When determining the length of a cycle, it suffices for us to measure the time from one crest of the wave to the next, or from one bottom of the wave to the next. A perfect model would feature a uniform distance between high points and between low points. In the currency market, however, it is extremely rare to find such a regular pattern, even though the lengths of cycles are very similar. Hence, we actually use the average distance to determine the length of a market cycle.

Regular readers of my reports will probably recognize that I use cycle analysis when trying to work out which direction a currency pair will be moving and when this direction is likely to reverse.

In a recent article I described the influences cycles have on price and how it is possible to identify approximate time areas where the underlying price trend will reverse. Through observing when these reversals are likely to occur in the future it is possible to forecast several months ahead of one of these turning points when they will occur and thus understand the underlying direction for the intervening period.

Recently I have posted two articles on cycles, the first providing a brief overview of how they work and the second on how to apply cycles. Cycles are generally drawn across cycle lows and indeed, this normally works well in Forex. However, there are some examples where cycles are best drawn across cycle highs.