other major indices are also signally in the same direction but also if the major sector ETF’s are also supportive of the potential move in the direction of an intended trade position.

The above is particularly powerful when applied to individual stocks. We look for the relevant Index and Sector ETF to which the stock belongs to also be indicating a move in our desired direction as well as supporting information about the other major indices.


The above chart is for Alibaba Stock (BABA). Using the combination of our Elliott Wave Count, Hurst Cycles expectations and then applying the information from the Squeeze Indicator a long entry was clearly identified in January 2017 when this stock was trading at around $96.00. At the time of writing (July 2017) this stock is now trading up at $152.00 representing a potential to have made a 58% gain in around 6 months in the stock itself. Various entries and exits were also clearly indicated as shown in the chart which could have been very beneficial to Options traders.

The latest part of the price action on this chart also clearly shows that the momentum to the upside is becoming weaker at each successive peak seen in the price. This indicates that a correction may be imminent and agin this is consistent with our other analysis methods at this time.

We would encourage members to also watch the series of video tutorials in this section on the Technical Indicators to further enhance your understanding.


Hurst’s Cyclic Theory



In the 1970’s an American engineer called JM Hurst published a theory about why financial markets move in the way they do. The theory was the result of many years of research on powerful mainframe computers, and it became known as Hurst’s Cyclic Theory.

Hurst published two seminal works: a book called The Profit Magic of Stock Transaction Timing, followed a few years later by a workshop-style course which was called the Cyclitec Cycles Course (later published as JM Hurst’s Cycles Course – currently not in print).

There are a number of very enthusiastic advocates, prominent traders and writers who proclaim Hurst as the “father of cyclic analysis” and confirm the efficacy of the theory (including the late Brian Millard who wrote several books about Hurst’s theory), but why is it that the theory isn’t better known and more widely used by technical analysts? There are, in my opinion, two reasons:

Firstly, Hurst’s Cyclic Theory is not “easy”. While it is simple and elegant in its essence, it is not a simple theory to understand or to apply. The Cycles Course is over 1,500 pages long, and most people take several months to work through it.

Secondly, although the theory presented in both the Profit Magic book and the Cycles Course is the same, there is a vitally important distinction between the analysis processes presented in the two. Hurst claimed his success on the basis of the process presented in the Cycles Course, whereas many people read the Profit Magic book and go no further, with the consequence that they never discover the more effective process presented in the Cycles Course.

Hurst’s Cyclic Theory in a Nutshell

Hurst defined eight principles which like the axioms of a mathematical theory provide the definition of his cyclic theory. The eight Principles of Hurst’s Cyclic Theory are:

The Principle of Commonality

All equity (or forex or commodity) price movements have many elements in common (in other words similar classes of tradable instruments have price movements with much in common)

The Principle of Cyclicality

Price movements consist of a combination of specific waves and therefore exhibit cyclic characteristics.

The Principle of Summation

Price waves which combine to produce the price movement do so by a process of simple addition.

The Principle of Harmonicity

The wavelengths of neighbouring waves in the collection of cycles contributing to price movement are related by a small integer value.

The Principle of Synchronicity

Waves in price movement are phased so as to cause simultaneous troughs wherever possible.

The Principle of Proportionality

Waves in price movement have an amplitude that is proportional to their wavelength.

The Principle of Nominality

A specific, nominal collection of harmonically related waves is common to all price movements.

The Principle of Variation

The previous four principles represent strong tendencies, from which variation is to be expected.

In essence these principles define a theory which describes the movement of a financial market as the combination of an infinite number of “cycles”. These cycles are all harmonically related to one another (their wavelengths are related by small integer values) and their troughs are synchronised where possible, as opposed to their peaks. The principles define exactly how cycles combine to produce a resultant price movement (with an allowance for some randomness and fundamental interaction).

