Future Trends from Past Cycles explains how to identify potential future trends and turning points in equity prices (short, long and medium-term) by analysing past cycles in market data. Brian Millard’s renowned technical expertise and mathematical insight forms the basis of this fascinating guide, built around a blend of cycle, channel and probability analysis.
It is now just about ten years since I wrote my last book, Channels & Cycles: A Tribute to J.M. Hurst. I have been gratified by the response I have had to that book and the many kind comments I have received about my approach to trading on the stock market. I still acknowledge that Hurst set me on the road along which I have been travelling since that time in 1979 (is it really 30 years ago?) when I picked up his book The Profit Magic of Stock Transaction Timing. This book was reprinted by Traders Press in 2000, and I urge readers to take advantage of its restored availability.
For those around when it was first published in 1971 it was a breath of common sense in showing what is possible when approaching the markets with a measured, logical technique based on firm mathematical and scientific logic. New readers will see it in a different light, because now there are many authors and many software packages that use these important principles. To these new readers it might not now appear as revolutionary as it did when first published, but they will still enjoy Hurst’s writing style and the book’s logical approach to the improved timing of buying and selling decisions.
When considering a title for this book, I started by thinking about what goes through a trader’s mind when contemplating a trade. It is usually: ‘I think the price of this security will rise/fall within n hours/days/weeks/months.’ The thought process of a much smaller number of traders will be: ‘There is a high probability that the price of this security will rise/fall within n hours/days/weeks/months.’
Provided the second type of trader has carried out his analysis carefully, he will in the long run be more successful than the first type of trader. You can now see my dilemma in choosing the title for this book. Should I stress the novelty aspect of using cycles in a way that hasn’t been attempted before, or should I stress the importance of making sure that probability is always on your side? In the end I opted for novelty, being aware that novelty is always appealing.
Readers of my books on channel analysis will be aware that the most difficult aspect of that technique is in deciding when a channel has changed direction. How the channel has behaved in the gap between its last calculated value (half of the span used to calculate it back in time from the present) is open to interpretation. It is this which has been the subject of my research over the last ten years and which lies behind my writings in this book.
In Channels & Cycles I made the point that channel analysis could be carried out with a paper and pencil and that a computer was not strictly essential. However, the study of cycles and their relationship to channels has now moved on so much that a computer is absolutely essential. Some of the scans of cycles that I will describe take tens of millions of calculations to perform and quite clearly a fast computer is therefore essential.
Except for the cycle scans described in this book that are unique to the packages Channalyze and CCS Visions, the isolation of single cycles can be performed by any software package that allows you to specify your own calculations. These types of calculation can also be carried out in a spreadsheet application such as Microsoft Excel. Of course, in all of these cases a good amount of accurate historical data is required so that long-term cycles can be studied.
Channels can be drawn by Channalyze, but for other software packages a paper and pencil can still be useful for drawing constant depth channels based on a centred moving average which has been calculated by the computer software. These constant depth channels should not be confused with Bollinger bands, which virtually all software packages can produce. Bollinger bands are not of constant depth and, unlike channels, bear no obvious relationship to cycles.
I chose the title Future Trends from Past Cycles because it clearly describes what the book is all about. Although no mention is made of channels in this title, channels are an essential part of taking an investment decision. The channel is based on the future trend, but knowledge of the future trend does not in itself give the trader the optimum time to place a trade. I took a rather different approach in Channels & Cycles, placing more weight on a discussion of channels and less on cycles. The balance in this book is reversed, since quite clearly all channels are derived from cycles, or rather sums of cycles.
- Risk and the Markets
- How Prices Move
- Simulating Future Movement
- Cycles and the Market
- Trends and the Market
- Properties of Moving Averages
- Averages as Proxies for Trends
- Trend Turning Points
- Cycles and Sums of Cycles
- Bringing it All Together
Future Trends from Past Cycles: Identifying Share Price Trends and Turning Points Through Cycle, Channel and Probability Analysis By Brian J. Millard pdf