mta educational web series using cycles in trading by: matthew caruso, cmt
TRANSCRIPT
![Page 1: MTA Educational Web Series Using Cycles in trading By: Matthew Caruso, CMT](https://reader031.vdocuments.net/reader031/viewer/2022020219/56649f295503460f94c4266f/html5/thumbnails/1.jpg)
MTA Educational Web SeriesUsing Cycles in trading
By: Matthew Caruso, CMT
![Page 2: MTA Educational Web Series Using Cycles in trading By: Matthew Caruso, CMT](https://reader031.vdocuments.net/reader031/viewer/2022020219/56649f295503460f94c4266f/html5/thumbnails/2.jpg)
Matthew Caruso, CMT
Matthew Caruso is a Senior Pro-Equity trader at National Bank Financial (NBF) as well as an active independent futures trader. Matthew is a Chartered Market Technician and serves as President as well Montreal Regional Director for the Canadian Society of Technical Analysts (CSTA). Matthew is also an adjunct professor at Concordia University’s John Molson School of Business where he teaches the course “How to build a profitable trading system (using technical analysis)”.
Matthew has written several articles which have appeared in stocks & Commodities magazine as well as the MTA newsletter
![Page 3: MTA Educational Web Series Using Cycles in trading By: Matthew Caruso, CMT](https://reader031.vdocuments.net/reader031/viewer/2022020219/56649f295503460f94c4266f/html5/thumbnails/3.jpg)
What are cycles?
Cycles are recurring patterns in time Many real world phenomena move in
predictable cycles In the market, a cycle is an approximate
length between important market bottoms No definite explanation as to cause
![Page 4: MTA Educational Web Series Using Cycles in trading By: Matthew Caruso, CMT](https://reader031.vdocuments.net/reader031/viewer/2022020219/56649f295503460f94c4266f/html5/thumbnails/4.jpg)
How can cycles help your trading?
Selection of TA tools – what technique should I use? What length should I study?
Prevents over trading Determines time frame for decision
making
![Page 5: MTA Educational Web Series Using Cycles in trading By: Matthew Caruso, CMT](https://reader031.vdocuments.net/reader031/viewer/2022020219/56649f295503460f94c4266f/html5/thumbnails/5.jpg)
Cycle Characteristics Retracement (Chart 1)
Cycles typically retrace by one to two thirds after their peak (uptrend) or bottom (downtrend)
Translation (Chart 1) In an uptrend (larger cycle is up), cycle tops are made
in the second half of the cycle In a downtrend (larger cycle is down), cycle tops are
made in the first half of the cycle
Fractals (Charts 2 & 5) Cycles work the same on all time frames Larger cycles impact smaller cycles
![Page 6: MTA Educational Web Series Using Cycles in trading By: Matthew Caruso, CMT](https://reader031.vdocuments.net/reader031/viewer/2022020219/56649f295503460f94c4266f/html5/thumbnails/6.jpg)
Chart 1
![Page 7: MTA Educational Web Series Using Cycles in trading By: Matthew Caruso, CMT](https://reader031.vdocuments.net/reader031/viewer/2022020219/56649f295503460f94c4266f/html5/thumbnails/7.jpg)
Chart 2 – Daily Cycle
![Page 8: MTA Educational Web Series Using Cycles in trading By: Matthew Caruso, CMT](https://reader031.vdocuments.net/reader031/viewer/2022020219/56649f295503460f94c4266f/html5/thumbnails/8.jpg)
Chart 3 - Downtrend
![Page 9: MTA Educational Web Series Using Cycles in trading By: Matthew Caruso, CMT](https://reader031.vdocuments.net/reader031/viewer/2022020219/56649f295503460f94c4266f/html5/thumbnails/9.jpg)
Chart 4 - Uptrend
![Page 10: MTA Educational Web Series Using Cycles in trading By: Matthew Caruso, CMT](https://reader031.vdocuments.net/reader031/viewer/2022020219/56649f295503460f94c4266f/html5/thumbnails/10.jpg)
