2 Useful Tricks to Identify the Hurst Cycles.

In the previous article, you learnt the basics of the Hurst Cycles:

  • What they are.
  • Their features.
  • The main 2 Principles.

Now it’s the moment to get more practical and learn how to detect a cycle from all the movements that the market does.

To Identify the Hurst Cycles I will use the two most common indicators:

  • Simple Moving Averages.
  • Momentum Indicators (Such as Roc, Rsi, Stoch and so on)

Moving Averages

Moving averages are the Best and Easiest instrument to detect a Trading Cycle, WHY?

Because the Moving Averages filter out the movement of the smaller cycles showing only the movements of the selected cycle.

You can set up the Moving Averages with two input:

  • With the Same Periods of the  selected Hurst Cycle, you’ll get an MA which CROSS exactly through the cycle.
  • With the Half of the Periods (Duration of the cycles / 2), you’ll get an MA that FOLLOWS the movement of the cycle, deleting the “noise”  from the smaller cycles.

Here a theoretical example:

  • The Black Line represent a hypothetical price movement.
  • The Dotted Lines at the bottom which are the Hurst Cycles you want to identify.
  • The Solid Lines on the Price Movement which are the two Moving Averages.

moving averages and trading cycle

As you can see the Blue and Red moving averages perfectly follow the Cyclical Movements.

What’s the difference between the real cycle and the moving averages?
The minimums and maximums of the cycles are shifted forward by 50% as  result of the smoothing process.

Real Example on Eur/Aud Daily.

eurauddaily

Looking for Some Advanced Hurst Cycles Techniques? Have a look at our Premium Hurst Cycles Course!

Momentum, the Speed of Price

What's the function that shows this interaction? The formula of the SPEED.

Speed = distance / time.

This amazing formula is the basis of all the momentum indicators as well as the key to identifying and, sometimes, predict the Hurst Cycle.

Place in your chart any indicator based on this formula (such as RSI, ROC, CCI, Stoch) and use as input the:

Standard duration of the cycle divided by 2.

Theory:

  • The Black Line represent a standard price movement.
  • The Red Dotted Line is the cycle you want to identify.
  • The Yellow Line is the speed of the Black Line using the specific input (Duration/2) to identify the Red Trading Cycle.

speed trading cycle

The results are amazing, the Momentum Indicator perfectly shows the movement of the selected Hurst Cycle.

Real example:
The blue line is a stochastich and the black line is the standard movement of a cycle (Sine Wave).
Have a look on how the Stochastic filter movement of the bigger cycle and reduce the noise from the smaller cycles.

In the reality, this instrument is even more powerful!
Quite often, the momentum indicators even predict the market by creating divergences with the price.

Have a look.
In the picture, I'm using the momentum indicator with 96 periods as input to identify the weekly trading cycle (192 periods) on the Aud/Jpy H1 chart.

real speed

The speed starts to decrease before the effective maximum of the weekly cycle giving us a good reversal signal.

Do you want to learn more?
Subscribe to the newsletter!

privacy We value your privacy and would never spam you

 

 

 

 

Leave A Response

* Denotes Required Field