These eight simple rules distinguish Hurst’s theory from any other cyclic theory. For instance most cyclic theories consider cycles in isolation from each other, and cycles are often seem to “disappear”. By contrast cycles never disappear according to Hurst’s theory, but they may be less apparent because of the way in which cycles combine. It is the fact that Hurst’s theory stipulates that there are an infinite number of cycles that makes it particularly different, and also begins to explain why it is impossible to forecast price movement with 100% accuracy. Just as it is impossible to conceive of the sum of two infinite numbers, it is impossible to define the result of combining an infinite number of cycles.

We use a software application (Sentient Trader) developed over many years now by David Hickson. David is probably the leading “Hurstonian” out there and has done a great deal of work to encourage the understanding and use of Hurst's work. Sentient Trader and its algorithms utilise the methods taught by Hurst in his Cycles Course hence our adoption of this method of Cycles analysis here.

Phasing Analysis in the Cycles Course

In the Cycles Course Hurst advocated a different analytical approach, a process which is simple in essence, and is based upon a form of pattern recognition and the application of an advanced (hopefully) human brain to the resolution of complex dilemmas.

The pattern recognition approach involves three stages:

Entry Stage: First of all the analyst identifies major troughs (“visually evident” troughs because they can be seen clearly) of the longest cycle that appears to be present in the data (Hurst called this the dominant cycle). If a particular expected trough is not apparent, or there is ambiguity in the positioning of the trough the positioning of this trough is postponed until the analyst has more detailed information.

Extension Stage: The analyst then considers the next shorter cycle in the cyclic model, and identifies the troughs of that cycle using the previously positioned troughs of the longer cycle as anchoring points. The positioning of shorter cycle troughs often resolves the positioning of the longer cycle troughs, and so the analyst is constantly moving between the cycles, but generally moving from the longest (dominant) cycle down to the shortest cycle.

Completion Stage: Having resolved the shortest cycle visible in the data (the 5-day cycle if one is working with daily data), the analyst reverses the direction of the process, and resolves the position of all the longer cycles.

It is this different approach that provides the true key to Hurst’s cyclic theory because it presents a complete “cyclic model”: it informs the analyst of the phasing of all known cycles, not merely the phasing of one or two cycles. By understanding the complete picture (as complete as is possible, given limitations on available data) the analyst can trade according to how the cycles COMBINE to influence price.
Having performed a phasing analysis, the results are plotted on a chart using a notation system proposed by Hurst, involving the placing of diamonds beneath the price to represent the troughs of the various cycles. The higher the pile of diamonds, the longer the cycle which is forming a trough at that point.

Overview of Phasing Analysis

The true genius of Hurst’s theory as presented in the Cycles Course was in the way that he proposed an analysis should be conducted. The analysis is called a “Phasing Analysis” because it is a matter of determining the current phase of as many cycles as possible. Hurst advocated a process which is simple in essence, and is based on a form of pattern recognition and the application of an advanced (hopefully) human brain to the resolution of complex dilemmas. This method differs from the approach he presented in the Profit Magic book which was purely “mathematical” in that it required the plotting of a displaced moving average (inflated to create channels around price – the well known Hurst envelopes).

The pattern recognition approach involves identifying major troughs (“visually evident” troughs because they can be seen clearly) of the longest cycle that appears to be present in the data (Hurst called this the dominant cycle). If a particular expected trough is not apparent, or there is ambiguity in the positioning of the trough the resolution of this trough is postponed until the analyst has more detailed information. One then considers the next shorter cycle in the cyclic model, and identifies the troughs of that cycle using the previously positioned troughs of the longer cycle as anchoring points. The positioning of shorter cycle troughs often resolves the positioning of the longer cycle troughs, and so the analyst is constantly moving between the cycles, but generally moving from the longest (dominant) cycle down to the shortest cycle. It is this different approach that provides the true key to Hurst’s cyclic theory. This approach elevates analysis from a mathematical process to a skill (perhaps even an art) which the analyst strives to refine and perfect.

