Forex Market Cycles Trading Indicator Part 3: This video (and article) on forex market cycles trading will teach you not only valuable insights to improve on forex trading, but also on stocks, futures, and more. This discussion about forex market cycles will also present the fundamentals of trading, the five energies which run the market, which can help you in your trades.
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Forex Market Cycles Trading Indicator Part 3
Welcome to part three of our series on forex market cycles. This one, we’re titling FOREX market cycles trading, but it also applies to stocks, futures, pretty much any type of market. This is one of those cycles that is rarely talked about. In fact, I hardly hear anyone talk about this and yet it is one of the most important. So we have taught about calendar cycles and we have talked about high volatility, low volatility cycles. Well, this one is when I call my order chaos cycle theory. First of all, there’s one theory that the market is a random walk. In other words, chaotic, random, and you’ve probably heard of the book random walk down Wall Street if you haven’t even read it.
It’s a popular book, very well thought out, very well researched, and it is a good book and there’s a lot of truth to it. Basically, the author said that everything that can be known about the market is already known and, therefore, the markets are already perfectly efficient and if we can’t get an edge and trading or investing. So that’s one theory. Another theory is exactly the opposite and these people say the market is perfectly orderly, predictable and they’ll often use mathematical models, often geometrical models. And here you’re getting into schools of thoughts such as Gan, probably the most famous, and some followers and people have followed up with his work, maybe altered it a little bit. It’s basically saying we can predict the market five years out, 10 years out, 20 years out to the exact day, time and price.
Forex market cycle analysis
Two completely opposing points of view and some of them even have some history to back up some predictions that they’ve made out into the future, which were pretty accurate. Obviously, I’ve read both of these positions and each one seems very convincing. They showed a lot of examples and you can say, ‘that worked, that made sense.’ But then, when you’re done reading both sides of the research, you’re stumped because they are completely and utterly contradictory. So, as I was doing this, I realized, yes, they both have examples that support to their positions. So there might be an issue here where sometimes the market is a totally random walk and other times when it is very orderly and predictable. That’s why I came up with this idea that there is another type of cycle where the markets go through periods of being orderly and chaotic.
While they’re chaotic, they are unpredictable and you cannot establish a probability scenario. Therefore, you should not be trading them. On the other hand, the times we do want to trade is when the markets are very orderly and then we can provide a probability scenario. This is why overtrading is one of the cardinal sins because people can trade for a while and maybe you’ve had this experience where you’ve traded a methodology and it’s worked for a little while and then all of a sudden it seems like it stops working. One of the reasons for that may be that while you’re trading it, the market is in an orderly cycle and then it goes into a chaotic cycle, and your probability scenario goes away just because the market isn’t a random walk during that time and nobody’s taught you about these cycles.
Forex cycle analysis
So if you’re trading during both cycles, then you’re going to be overtrading because you shouldn’t trade during quarterly times. And this is the foundation of waiting. What I do is I wait for the alignment of what I call five energies in the market. Well, how do we determine now when we have an orderly cycle in the market? I don’t like to use the word predictable because that assigns too much certainty to what we’re doing. But probability, which is really all we need to exploit that probability over a large period of time, is what makes us money. So here’s how I determine an orderly cycle, I’m looking for the energies in the charts: the money, money flow, buying, selling, buying pressure or selling pressure volume, and the speed of the orders. So I break the energy of the market down into five subsets.
Now you can add more to this, but these five are important and I’ll show you why in a moment. But first, let me just give you the list. So step one in my trading method is trend, and I always trade by going right through this checklist. Start with step one. What’s the trend? A good place to start because I want to know which size of the market I should be in. Number two, trend is not enough. A lot of people think you just to trade with the trend. No, there are two types of trends, strong trends and week trends. Again, that is a huge vacuum in your knowledge of trading and you will lose money unless you learn how to determine whether the market has momentum behind it because momentum is strength, and if a trend is weak, it will fail.
Forex cycle indicator
The trend is your friend until the end and you will be getting in at the end, so you must always ask yourself a question. In fact, I’d encourage you to write this down and here’s the question, is this a strong trend or a weak trend? And Ask yourself that question every time before you take a trade. Step number three, cycle. So now that we have a trend and it’s strong, then we go to step three, but only if we have step one and two in place. Now, we say when do I want to get in? I want to buy the final cycle low so the market doesn’t make another low after I bought. By the way, that’s where my cycle indicator comes in, which I did get away for free.
