Cycle Charts

If you haven't gone through our Cycle Tutorial yet, click here. It is important
that you understand the principals behind our Cycle Charts before you start learning

To get started, lets look at ebay. Type in EBAY and press enter on your keyboard. Now, if you haven't already, click on the cycle chart icon on the toolbar. It looks like this :

You will now see a blue screen with lots of dark lines and one thicker yellow line, like the picure below.

What we have done here is create a one year chart. Notice the months at the bottom of the chart. The lighter blue lines in the background of the chart are each year for the stock on a percentage basis. Notice the percent numbers on the right side of the chart. What do we mean on a percentage basis?

Lets say for example a stock went from $10 to $20 in one year, and for simplicity's sake lets say it went up in a straight line throughout the whole year. What would it look like on our chart? In January the blue line would be near 0%, since that would be the low of the year. Around June or July it would be near 50%, and in December it would be near 100%.

Each year (light blue line) is plotted on a percentage basis for that year only. What that means is that a stock may have gone from $10 to $20 one year, and from $20 to $30 the next. In this example, the year the stock went from $10 to $20 increased 100%, but the next year, it only increased 50%. To compare apples to apples, we need to compare percentages, not actual prices.

Now, the next thing you will notice in our charts is the thicker yellow line. This is the average of all the years put together. This is what you want to concentrate on. The yellow line shows us the average cycles of the stock from year to year. What we want to look for is the highs and lows, and the trends.

In the example of ebay, you will notice that it makes a high around the end of June, and then tanks during the whole month of July. In this case, you would not want to own ebay during July. If you did own ebay, you would want to start putting in some closer stops at the end of June. What you could also do is short ebay, or buy some puts.

Can you start to see the incredible timing opportunities that these cycle charts can show you? The idea of these charts is to put the odds in your favor. With these charts, you can see how often in the past a stock went up and down. Of course there is no guarantee that it will do the same this year, but would you really want to hang on to ebay during July after looking at this chart? Of course not. Just look for shorting opportunies or breakouts to the downside. If ebay this year (2004) never went down, then you never took the trade. Simple as that. Of course ebay did go down in July, to the tune of almost 20 points.

From here on this page, the words trend and cycle will pretty much mean the same thing. In the example above in ebay during July, the yellow line made a down "trend". This is also the yearly "cycle" of ebay during July. We want to make sure you understand how we are using these words in this tutorial.

Also notice the date in the top left corner and another number change when you move the mouse around the chart. This will allow you to see the exact date and the yearly percent of the average line where you currently have the mouse.

Another important thing to look at is the earnings during the year. These are small green boxes spaced apart every three months on the chart. They show the dates during the year that you can expect an earnings announcement for the stock you are currently looking at. Why is this important? If the announcement is off the expected earnings by even a few cents, the stock can gap up or down by a drastic amount. We highly recommend not being in a stock, or watching it very closely around the earnings annoucement.

Features of the Cycle Charts

Ok, lets take a look at using some of the specific features of our cycle charts. If you look at the legend on the right side of your screen, you will see three tabs lables 1, 2, and 3. It will look like the picture below.

This tab shows you all the years of data available for the stock you are currently viewing. If you click on a year in the list, the program will high-light that year on the chart. This will allow you to see what the stock did for a particular year. If you see a large down trend on the yellow line during a particular month or months, it makes it easy to see for each year what it actually did, and how well it performed year to year compared to the average. One thing you may notice is that some years may have started a little before the average and some years it may have started a little after. Once you see a cycle on the yellow line that you want to take advantage of, we recommend watching that stock starting about a week before the trend starts, in case this year it starts a little early.

If you are excited already about our cycle charts, we are really just getting started. We talked earlier about the imporance of putting the odds in your favor. Wouldn't it be nice to know what the exact odds are of a particular average trend (or cycle) during the year? Wouldn't it also be nice to be able to rate the trades so we can take advantage of the best ones?

We have created the ability in Best Choice to be able to find the trades with the best odds and returns. Basically what you are going to do is look at the cycle chart of the current stock, and look for cycle trends during the year that look consistant and fairly large, like the down trend during July for ebay.

When you see a good trend, you will click the mouse at the start of the trend, hold the mouse button down and scroll to the end of the trend you want to look at (basically high-lighting the cycle we want to take advantage of), and then letting up on the mouse to see all the statistics for the cycle you just selected.

In our example of ebay above, you would click down on the left mouse button around June 29th or 30th, and then hold down the mouse button while you move the mouse right until around August 4th or 5th, and then let up on the mouse. When you move the mouse, you will see a white box highlight your selection.

Don't do this yet, as we just want to explain the process of how to select a trend to see how well it has done in the past. We still need to choose how we are going to select a cycle, so please be patient for the moment.

For now, lets pass tab number 2, and click on tab 3. It will look like the picture below. Tab number three lets us choose exactly how we want to select our trends.

There are four choices for selecting the start and end of a cycle with your mouse. Exact Selected Coordinates - this calculates the statistics for exactly where you started and ended your selection. Best Profit Per Trade - this actually tests all the possible combinations starting 10 bars before and after your start click and ending 10 bars before and after your end click, and returns the best statistics based upon the best profit per trade. Best Rating of Coordinates - this is the same as the Best Profit Per Trade, except it returns the statistics based upon the best rating.

Best Rating of Whole Zone

This is the best one to use, unless you want to use the first one just to see the statistics of your exact selection. What this does is start 10 days before your initial starting mouse click, and tests every combination between that and 10 days after where you let up on the mouse, with a minimum trade length of x days. You specify that in the white text box labeled "Min # Days" So if you don't want any trades that last less than two weeks, put 14 in the box. If you want trades that last a week or more, put 7 in the text box. If you leave it blank, the default is 14.

