What Is a Cycle?

A cycle is a regularly occurring sequence of events. The sun rising every morning and setting in the evening is a cycle. The four seasons are one cycle. In financial and commodity markets, a cycle is loosely defined as price movement of a market from a local bottom to a local top and back again. For example, a stock’s natural ups and downs may come at regular three-month periods. Every three months, falling prices tend to make a local bottom. In between the bottoms, rising prices tend to make a local top. Knowing where these reversals tend to occur can help time purchases at cycle bottoms and sells at cycle tops.

Cycles, just like price trends, can be long, short, or intermediate in length. A specific market may have a 20-day, ...

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