Having performed a phasing analysis, the results are plotted on a chart using a notation system proposed by Hurst, involving the placing of diamonds beneath the price to represent the troughs of the various cycles. And then one moves on to the second aspect of Hurst’s theory: making trading decisions on the basis of the cyclic analysis.

This aspect of Hurst’s theory is once again distinguished from other cyclic theories. Most cyclic theories advocate buying a market when the cycle is rising, and selling when the cycle is falling. Hurst’s trading methodology on the other hand takes into account the fact that price is the result of a composite of many cycles, and only advocates buying when a cycle is rising, and the two cycles longer than the trading cycle (in the harmonic collection of cycles) are also rising. Similarly one should only sell (go short the market – exits are a different matter) when the two cycles longer than the trading cycle are also falling. There are further guidelines to be observed before selling short, because of the principle of synchronicity which tells us that troughs are synchronised – and therefore much easier to trade, whereas peaks are not synchronised and are therefore more complicated to identify, and much more difficult to trade.

Timing Trade Entries and Exits

Beyond the above overall guideline as to when one should enter the market, trading according to Hurst’s cyclic theory requires that one times one’s trading actions by means of using two cyclic tools: the FLD (Future Lines of Demarcation) and the VTL (Valid Trend Line).

The FLD (Future Line of Demarcation) of a particular cycle is calculated by transposing the median price by roughly half the wavelength of the cycle in question into the future.
The VTL (Valid Trend Line) of a particular cycle is a trend line which joins two consecutive troughs or peaks of that cycle (as seen in the price movement), and then further validated by obeying a few simple rules defined by Hurst.

These tools provide evidence of a cyclic nature that a trough or peak of a particular cycle has occurred, and so they are used to create what Hurst called “action signals” – when price crosses an FLD or VTL a signal is generated, whereupon one should take an action (such as buying or selling).

This is all very well, but if one were to wait for evidence that one’s trading cycle had experienced a trough (by waiting for price to cross the FLD or VTL applicable to that cycle) then one would have missed a good deal of the price move. This is where the true beauty of Hurst’s principles emerges. Because of the principle of synchronicity (which states that troughs are synchronised) one knows that the trough of the trading cycle will be synchronised with the troughs of several shorter cycles. Therefore when evidence is received that a trough of a much shorter cycle has occurred (by price crossing the FLD or VTL applicable to that shorter cycle) then one can take action. Because of the shorter wavelength of this synchronous trough one catches much more of the price move.

Sentient Trader & Other Software

Performing a good phasing analysis can take some time. And then making the trading decisions based upon that phasing analysis can take even more time, so that trading on the basis of Hurst’s cyclic theory has always been a time consuming process and it is therefore not practical without the benefit of modern computer processing power and appropriate software. Primarily we have used a software application developed by David Hickson: “Sentient Trader” to perform the full Hurst Cycles Analysis that is part of our overall analysis here at TPA. More recently we have been able to add a Hurst Cycles Indicator and charts using these are updated Daily on our site for many instruments on multiple time frames.

We have also been working with a major software vendor to assist them in adding the Hurst Cycles Analysis tool set to their existing application. Once released this will facilitate the addition of the Hurst Cycles directly on the same charts as our other techniques.

We encourage members to also watch the series of video tutorials in this section which have been provided by David Hickson of Sentient Trader ( www.sentienttrader.com ) to further enhance your understanding. For those wanting to study Hurst's Cycles Theory in greater depth we recommend the following reading:

The Profit Magic of Stock Transaction Timing J.M. Hurst
Mastering Hurst Cycle Analysis Christopher Grafton
Channels & Cycles: A tribute to J.M Hurst Brian J. Millard
Future Trends From Past Cycles Brian J. Millard

We would also highly recommend purchasing and completing David Hickson’s FLD Trading Strategy Course which is available to our memebers .

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