There is a big difference between this and the second and third choice in tab 3. The trades returned using choices two and three are limited to the combinations starting with the 20 days around the start of the cycle you chose, and ending with the 20 days around the end of the cycle. The Best Rating of the Whole Zone starts with the day 10 days before your starting mouse click, and calculates every combination between that day and 10 days after the last day you selected, with a minimum number of days of 14, or whatever you entered in the text box.

It is not really important to understand all the math behind this, just use the fourth choice for selecting trades. 14 is a good default for trades. This will help you find trades with the best rating.

Lets get started.

Ok, now that you have chosen how you want to select the cycles, lets select a cycle. Go ahead and select the ebay cycle from the end of June to the first of August. Notice how you see a white box develop while you move the mouse after you have clicked down on the left button. If you have the fourth choice selected on tab 3, "Best Rating of Whole Zone", then you will see a highlighted trade on your chart like in the picture below.

You will notice in this case, the best trade didn't start at the end of June, nor did it end at the very bottom of the cycle. The Best Choice program analyzes every possible combination of days during the trend you selected, and shows the best trade based upon what happened in the past. Sometimes the trade may start a little before the cycle you select, and sometimes the trade may end a little after. Again, thats because if you select the fourth choice on tab 3, the program will start testing 10 days before and end 10 days after the cycle you select.

Once you select a cycle trade in the cycle charts, now tab 2 will automatically show the statistics for that cycle. It will look like the picture below.

This is where things start to get exciting, because we can now see the numbers behind what we see on the chart. This cycle has a rating of 7.5, which is excellent. Why is it an excellent trade? Well, in the last six years, if we had gone short on the Start Date, and exited the trade on the End Date, we would have been profitable 100% of the time! We would have averaged 11.3 percent profit per trade for an average trade length of only 15 days! All the stats show in the upper part of tab 2 are regarding the average trade for the last so many years shown in the lower part of tab 2. In the upper part of tab 2, we show the stats on whether each trade was long or short, average number of days in each trade, among other things. You will notice in the lower part of tab 2 each year, the dollar profit and percent profit for each year in the past.

Are you starting to see how these charts can improve your odds and your timing? Now, the important thing to remember is that we do not recommend blindly entering trades on the Start Date and exiting on the End Date. While the odds are in your favor, there is no guarantee that it will do exactly the same thing this year. While we have seen many trades start or end exactly on these dates, the reality is that most trades will start a little before, or a little after the Start Date, and end a little before, or a little after the End Date.

So what you want to do is start watching the stock about a week before the Start Date, and look for breakout opportunities in the direction of the cycle. In this ebay example, we would start looking for shorting opportunities around July 13th. One could also choose to start watching around June 30th, since that is when the average trend starts on the cycle chart. You could also select the first choice on tab three to see what the average trade was like starting exactly on the coordinates of June 30th to August 4th or 5th. The more you look at the information available, the better trader you will be.

What are the Ratings?

We have ratings for the short term, and we also have ratings for the cycle trades. The ratings for the cycle trades are calculated differently than the ratings for the short term, but they act the same and are the same colors. You want to find the green trades. Those are the excellent trades. They have a rating of 4 or better. Good trades are light blue and have a rating of 2 to 4. We aren't using marginal trades, which are yellow in the short term. Bad trades are red, and have a rating of less than 2.

Saving Excellent Trades.

If you look on tab 2 after selecting a cycle on the chart, you will see a Save button. This button allows you to save the trades you would like to remember during the year. What we recommend is to create a user list in the Wizard of good trading stocks. This would include stocks with good volume, etc. Then go through those stocks in the cycle charts, and find excellent trades. Then use the Save button to save those trades.

We have a place in the program we will show you in a little while further down where you can go to view these saved trades. For example, say it is October, and you want to see all your saved trades for the month of October. You can pull them up, with all their ratings, and other stats, print them out, and have a list of stock trades for the month to watch for.

Also notice above on tab 3 above that we show your currently saved trades for the current stock. That is helpful when you have been saving and looking for other trades, and you have forgotten whether or not you saved a particular trade, you can always check in tab 3.

Finding the best trade of the year.

One initial thing you can do when you first pull up a stock is to start around the beginning of the yellow line in January, left click down with your mouse, and scroll across the whole year holding the left mouse button down while you move the mouse. Then let up on the mouse about a week from the end of December. This will highlight the whole year, and if you have selected choice number four on tab 3, show you the best rated trade of the whole year. Be sure to give it a few seconds or more, as there are over 40,000 combinations it has to go through. This can be a good place to start for any stock. If it is an excellent trade, then be sure to click the Save button on tab 2.

Once you have found the best trade of the year, you can then highlight and check out other cycle trends you may see on the chart. If they are excellent, be sure to Save those as well. A stock may have multiple excellent trading opportunities throughout the year. It might take you a few hours or more to go through a couple hundred stocks, but once you have done this, you will have more than enough trades saved for each month of the year.

Viewing Saved Trades Throughout The Year

Once you've gone through a list of stocks and have saved a bunch of trades, now comes the really fun part! Watching for and making trades! The sixth button from the left on the top toolbar will allow you to go to the currently saved cycle trades. That will pull up the following window.

To view your currently saved trades for any month, just simply select the month you wish to view in the drop down box under the word "Month" in the top left corner. We recommend using the Order By Date so you can view the trades in order, but obviously you can sort by any of the criteria in the Order By drop down box. Now click the Go button.

You will see all of your long and short trades for the month. The long trades are in the upper spreadsheet, and the short trades are in the lower spreadsheet. From here you can save them to a user list for viewing. Happy Trading!

Related Links

Cycle Trades Screen

Cycle Wizard

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