JM Hurst was an American engineer who, in the 1960s and 70s, was the first researcher to use the power of the modern computer to investigate cycles in the financial markets. JM Hurst is widely recognized today as the ‘father’ of modern cyclic analysis. His ideas are generally accepted as the optimal method for trading with cycles and many traders worldwide profit from trading the Hurst Cycle.
Hurst published a book in the early 1970′s called “The Profit Magic of Stock Transaction Timing”, and then followed that with the publication of a workshop-style course, called the Cyclitec Cycles Course, also known as “JM Hurst’s Cycles Course”.
In these two works he presented the Cyclic Theory for which he has become famous and he set out his methodologies for trading with cycles. The Profit Magic book proposed a technique for applying his Cyclic Theory, but it was in his later Cycles Course that Hurst presented his truly ground-breaking work for trading the Hurst Cycle.
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Five Key Facts For Understanding Hurst Cycles
These Five Key Facts will help you understand why it is possible to consistently profit from trading with cycles in the financial markets.
1. Multiple Cycles in the Markets
Hurst proposed there are multiple cycles acting on all financial markets. In fact, he proposed there is an infinite number of cycles and that markets are moved under the influence of these cycles. He did not attempt to explain what caused the cycles, but merely that financial markets are moved by them.
2. Harmonic Nominal Model
Hurst studied the price movement of 1,000s of instruments, using newly available computers. He discovered that rather than cycles being a random collection of cycle lengths, there are prominent wavelengths which are related by an harmonic ratio. These prominent wavelengths recurred again and again across all the instruments he studied. He defined these wavelengths in a Nominal Model (nominal meaning the name of the cycle).
3. Variation in Wavelength
Hurst discovered that the cycles in the Nominal Model experience variation in wavelength from cycle-to-cycle and are not of a fixed length. Even though cycle wavelengths can vary over time, their average wavelength always reverts to the values shown in the Nominal Model table above.
4. Synchronized Troughs
Hurst also discovered that cycles in the Nominal Model, which influence the movement of financial markets, have Synchronized Troughs rather that Synchronized Peaks. This is a powerful principle when multi-cycle, synchronized troughs occur, because evidence that a shorter wavelength trough has occurred can by used to conclude that a trough of a longer cycle has also occurred.
5. Underlying Trend
The Underlying Trend is the sum total of the combined effect of Hurst Cycles longer than the cycle you are trading. Through understanding the Underlying Trend, you will know how the longer cycles are influencing the price movement of your trading Cycle upwards or downwards and this help make better trading decisions.
Trading With Hurst Cycles
David Hickson, the creator of Sentient Trader, has formalized a trading methodology for trading the Hurst Cycle. It is uses one of Hurst’s most powerful Trading Tools, the Future Line of Demarcation (FLD).
The FLD Trading Strategy (trading plan) uses the interaction of Multiple Hurst Cycles and an FLD, whereas Hurst’s original methodology used a Single Hurst Cycle and its FLD. It is used by traders on all financial markets (Stocks, Forex, Futures, Commodities, Options, etc.) to build steady and consistent trading profits.