CYCLESX

Track 1 · Hurst cycle analysis · Lesson 1.2 · 8 min

Hurst’s eight principles

Hurst boiled his observations down to a handful of rules about how cycles behave in markets. Together they explain why cycle analysis works when it does, and why it needs care.

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Fig. 1.2 · Summation: simple waves add up to something that looks like price

  1. 1

    Commonality

    Freely traded markets tend to show similar cycles. A stock, a currency and a commodity often share rhythms of similar length.

    For the trader: What you learn on one market carries over to others.

  2. 2

    Cyclicality

    Price movement contains repeating rhythms. Not everything is a cycle, but a meaningful part of the movement is.

    For the trader: It is worth looking for rhythm before assuming randomness.

  3. 3

    Summation

    What you see on a chart is several cycles added together, plus a trend and some noise.

    For the trader: One rising cycle can be hidden by a larger falling one. Always ask which cycles are pulling which way.

  4. 4

    Harmonicity

    Neighbouring cycles are linked by small whole numbers, most often about two. A short cycle fits roughly twice into the next one up.

    For the trader: If you know one cycle, you have a good guess for its neighbours.

  5. 5

    Synchronicity

    Cycles of different lengths tend to make their lows at the same time.

    For the trader: The most important lows are where several cycles bottom together.

  6. 6

    Proportionality

    Longer cycles move price further. A cycle twice as long usually swings price by a larger amount.

    For the trader: The longer cycles set the direction; the shorter ones set the timing.

  7. 7

    Nominality

    A common ladder of typical lengths can be used as a starting point for most markets.

    For the trader: A useful map, but a map of averages.

  8. 8

    Variation

    Real cycles drift. Their length and size change over time and differ from the typical values.

    For the trader: Expect timing to be approximate, and re-check your cycles as the market moves.

The tension worth noticing

Two of the principles pull against each other. Nominality says a common set of lengths describes most markets. Variation says the real lengths never sit exactly on those values. Hurst used the common set as a starting point because measuring every market by hand was not practical. How far you trust the textbook lengths, and how much you measure the market in front of you, is one of the biggest choices in cycle work.