I offer it through a live Webinar, at least at the time of this recording. I’m still offering that for free and it takes about an hour to explain it – not only how to get it set up in your charts, but how to trade it so we modify an indicator that’s already in your charts to turn it into a cycle indicator. So if you want that, just send me an email at barry@topdogtrading.com. Like I said, if it’s still available, we’ll let you know the date and time of the next webinar. It’s all for free. Now, step four then, we’ve got a trend that’s strong, we’ve got the time to get in and we just want to make sure that we’re buying at a support level or shorting at a resistance level, and that’s all on the short-term chart.
How market cycles work
Then number five, I look at the longer term timeframe and I want to make sure I’m trading in the direction of the strength, the momentum of that longer timeframe. Not trend, I don’t care what the trend on the longer timeframe is. So that’s one of the heresies of traditional technical analysis that I violate. It’s not the only one by the way. But if you’re making money with traditional technical analysis, God bless you. Most people aren’t, by the way, there’s a reason for that. It’s not that it’s no good, it’s just that the markets have changed since those rules were written. Now, markets move very differently because of technology – computerized trading, algo-trading, commoditization of retail, traders direct access, high-frequency trading, all of this stuff has dramatically changed the way markets move since the establishment of traditional technical analysis.
So you’ve gotta keep up with the times. Thus, trend on the longer timeframe no longer means anything. Used to work, but no more. So I wait for the alignment of these five energies. Now, here’s the key, as I measure these, we’re going to use indicators not because indicators are any kind of magic. They’re not magical, they’re just mathematical. But I use them because being mathematical gives me objective measurements so that I don’t have to be a discretionary trader. And indicators themselves don’t make us money, right? They do what they promised, well the answer’s in the question, they indicate. But they do give us an exact value so that the measurement of those energies is objective, rule-based and duplicable. So when I share this with people, they can do it as well. It’s not just that I’m good.
Cycle analysis trading
So here’s the bottom line on how this all then creates a probability scenario. At each point, I’m looking to possibly take a trade. I simply ask myself how many of those five energies are aligned and give each set up a score of one to five. Now, the higher the score, the higher the probability of success. So, I liken this to taking each trade to court, but here’s the key. These particular five energies were strategically chosen because they are independent and uncorrelated to each other. That’s why these five energies, as I said in passing earlier, you can use more. But these five are special because they are very uncorrelated to each other. That’s what makes it significant when they’re all bullish or bearish. That gives you a preponderance of the evidence and gives you a probability scenario.
So that’s when we then say, now we have an orderly cycle in the market. The market is moving in an orderly manner and we still have to use our stops. We still have to hedge our positions because anything can happen at any time. But that’s okay because we can survive those as long as we use good risk management and money management. But this is how I establish a probability scenario. I find cycles that are in a time of moving in an orderly way that gives me a probability scenario.
Our Favorite Rubber Band Trade Strategy
So if you liked this video on forex market cycles, please understand that it’s free. But if you get value from it, then you should pay that value forward. And the best way to do that is clicking the share button below. If you’re watching on Youtube, please subscribe. You’ll get notified every time I release a new tutorial, which is about every week. Click the thumbs up icon and leave a comment. I really love your comments. I’ve got a special offer for you if you’d like to learn more details about the five energy map. Obviously, I can’t go into all the details. Just want to give you the overview so you get the concepts.
The best place to start is to start for free with me and just get my rubber band trade. It’s absolutely free, tells you where to get in and out and where to place your stops. It has a very high win-loss ratio and I want you to start making money immediately, without having to pay. So this video’s about 26 minutes. You’d get my rubber band trade strategy absolutely free by clicking on the image in the top right corner of this video, or in the description below the video. If you happened to find this video somewhere other than youtube, there’s probably a link below or an opt-in form on the side. And once you do that, I’ll personally email the video to you with the rubber band trade strategy.
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BTW, if you’re interested in the indicator that I use personally for very precise entries and exits. I’m happy to share that with you. Just send me an email at Barry@TopDogTrading.com, and I’ll show you how to get access to that indicator.
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