Forex market cycles research

Close X We are raised to see the concept of time as a linear flow. When we put it simply, that means we divide time into the past, the present, and the future. The nature and the events in our lives and artificially created approaches shows us that we should not see the flow of time in a linear way, but cyclically.

One great example is the changing of the seasons. Our lives happen in cycles as well, because we experience good and bad life periods that alternate. There are plenty of cycles to be found outside of lives, for example in nature and other places; there are countless cycles. The trading cycle is the alternating of economic growth by falling and the other way around. This type of cycle is a fundamental element for increasing or decreasing the money supply.

Generally, the more currency is in circulation of the market , the more the value of it decreases investors and traders with real currency contracts are losing and the forex market usually responds to this phase of the cycle by increasing the selling of the currency. Contrarily, if a country is in the economic crisis phase of the trading cycle, the international flow of capital falls and the value of the currency decreases. Every day, the markets receive false reports about in which phase of the short-term economic and trading cycle the countries are.

The cycles and phases of the currency market Every financial market usually has three cycles. These 3 trading cycles are: The trend cycle — the markets are in this cycle when the value of the currency is steadily growing or falling. In this cycle, the market creates more and more new highs when growing, or more and more new lows when falling.

The correct determination of this cycle can be quite tricky because it usually cannot be connected by a straight line, which is the most suitable way to determine this cycle. Trend strategies are the most efficient in this currency cycle. There are two trades based on the bank open. The first is the standard bank open. We would simple sell the AUD, place a stop above Resistance and check the trade before we go to bed to either adjust the stop or pull off the trade.

The Tokyo bank opens up at pm est. I started calling this trade the Go To Bed trade after one of my forex mentors told me to stop managing the trade and simply go to bed. In the morning you simply wake up and close the trade. The reality is that unless something else comes out to impact the trade in Europe or the open of the New York bank, the trade will fade in the same direction that it started.

This is due to the momentum in the pair. The Bank open is an easy trade as it is simply a visual identification trade. If it opens up we will be buyers of the base currency and if it opens down, we sell. When a bank is closed, there is little activity and thus the trends go neutral. Your profit potential is always better and the trader has higher probability when the bank is open vs a bank being closed.

The number one reason most markets move is due to economic reports. This is why we discuss economic reports in our newsletters and in the Forex Report along many other things the coaches put out on Tackle Trading. You must understand the economic reporting system even if you never trade forex as it impacts all markets.

Economic events are dominated by High-Frequency Traders as they program the numbers into their systems. There are two numbers that are important to an economic report, the first is the Market Expectation which is already build into price action. This is called the efficient market theory in that everything known is embedded in price action. We know the expectation, what we do not know is the actual number which is oftentimes wrong.

The actual number upon the announcement will be immediately embedded into the price. Two decades go, the new number would take days to place into price, in it takes less than two hours. If you are going to trade the Roller Coaster you must be in front of the computer and understand standard movements vs non-standard movements.

In all of these examples, the market prior to the announcement is neutral. This is due to a couple of reasons. The first, the US market is closed as the economic reporting system happens typically prior to the stock market opening. Second, no one wants to get in front of the HFTs that will dominate the event. Prior to the event the trader will identify resistance and place a buy stop above the level of resistance and a sell stop under support.

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