What is a cycle?

A rhythm, not a pattern

Most chart patterns are shapes: a head and shoulders, a flag, a triangle. A cycle is different. It is about time. The question a cycle answers is not “what shape is this?” but “how often does this happen, and when is it due again?”

Think of the tide. You cannot say exactly how high each wave will reach, but you know roughly when the next high tide is due, because it keeps a rhythm.

Count from the lows

Cycle traders measure a cycle from one low to the next. Lows in most markets tend to be sharp and well defined, while highs are often rounded and messy. A sharp low is a cleaner marker in time.

The low where a cycle starts is called its trough. The length of a cycle is the time from one trough to the next.

Three things every cycle has

Length: how long one full rhythm takes, from trough to trough. It can be counted in bars or in market time, such as trading days.

Size: how far price swings between the low and the high. Bigger cycles move price further.

Timing: where the cycle is right now. Has it just made its low, is it halfway up, or is it rolling over towards the next low? This is also called its phase.

Bars and market time

A 40-bar cycle means different things on different charts. On a daily chart it is about two months of trading. On an hourly stock chart it is about six trading days. Always translate bars into market time before you think about what a cycle means.

Real cycles wobble

No market cycle keeps perfect time. A cycle that averages 40 bars might run 36 one time and 45 the next, and its size will change too. Cycle analysis is about reading a rhythm that breathes, not a clock that ticks.

That wobble is also why you should be careful: a pattern that looks rhythmic on a chart is not always a real cycle. Later lessons cover how to tell the difference.