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Intraday Trading Setup using Hurst Cycles

How to Trade with Hurst Cycles Intraday?

I have just sent a friend the following chart showing how I setup my platform for intraday trading using Hurst Cycles. It may look a touch complicated at first but it really isn’t and Hurst advocates will immediately recognise the FLDs and VTLs.

At the intraday level I use the 1 minute chart.This resolution allows me to see the cycles clearly in most instances. I am specifically focused on the 5 hour, 160 minute and hourly cycles. If you are new to intraday trading the nominal model displayed in the intro section will help you to understand. The hourly cycle is in a 3:1 harmonic ratio to the 160 minute, which in turn is in a 2:1 ratio with the 5 hour. You should be aware that a complete understanding of Hurst is required to trade intraday since knowledge of the underlying trend (cycles above 5 hour) is prerequisite.

Right click on the chart to save the full resolution version to your computer for easier viewing.

hurstintraday
There are many points to make about trading intraday so for the sake of brevity I will form a non exhaustive bullet point list below!

  • Always wait for price to start forming cycles at the start of the trading day. Patience is key. Price WILL start to betray it’s cyclic nature. One can measure from overnight trading if you have a quality datafeed and a highly traded instrument but be careful!
  • Entries are either at VTLs or FLDs
  • Exits are at VTLs or FLDs
  • I try to get in and get out at the smallest possible VTL or FLD I can create on a 1 minute chart. Usually a 15 minute VTL or 7 minute VTL depending on angle. Due to the principle of synchronicity this maximises my risk reward ratio.
  • Note how as the cycle unfolds one can learn about the underlying nature of trend (bearish in the above case). The undershooting or overshooting of T2 FLD cross targets reveals the nature of the underlying direction.
  • Note the left translation of the price peak compared to the 160 minute cycle trough, another bearish indicator for this particular day’s trading.
  • Hurst’s principle of variation states cycle lengths oscillate around the nominal model lengths. Above, the 1 hour cycle is showing excellent cyclic form and the 160 minute comes in slightly longer than nominal at 171 minutes. All within the range.
  • It is possible to use David Hickson’s FLD trading strategy with the intraday model and I often have it in mind. It can be used by counting 15 minute FLD interactions (A-H) in the hourly cycle. It can come in useful. It is also possible to do the same with the 160 minute cycle.
  • Later on in the day price found resistance at the 160 minute VTL which I have not drawn on the chart. Challenge: can you identify where it would be placed?
  • The best long trades are those where the cycle bottom is both a 160 minute and 5 hour, usually. The larger the cycle the larger the move in general.
  • When price crosses an FLD we know that a peak/trough has formed in that particular cycle. However price can also interact with an FLD in a different way and indicate a peak/trough. If the cycle is near to finishing in terms of average time and it is near the FLD, sometimes expect support/resistance AT the FLD!
  • Use small VTLs and the principle of synchroncity to form probabilities of tops and bottoms forming.
  • If the cycles are not clear, stay on the sidelines until they are. They will crystallise in time.
  • Beware of fundamental news announcements. However in my experiences news announcements often accelerate the underlying trend. So you may well be in a trade which receives what I term an ‘acceleration event’!

Finally, here are the settings I use for the creation of the FLDs:

  • 5 hour cycle (not shown): Simple MA on bar close, Period: 1, Horizontal offset: 160
  • 160 minute cycle (orange): Simple MA on bar close, Period 1, Horizontal offset: 80
  • 1 hour cycle (green): Simple MA on bar close, Period 1, Horizontal offset: 30
  • 15 minute cycle (grey dotted): Simple MA on bar close, Period 1, Horizontal offset: 7
Because of the principle of variation inherit in cycles according to Hurst, the offsets of these FLDs should, strictly speaking, be adjusted as the lengths of their associated cycles vary. However this is not really practical in an intraday setting without a dedicated piece of software like the brilliant Sentient Trader which does it all on the fly. I tend to stick with the above offsets and use my experience to make judgements on FLD crossings and targets. When you are completely comfortable using Hurst’s cyclic principles it shouldn’t be a major problem. As long as you have this in mind you can get by with most common trading platforms, all of which offer moving averages to use as FLDs.

 

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