Ebb and Flow, Market Cycles and High Performance Analysis

[NVendetti]

Here's a thread of an educational discourse away from the use of analytics and something you can use in your own trading. Don't expect to have it bloom instantly, it takes time, but if you water it, you'll find that it's the soil that ALL movements are based upon.

I used to be a believer of Fibonacci levels, but they are merely static numbers and to trade successfully you should have in your weaponry an approach that stays dynamic to all market movements while remains relatively independent of time or commodity/instrument in itself.

The studies presented are from my own research and based upon results of price movement through the granular study of global volume. I'm going to break down market cycles and give you a method to predict them with shocking accuracy. It takes work, hard work but you'll see levels of accuracy that shock you, while their appearance has always been present. I just put it to science. To understand it more completely we must understand :

Market Cycles (Cycle Magnitude & Cycle Timing)
Price Action - Quality & Statistics
Liquidity Analysis - Theory

I'm going to illustrate and demonstrate on the H1 chart and M30 yet keep in mind that this approach works all the way down to the M1. The results... shockingly accurate from a passive approach to market movements and the bigger picture of global order flow shifting directions.

 

[NVendetti]

Here's a short snip on liquidity. The basis for all fluctuations in price is always volume and liquidity analysis is the basis for understanding volume. It's a common misnomer that volume truly isn't available for Spot FX and that may be true to a sense in most cases, the liquidity that spot provides us is much more clear than any other capital market instrument available. Including that of the S&P or other indexes.

Here's a starter lesson on Liquidity... Enjoy!

Watching the market and understanding price movements is like standing on the beach studying liquidity through wave patterns. First, you view the market cycles and their respective tide. The tide presents us with a trend to follow. While we follow the trend of cycles, we also have individual waves to examine for price action in their respective deviations away from balance.

Off in the distance, about 100 feet off shore, you see the crest of a wave. The wave is sizable, certainly larger than what recent history has shown in other waves. But, at what point do you know that the next wave coming will crest over the previous three? Looking at your watch and a tide chart, you see that the elements of daily distribution through the clock are much like the timing of the tide. We’re still moving higher on the trend as the tide comes in.

Now you find yourself crouching lower, so you can ‘measure’ this behemoth wave in relationship to the three waves before it that have not yet rolled onto the shore. The three before it are quickly approaching the sand at eye level, but your suspect wave is twice as high. Will it disappear before it reaches the shoreline? How will you know? Easy. Throw a paper cup with a stone in the bottom so it carries the distance. Once the cup hits the trough of the wave, track the movement. You’ll see quickly that the trough just before your expected wave is at a level higher than the previous troughs. Now, doesn’t this suggest that the trend and tide are, in fact, moving higher? The troughs are all subsequently higher in price, so the resulting expectation is that the high of the wave is also higher. You can definitively see the exact point where it supersedes the waves before it. This is liquidity analysis.

 

[NVendetti]

Market Cycles, Magnitude and Timing

Now we have the bigger picture of how volume, flow & liquidity move (they are all the same). We must realize that volume is the driver of the market and the most precise method of analyzing future movement. But do we need volume to analyze the flow? Absolutely NOT.. not on the bigger picture anyways. Yes, if you're going to trade higher frequency then it's a requirement but not for market cycles and that's the subject of this post.

Market Cycles.. they provide two components.. Magnitude of Movement and Timing. To understand one, you already understand the other as they are both intertwined and are dynamic to market movements. Elliot Waves and Fibonacci numbers completely fail us here as they are static and 'require' a price point or they aren't true, but market cycles on the other hand give you objectives in price movement and tell you when that fails as well as when the 'turn' is likely to happen.

So lets start with market timing. I'll present a naked chart for this component.

The chart being used is a H1, EURUSD As of recent history, drawn today.

There are two sequences of cycles between the 3 grey lines. The 4th Line (red) is the predicted timing of that turn. We identify the clear break in direction where the gold line is broken and the arrow triggers the downside cycle.

Before we go into the relationship between the two we must connect the dots so to speak on cycles. The rhythm of the market is similar to that of an EKG at the hospital. It's a heart beat of cycles and all time frames have these repetitions. It's the same that took place overlooking the ocean and the waves of liquidity coming into the market (tide).. it's the repetition that takes place which is critical.

What is this repetition? It's the analysis of trader psyche through the course of the day.
What are the cycles ? Windows of Opportunity. They are NOT definitively repetitious, they merely provide a window where movement is highly probable for a change in direction. It's up to us as traders to determine whether that change in direction is likely to be to the upside or for movement lower.

Now that has given us timing and we'll dive into 'how in the heck' in the following few posts.. but lets look at the 'magnitude' component of cycles first.

There's a horizontal green line at the lower edge of the chart labeled Low 1 and at the top after that is a respective High 1 the magnitude of this movement is... 622.9 Pips (Nice move)

Now lets look at Low 2 vs High 2 = 348.8 Pips ( Another Nice move )

Low 3 and it's expected High 3 are 195.14 Pips.. this is an expectation/prediction of movement based upon the same calculation that provided us the timing of the red line, but in this case the turning point occurred precisely ( I chuckle as the H1 is not precise trading, but a more general direction) In any case it occurred within 10 pips of the predicted movement.

Market Cycles are the dominant force on the chart, but drill down and you find subordinate cycles I term as 'deviations', both have predictive properties in both magnitude and timing. The lower the time frame the more frequent the cycles and thus opportunities.