Monday, October 25, 2010

Cycle lengths (Gann vs Hurst)

I showed you (INTC post) how to use the vertical line tool to try and zero in on cycles....  But what if you had an idea of what lengths were likely?  That would be helpful in your efforts to isolate cycles - wouldn't it?

Well you are in luck.  Much research has gone into this subject.

Gann Cycle lengths:
Gann used degress in a circle to compute cycle lengths. The 360% in a circle is approximately the same as 365 days in a year. So he used 180 (half a circle), 90 (quarter of a circle), 45 (1/8 of a circle), 135 (90+35), etc.

He also used eights of 90 for shorter cycles to calculate the trading days in a cycle. 1/8 of 90 is 11.25 days, 2/8 is 22.50 days, 3/8 is 33.75 and 4/8 is 45 days. 5/8 is 56.25, 3/4 is 67.50, 7/8 is 78.75 and 8/8 is 90. If we round these we have cycle in trading days of 11, 22, 34, 45. 67, 79, 90.

Hurst cycle lengths:
2.5 weeks - 18 days - 13-14 TDs (Trading Days) (Gann 11 TDs)
4.6 weeks - 32 days - 23-24 TDs (about 1 month) (Gann 22 TDs)
10 weeks - 70 days - 48-50 TDs (Gann 45 TDs)
1 Qtr - 13 weeks - 91 days - 65 to 67 TDs (13.9 wks?) (Gann 67 TDs)
20 weeks - 140 days - 98-100 TDs (Gann 90 TDs?)
Half yr - 26 weeks - 182 days - 125-128 TDs (Gann 135 TDs?)
3 Qtr - 9 mths - 39 weeks - 273 days - 190-192 TDs (Gann 180 TDs?)

Now there are many more cycles.  I have focused on shorter ones that could be used in swing trading.  I have covered 2 longer cycles previously.  One was the 40.68 month cycle (3.39 years) from Dewy.  The other was the PI cycle from Armstrong (1000 x PI or 3,142 days or 8.6 years).

My experience is that the cycles tend to conform better to the Gann cycle lengths than the Hurst cycle lengths.  But, many swear by the Hurst interpretation of cycles.  I have given you both so you can decide for yourself.  With this knowledge you are well on your way to doing your own cycle analysis.

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