Quick post today on cycle analysis and how to increase your odds of trading cyclical turning points.
Cycle Analysis: Cyclical Top (Emini 135 min)
Friday’s post showed that we were approaching a cycle turning point on the 135 minute time frame (3 bars per trading day). The chart above shows the Hilbert Sine Wave had crossed with the red line below the blue line and so a cyclical top was approaching.
"Cycle moves in higher time frames equate to Trend moves in lower time frames" – a very important principle of trading using cycle analysis. Now if we drop down to the lower time frame we can see what was happening:
Cycle Analysis: End of Trend (Emini 15 min)
On the 15 minute chart we had an "End of Trend" warning signal, which indicated that the cycle top on the higher time frame was likely to be valid. You can also see that the beginning of this latest uptrend move was also marked by and "End of Trend" warning signal that also coincided with a late cyclical low turning point on the 135 minute chart.
The 15 minute chart is chosen because I use a factor of 3 when moving from the lower time frame to the intermediate time frame and then to the higher time frame. So 15 min x 3 = 45 min and 45 min x 3 = 135 min. I use the same ratio when day trading i.e. moving from 233 tick to 699 tick and to 2,097 tick time frames.
Good luck with your Emini trading.