Channels & Cycles: A Tribute to J. M. Hurst is an examination and explanation of cyclic price movements and how they can be applied to trading and investing. Summarizes the main points of the work of J. M. Hurst and explains each aspect thoroughly. Authored by a prominent British financial writer, whose earlier work, Channel Analysis, was eagerly sought by U. S. investors, but was not readily available in this country.
Channels & Cycles: A Tribute to J. M. Hurst updates, expands, and revises the concepts in Channel Analysis. Explains how price channels may be drawn around price action and combined with cyclical analysis to determine effective buying and selling points. Shows and explains methods that make it possible to predict some turning points months before they are due to occur.
Introduction (From Author):
Until 1979 my career followed the established path of university scien-tists and teachers the world over-writing papers, teaching students, pre-senting my work at conferences and visiting other workers in my field of scientific research. Then I was invited to spend a year as visiting scien-tist with the Food and Drug Administration in Washington, D.C., bring-ing my family with me.
Since I had an interest in the stock market, mainly from the scientific aspect of using digital filters to market data, I naturally paid a visit to the local library to see what was available on the subject of investment. I was astonished to find almost a whole wall of books devoted to this topic, at a time when there would have been probably none, or at best a couple of books on this subject back home in our local library in En-gland.
Imagine my delight and pleasure when after about three months I came across J.M. Hurst’s book The Profit Magic of Stock Transaction Timing (published by Prentice Hall). Unknown· to me, Hurst had been putting into practice for years methods of analysis of market data that I had only recently begun to look at. Hurst was a mathematical analyst with an engineering background and he employed techniques familiar to me as a scientist where I frequently analyzed the noisy output of various instruments. He also, in his book, satisfied the slight reservations I had as a scientist about the predictability of the stock market by providing a great deal of evidence in support of the author’s theories about cycles and channels in stock price movement.
If I had any criticism of the book at all, it was simply that the average investor, picking it up and quickly scanning through its pages, would perhaps feel that it was too mathematically orientated, and replace it on the shelf, because it contained terms such as Fourier Analysis, modu-lated side-bands, etc. The investor would then be missing an important contribution to the subject of technical analysis. However, a reader who took the trouble to study the book in depth would grasp that Hurst’s’ work was based on five main concepts. These were:
- 1. Maximum profits are obtained from shorter trades
- 2. Some 23% of price motion is based on cyclic movements in nature
- 3. These cycles are additive
- 4. The cycles can be seen clearly if envelopes are constructed around the price movement
- 5. The ideal buying point is when several such cyclic components are reaching their low points
Now, some 20 years later, Hurst’s pioneering work is as valid as ever, and his concepts form a solid foundation for profitable investment. To my regret, I never had the opportunity of meeting Hurst, but I can truly say that he was responsible for changing my life, because once I returned to England I used his basic principles as a starting point for my own line of research into price movements. This soon became my full time occupation. Of course, I have the advantage over Hurst of state-of the-art computers and vast amounts of price data from markets all around the world on stocks, commodities, currencies and futures. However, these markets all have one thing in common-the methods described in this book apply to all of them, as will be seen by the examples used to illustrate the various chapters.
In Channels & Cycles: A Tribute to J. M. Hurst, I have employed the general principle of putting forward a concept and then applying it to artificial data before using it on real mar-ket data. The reason for this is quite simple predictive techniques must be shown to work with totaIJy predictable data, i.e. artificial data, so that the accuracy of the predictions can be checked. It is only then that these same techniques can be applied to less predictable market data.
A great deal of space has also been taken by a full discussion of moving averages and their properties. Moving averages are not only simple to calculate, they are also extremely powerful tools, but unfortunately the majority of investors have no idea of how to harness this power. It is to be hoped that the treatment given here will enable readers to avoid the mistakes made by using them incorrectly. Finally, although the majority of investors have access to computers and programs to carry out various calculations and plot charts, computers are not absolutely essential for channel analysis, and the investor with only a pencil, paper and calculator can still achieve a great improvement in performance.
- Chapter 1. Money Management
- Chapter 2. The Trading Interval
- Chapter 3. How Prices Move
- Chapter 4. Trends within Trends
- Chapter 5. Graphical Channel Analysis The Basics
- Chapter 6. Graphical Channel Analysis Applications
- Chapter 7. Numerical Analysis the Basics
- Chapter 8. Numerical Analysis-More about Cycles
- Chapter 9. Applications of Numerical Analysis
- Chapter 10. Channel Turning Points