Financial markets are repetitive creatures.
The same price movements can happen over and over again.
That's why we use charts to guide us in our trading.
We look for the levels where a price has reversed in the past and we are on guard for that to happen again.
But price is only part of the story here.
Markets often also change direction at repetitive points in time.
The phenomenon of a price making highs and lows at regular intervals in time is called a cycle.
Take a look at the chart here of the Wall Street 30 index.
The black line is the index's price, while the red line shows an 87-day cycle.
Based on what's happened in the past, this red line is suggesting that there's a particular rhythm in this market, with prices tending to make lows or highs every 87 days.
As you can see, it's been a fairly reliable pattern, as the index has indeed tended to experience turning-points at this interval.
Of course, this cycle isn't perfect.
It was suggesting a turn in the Wall Street 30 index around 31 December.
But when that date arrived, nothing happened.
Instead of its uptrend stopping or reversing, the index just kept on going up.
However, a cycle doesn't need to work every single time in order for you to make money.
It just needs to work more often than not, which this cycle certainly has done over time.
There are cycles at work in almost every single financial market going.
Stock market indices, individual shares, commodities, bonds and exchange rates all follow cyclical patterns.
These range from very short-term cycles lasting less than a day to cycles lasting years and even decades.
As traders, we're obviously most interested in cycles lasting a few days or perhaps a few weeks, as these most closely match our own trading periods.
How do you go about finding cycles? While you can use specialist software like the one used to create the previous chart, most mainstream charting software programmes contain at least a basic tool called "cycle lines.
" You simply click on two significant highs or lows on the chart and the computer will tell you how far apart they are and also draw lines at that interval over the entire chart.
You will then be able to see if other highs and lows have regularly occurred at this interval in the past.
And if they have, you can then see where the projected turning points fall in the future.