Tools: Cycles

To use the Cycle lines or Moon Phases tool, click the Cycles button. The cursor will change to a pencil while in the draw mode. Cycle lines mark time cycles from important highs and lows. A bar counter will be displayed while drawing the cycles. This displays how many bars are contained in each cycle. A start and end point are necessary to draw the cycle lines on a chart. The distance between the start and end points will be replicated across the chart. Vertical dashed lines mark each cycle point.

To draw cycles on a chart move the cursor to the starting point and then drag the mouse to the ending time cycle point. The starting point is generally an important high or low on the chart. The ending point is usually the end of an important trend or correction following the starting point. The cycle lines can extend into the future and backwards to indicate possible cycles. Watch for a market to switch directions at the cycle points.

Adjusting Cycles
Re-selecting the cycles will activate the ability to move and adjust the cycles to a different location. Click the mouse on the bottom of a cycle line to activate it. The cursor will change to a pencil and square bullets will mark the original start and end points. Drag the square bullets to a new location and the cycle lines will adjust.

Properties
After drawing a cycle, click the Chart Objects button, select Cycles, and then click Properties to view the properties window. The properties window can also be displayed by re-selecting the cycle lines and then right-clicking the mouse.

In the properties window, place a check mark next to Pin To Bottom to Pin the Cycles to the bottom of the chart. Place a check mark in the 'Mirror' box to cause the cycle lines to extend in both directions. Place a check mark to in the Show box to show the Cycle Arcs, Vertical Lines, and Moon Phases. Place a check mark in the 1/2 Cycle, 1/3 Cycle, and 1/4 Cycle boxes to plot additional cycle lines which divide the original cycle.

Case Study
One of the most critical aspects of successful trading is not what the direction is or why it's happening.  It is the mostly overlooked when.  The when can often be forecasted just like phases of the moon or the tides or waves or rhythms of any kind.  Using one very simple tool, time cycles, and some common sense, you can win consistently.  Without that tool it's a crap shoot.  For that reason and dozens of others, and I've tried them all... I repeat, Ensign rocks!

In reference to the what, why, and when, and the importance of each, please don't misunderstand me about down playing the what and why.  There are so many commonly known and used sources of what (see oscillators and advanced indicator studies, volume etc.)  As for why... that's as easy as keeping a couple of televisions running while you trade, ie: CNBC, Fox News, etc.  They will keep you apprised of fundamentals (government reports, election antics... argg, dominating large caps, etc.)

As to where to find more printed information on time cycles, there isn't much out there that I've found.  Do you suppose it's something the big guys don't want you to know?  Anyways, I have found bits and pieces in these sources:

-Futures Magazine
-Bridge Trader Newspaper
-DayTraders Bulletin: Tips, Tricks & Techniques for Day Traders (www.daytradersbulletin.com) awesome stuff.

Where is the Cycles tool in Ensign Windows?  Click the Draw Tools button (3rd from the right).  The Cycles button is the 2nd button from the right, in the 2nd row down, right next to Daily Price Lines.  As you pass your cursor over it, the hint 'Cycles' pops up.  When you click on it, the cursor changes to a pencil.  You can and probably will run a few cycles at a time.  I recommend that you color them differently, and always start by placing the ones you're least likely to adjust later, as you'll generally only be able to manually move the last one you lay down.

Try this: Open the March e-mini Nasdaq contract 1-minute chart (eSignal users: NQ H1).  It's all you'll need for this example.  Now try this... place your pencil cursor exactly on the 8:02 a.m. EST top on Dec 12th, holding the left mouse button down... drag the pencil to the right and when you're on top of the 8:25 a.m. EST bottom release the mouse button.  If you screwed it up just hit delete and do it again.  Now look where the repeating cycles land:  8:47, 9:08, 9:29 etc.  Do you see how they have approximately identified those small bottoms?  Now for the big news.  Now look after the bell, where this pre-opening bell homework really counts. IT PRECISELY IDENTIFIED THE 9:50 AM BOTTOM... AND AGAIN, THE SMALL TOP AT 10:11 AM... AND AGAIN THE TOP AT AROUND 10:33!!!!!  Now combine that with On Balance Volume, MACD and Stochastics, etc.  See illustration below.

