Track 1 · Hurst cycle analysis · Lesson 1.10 · 6 min
Setting up a trade
A cycle trade is planned before the trigger. You know the direction, the turn you are waiting for, where you are wrong and where you aim, before you risk anything.
Start from the bigger wave
The longer cycles decide which way you are allowed to trade. When they are rising, look only for longs; when they are falling, only for shorts.
Read them on a higher timeframe if you can. A trade with the bigger wave behind it has room to run; a trade against it fights the current.
Name the turn you are waiting for
Pick the cycle whose low you plan to trade, and note when that low is due. Because cycles vary, it is a window, not a day: roughly a quarter of the cycle either side of the expected date.
Outside that window, there is nothing to do yet. Inside it, you watch for price to confirm.
Decide where you are wrong first
The trade rests on one idea: that the low has formed. If price falls below that low, the idea is wrong. So the stop goes just beyond it.
Setting the stop first keeps you honest. It also tells you how big the position can be.
Choose the trigger
The usual trigger is a close across the trade cycle’s FLD after the low. It is later than the exact bottom, but it is proof the cycle has turned.
Earlier entries, at the turn itself or on a shorter cycle’s FLD, give a better price and a closer stop, in exchange for less proof. Take them smaller.
Check the reward
The FLD target gives a price and a rough date. Compare the distance to the target with the distance to the stop. If the reward is smaller than the risk, or the target is due after the next peak, let the trade go.
A trade plan in six lines
- 1Direction: what the longer cycles say, and on which timeframe.
- 2Turn: which cycle’s low, and its window.
- 3Trigger: what has to happen before you enter.
- 4Stop: just beyond the low the trade depends on.
- 5Target: the FLD target, and when it is due.
- 6Size: the risk you accept, set by the distance to the stop.