Track 2 · Spectral analysis · Lesson 2.2 · 6 min
Why the trend comes out first
A trend is the biggest, slowest movement in any chart. Left in, it swamps the spectrum and makes long cycles look stronger than they are. So the trend comes out before anything is measured.
The trend drowns the rhythm
A market that rose for two years contains one enormous, slow movement. To a spectrum, that looks like a very long wave with a huge size, and its influence spills over into the long cycle lengths nearby.
The real cycles are still there, but they are hard to see underneath.
Taking it out
The simplest approach subtracts a straight line. It works when the trend is steady and fails when it bends.
A smoother approach fits a flexible curve that follows the slow drift but ignores the shorter swings, and subtracts that. What remains oscillates around zero, which is exactly what a spectrum measures best.
Too stiff or too loose
The trend line has to be judged carefully. Too stiff, and some of the trend stays in, inflating the long cycles. Too loose, and the curve starts following the cycles themselves, removing the very thing you want to measure.
Good settings depend on the longest cycle you are looking for: the trend should be slower than that cycle.
The edge problem
Any smooth trend is least certain at the most recent bars, because it cannot see what comes next. The latest part of the curve can shift as new bars arrive.
This is one reason cycle readings near the right edge of the chart deserve a little caution.
Putting it back
Once the cycles are measured, the trend can be added back to draw them over price. The projection then shows the rhythm riding on the drift, which is how traders see markets move.
What to remember
- 1Trend first: measure cycles on what is left after the trend.
- 2Slower than the cycle: the trend line must move more slowly than the longest cycle you want.
- 3Caution at the edge: the newest bars are where the trend line is least settled.