Every day I check the pre-bell market first, then extend them forward after the bell.  Then I lay down a permanent 22 minute cycle from 9:30 am (the bell) onward. After the bell I start tracking reversals as I trade and make subtle modifications.

Understand 2 things:
1. Cycles don't have to reverse the trend every time, they can be skipped sometimes just causing a little hiccup and sometimes nothing visible at all and two or three can be skipped only to be resumed down the road (pre-bell cycles in particular).
2. You will notice that many times the market will trade with a lot of volatility right on the cycle turning point... streaking up (or down) to form a peak (or trough), only to reverse quickly forming a sharp spike.  This ends up being the top (or bottom)... these are my favorites, what a rush!  On the other hand... a cycle can be a catalyst... acting to push or accelerate the current trend appreciably in the same direction.

Now remember, cycles don't tell you the what or the why, you have plenty of other tools for that.  It only says "LOOK BUCKO, SOMETHING IS PROBABLY GOING TO HAPPEN HERE>>>."  That's what it's good for and as far as I know that's all that it does, but it's enough.  Give yourself a few weeks using cycles before you start relying on them heavily.

One neat thing about using time cycles is that it gets you thinking about the past and the future in a different way.  It got me graphically tracking the small and large reversals every day early on, when they happened, how many points the move was and so forth.  And it's amazing how trading days repeat themselves again and again in the same and subsequent weeks. Case in point:  Take a look at the morning lows (reversals) on Dec. 7th (9:46 am), 8th (9:49 am) and then again yesterday the 11th (9:40 am) and then again finally today Dec. 12th (9:50 am)... pretty cool eh?

If you haven't guessed by now, I'm geared toward index futures specifically the e-mini Nasdaq contract, and yes, you should be trading March (H) right now... unless you enjoy being crushed, and eaten for lunch.  I like the NQ H1 because it's really fast and enormously profitable when trading between 9:00 - 11:30 am (the only time I trade).

But you must (unless you are very well healed) use very tight stops... sometimes placing your protective stop even before your market entry limit order.  1 or 2 winners and I'm out for the day... no hanging around all day in a sideways market... but that's me.

Here are some of my personal observations (for NQ), I'll kick my own butt later for making them known:

- Cycles are all about trial and error... always.
- Cycles, like Stochastics or anything else are only guidelines.
- 22-minute cycles from the opening bell forward... every day.  Be conscious of the 11-minute cycle as a rule.
- Some times cycles run top-top, top-bottom, bottom-bottom... just try different combos.
- For the Nasdaq, use the contract 1-minute chart, not the index.
- Look at the long-term and short term (last hour) before the bell, then watch the 1st reversal after the bell, 2nd, 3rd.
- Every day is different, but usually once cycles are set up they are reliable.  Don't trade on days that they don't.
- Usually as of 11:30 a.m. EST, your current cycles will usually go into the toilet, look for a new set starting around 1 p.m. EST  (This is true of most of the studies, because of low volume generally).
- Go to www.cme.com and download MarketSound, use it in conjunction with your cycles, it's killer.
- Get ready to kick yourself at the end of the day as you look back on the day-- for not trusting the cycles you had set up earlier.  It pays to be patient... the market will still be there tomorrow, even if you're not, get my meaning?
- Get ready to be floored at what you see, on a daily basis, but remember, cycles are guidelines like anything else,
- DO NOT BET THE FARM ON CYCLES UNTIL YOU ARE PRACTICED.
- DO NOT IGNORE YOUR OTHER INDICATORS BECAUSE YOU FOUND CYCLES.  Compelling as they are, Cycles are is just one more tool.
- Watch how cycles coincide with trend lines, speed lines, support & resistance levels, open/high/low and lock-limit-down levels, and a host of other studies.  Combined together they tell a story.