Chris Pulver, the seasoned trader and Senior Currency Strategist at Market Traders Institute, understands the ebb and flow of the market like no other. His systems, tricks, and strategies have been the cornerstone of countless successful trades.
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The financial market, much like the rhythm of life itself, dances to the beat of cycles.
It surges beyond recent lows, slumps from recent highs, or meanders within a wide range over time. These cycles are the heartbeat of the market, and understanding them can be the key to profitable trading.
The problem? Many traders fail to recognize when a cycle can start or end and what course of action they should follow during a particular cycle.
So, let us look at a simple and effective way to trade these cycles.
Decision vs Indecision Cycles
Market cycles can be broadly classified into two categories: decision cycles and indecision cycles, each marked by distinctive characteristics.
A decision cycle is when we tend to see…
- Clear Trends – an uptrend or downtrend
- Increased Market Volatility
Conversely, an indecision cycle is when we tend to see…
- Ranges and consolidation patterns
- Decreased Market Volatility
Here’s an example to help you understand this concept better.
Let’s say we’re trading the GBP/CHF currency pair. The chart below shows that the pair has had many uptrends and downtrends over the last few years.
Decision Cycle for GBP/CHF
Source: SmartTrader
So, any huge drop or rise we see here is considered as a decision cycle.
Have a look at the arrows in the chart. Starting with March 2018, the GBP/CHF witnessed an uptrend and then witnessed a downtrend back in May 2018 – both of these trends are decision cycles.
And here’s where we would see the asset price going up or down in a certain direction along with higher volatility.
On the other hand, below is an example of an indecision cycle.
Indecision Cycles for GBP/CHF
Any consolidation or range-bound activity we see here is an indecision cycle.
Right after the decision cycles the GBP/CHF saw in March-May, it went on to trade on a flat note and within a range during June 2018. This phase is an indecision cycle and here’s where we tend to see lower volatility.
Now that we know what these cycles are, how can we trade them?
Trading Market Cycles
The answer is elegantly simple—when you identify an indecision cycle, establish a range, and pinpoint the cycle’s highs and lows. These levels serve as your entry and exit points for trades.
For instance, if GBP/CHF is confined within a range of 1.16 to 1.22, consider entering a trade at 1.16 and aim to sell at the highest point in that cycle, at 1.22.
Apart from the above, you can also use an indecision cycle to know when there’s a build-up for a potential decision cycle for a particular currency pair, stock, cryptos, or commodities.
All you have to do here is to watch out if the price is moving out of the indecision cycle range. And if that’s the case, it indicates there’s a trend formation shaping up in the direction the price is moving.
So, if we have to apply this to the example we saw above, any large movement in GBP/CHF below 1.16 or above 1.22 will mean there’s a sign of a decision cycle forming up (the chart above shows us how there was an uptrend and a decision cycle formation after the price crossed 1.22).
You can try reading these cycles on various stocks and currency pairs to get a better understanding of how cycles for those assets are forming and the pockets of opportunities they provide to target profit from.
Chris Pulver has also recorded a short video on this concept, which you can Watch Here.
If you are looking for such simple-to-implement, yet potentially profitable, strategies, you should check out Chris’ Trading Rooms. It’s where you get to learn the very strategies he employs personally. Click here to take the trading room for a test drive.
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