Discussing the article: "Cycles and Forex"
Cycles are actually searched either from a specific pattern or from past points (bars).
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Check out the new article: Cycles and Forex.
Cycles are of great importance in our lives. Day and night, seasons, days of the week and many other cycles of different nature are present in the life of any person. In this article, we will consider cycles in financial markets.
In trading, cycles can be associated with recurring market trends or patterns. For example, the price may fluctuate within a given channel. And such a behavior may continue for quite a long time.
We can use spectral analysis, trigonometric polynomials, periodograms, auto correlation function and cycle detection algorithms to extract the cyclic component from a time series.
We can also use a simple moving average to find the cycle. This method is the simplest and most visual. Let us assume that we have a time series that is a cycle with period N. If we apply an SMA with the same period to this series, we will get an average level, around which the oscillations occur. The use of SMA with other periods allows us to obtain oscillatory processes that differ from the original. But despite these differences, using such averages it is possible to restore the parameters of the original cycle.
Author: Aleksej Poljakov