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.
An example of this is in the Euro, both against the Dollar and the
Japanese Yen. Historically the Euro is an offspring of the group of
currencies that formed the Euro-zone and prior to January 1st 1999 the
European currencies were priced as currency per Dollar. However, on
creation of the Euro the quoting method changed to Dollars per Euro.
Thus, when looking at the historical data series including the
synthetic history created by measuring a trade weighted contribution by
each previous currency pair, clearly the price highs in the Euro used
to be price lows when the individual currencies were quoted as currency
This means that the chart has effectively inverted and as such we need
a method of applying cycles to math highs. The cycle drawing tool in
Dealbook is designed to measure cycle/price lows. What I have done to
overcome this is created an "inverted chart" in Chart Studio as an
indicator which can then be inserted into a chart. Since it is
impossible to create an indicator that looks like a bar I have had to
take the close of each bar only. This is done very simply in Chart
Indicator Inverse_Chart ;
Draw LastPrice("Close") ;
LastPrice := Close * (-1) ;
Following this select "Build" and select "Verify Module" from the top
You will be prompted to enter a name for this analysis technique. Write
in "Inverse Chart".
The Select "Build" again and this time you should see this succeed in
the output window at the bottom of the studio.
Then select "Build" again but this time choose "Install Module"
The module will be installed into the User Modules.
You will now be able to access Inverted Chart in the charting
application via the "set Up Indicators" icon at the top of the chart.
After applying the indicator to the chart you may find it useful to
slip the main bar chart higher so that it occupies only a small area:
This is the daily chart of EURUSD which displays quite solid cycle lows
– which actually reflect the price highs in the chart. The
next chart is of the weekly chart which also shows the imminent cycle
low/price high expected.
Written by: gftforex.com