Chart 5 – Larger Fractal
![Page 11: MTA Educational Web Series Using Cycles in trading By: Matthew Caruso, CMT](https://reader031.vdocuments.net/reader031/viewer/2022020219/56649f295503460f94c4266f/html5/thumbnails/11.jpg)
Cycles Pros Risk vs. reward (chart 6 & 7) Prevents over trading
Prevent excessive pyramiding at wrong time Forces you to wait for the market and anticipate
Provides a rationale for selection of indicators as well as lengths of indicators
Provides a continual understanding and awareness of trend (right & left translation a result of larger cycles. Larger Cycle = trend)
Knowledge of the direction of the larger cycle is gives insight of the current trading trend – chart 5
![Page 12: MTA Educational Web Series Using Cycles in trading By: Matthew Caruso, CMT](https://reader031.vdocuments.net/reader031/viewer/2022020219/56649f295503460f94c4266f/html5/thumbnails/12.jpg)
Chart 6 – Risk vs. reward
![Page 13: MTA Educational Web Series Using Cycles in trading By: Matthew Caruso, CMT](https://reader031.vdocuments.net/reader031/viewer/2022020219/56649f295503460f94c4266f/html5/thumbnails/13.jpg)
Chart 7 – Risk vs. reward
![Page 14: MTA Educational Web Series Using Cycles in trading By: Matthew Caruso, CMT](https://reader031.vdocuments.net/reader031/viewer/2022020219/56649f295503460f94c4266f/html5/thumbnails/14.jpg)
Cycles Pros Risk vs. reward (chart 6 & 7) Prevents over trading
Prevent excessive pyramiding at wrong time Forces you to wait for the market and anticipate
Provides a continual understanding and awareness of trend (right & left translation a result of larger cycles. Larger Cycle = trend)
Knowledge of the direction of the larger cycle gives insight of the current trading trend (chart 5)
Provides a rationale for selection of indicators as well as lengths of indicators (Slide 15)
![Page 15: MTA Educational Web Series Using Cycles in trading By: Matthew Caruso, CMT](https://reader031.vdocuments.net/reader031/viewer/2022020219/56649f295503460f94c4266f/html5/thumbnails/15.jpg)
How cycles determine your TA tools Oscillators used with cycles should be ½
or ¼ the length of the cycles being traded (Charts 8 & 9)
Oscillators should be used only to enter a market, not to exit
All oscillators give very similar results, use what you are most comfortable with. I prefer the stochastic or %r
![Page 16: MTA Educational Web Series Using Cycles in trading By: Matthew Caruso, CMT](https://reader031.vdocuments.net/reader031/viewer/2022020219/56649f295503460f94c4266f/html5/thumbnails/16.jpg)
Chart 8 – Tools selection
![Page 17: MTA Educational Web Series Using Cycles in trading By: Matthew Caruso, CMT](https://reader031.vdocuments.net/reader031/viewer/2022020219/56649f295503460f94c4266f/html5/thumbnails/17.jpg)
Chart 9 – Tools selection
![Page 18: MTA Educational Web Series Using Cycles in trading By: Matthew Caruso, CMT](https://reader031.vdocuments.net/reader031/viewer/2022020219/56649f295503460f94c4266f/html5/thumbnails/18.jpg)
Cycles Cons Not perfectly consistent Very difficult to automate Very difficult to mechanically back test Sometimes downright confusing Difficult to apply on short timeframes
![Page 19: MTA Educational Web Series Using Cycles in trading By: Matthew Caruso, CMT](https://reader031.vdocuments.net/reader031/viewer/2022020219/56649f295503460f94c4266f/html5/thumbnails/19.jpg)
Recommended Reading CMT Program “The power of Oscillator/Cycle Combinations” by
Walter Bressert*** “The mysterious forces that trigger events” by
Edward Dewey “The profit magic of stock market transaction
timing” by J.M. Hurst All books by Larry Williams (not cycle related)