Market pattern is the result of combining cycles of different frequencies and magnitudes. In electronics, we call this resulting pattern Distortion.

Assume that one cycle pattern tops at 11:49 pm Chicago Time. Assume another cycle tops a little later at 9:43pm Chicago time the next day. When might this top actually manifest itself on the price chart? This is hard to tell, as there are other factors to miniscule and time consuming to determine, such as 'which of the two cycles is the strongest?', or 'what other cycles combined may push or pull on this market pattern to alter it by one single price bar?'

Therefore, when using mathematical techniques to extract some of the underlying cycles from past market price action to form a basis for future reversal dates, such as is currently done with the Fdates program, we must make allowance for cycles undetected that may alter the market pattern by a single price bar.

Some cycle analysts use a set of ranges rather than a single date to represent when they believe these cycle turns will occur. For example, one newsletter on cycles will normally report a cycle turn in a format such as '3/15-17.' This is the same as using a single date of '3/16' with a one-price bar standard deviation.


CLOSE DATES
Individual cycles alternate from top to bottom in evenly spaced time frames. Each top will occur in x number of increments, and each bottom will occur in x number of increments as well. It is the combining of these cycles that 'distort' the evenly spaced patterns. This is actually a good thing for those of us who trade. If the markets made tops and bottoms every x number of increments, everyone would quickly know what those increments were and there would no longer be a market.

This distorting of the individual cycles creates a pattern that varies incrementally between major and minor tops and bottoms. Because of this, you will get some minor tops and bottoms appearing very close to each other, than farther apart. Same goes with the major tops and bottoms.

When there are tops and bottoms due to occur in close proximity to each other, this will result in reversal dates being close in proximity. With a standard deviation allowed of one price bar in isolating these cycle turns, you may at times have some overlap.


OVERLAP AND TRADING DAY COVERAGE
Suppose that a cycle reversal is due to occur on 3/14. Yet another is due as soon as 3/17. When you consider the ranges involved, these two dates will cover an entire week from 3/13 to 3/20.

Some mistakenly look at this as 'blanketing' the market. Those usually viewing it this way are missing the whole point of cycles and using dates to isolate the reversal 'ranges' they fall in, but rather suspect that the provider of the cycle dates is merely making sure he/she will always have a reversal within their dates turn range.

But this view is faulty. For example, if two dates are provided indicating the expectation of two reversals, then just having one reversal occur within the overlap of two dates still ends up with one failed date. Nothing has been gained by overlap or blanketing. Also, two reversals within the days covered by two dates would also have one failed date if both those reversals occurred only within the range of one of those reversal dates.

The bottom line is, whether the dates are close together or not, if you have a reversal date expected to produce a cycle turn, one must occur within each of the reversal date ranges for that range to be valid.


HOW TO TAKE ADVANTAGE OF CLOSE PROXIMITY DATES
Now that we have covered how the combining of different cycle patterns produce the market patterns we see today, and also how this affects the distances between minor and major tops and bottoms, we will now take a look at how this can be taken advantage of.

Cycles always alternate from top to bottom to top again. If we are successful in isolating every cycle reversal due, then we can expect one cycle date that produces a top to give us a bottom on the next cycle date. Sometimes, however, due to techniques currently in use today to expose market cycle patterns, we may miss a cycle turn along the way. The result is one cycle date producing a top or bottom, having a cycle top or bottom form without our having a date, and then the next cycle date producing the same as the last.

When you have two dates in close proximity, the probability of missing a cycle turn is greatly reduced. In fact, the odds are overwhelmingly high that if one cycle date produces a swing top, the next cycle date in close proximity will produce a swing bottom. This is one big advantage to having some of our cycle dates in close proximity to each other.

Understanding cycles is key to understanding the advantages they can afford the futures trader. When you are in posession of two cycle dates in close proximity to each other, and you have noted that the first one has produced a top or bottom, knowing that the odds are high that within the next dates range you should get the opposite is considered an 'edge'. We can use all the edge's we can get.

Cycle dates, reversal dates, or whatever you chose to call them, should never be used alone. They are just one additional indicator to use with tools you have already found useful in analyzing the markets. I will now give you another example on how close proximity cycle turns can be taken advantage of.


THE TREND EXAMPLE
Assume that you have determined that the market trend is bullish by whatever tool or approach you use to determine this. Because it is always wise to trade in the direction of the trend for that extra edge, reversal/cycle dates can help you increase that edge.

With a bullish trend, you will want to concern yourself with cycle bottoms for entry, cycle tops for stop-loss tightening or exiting.

If you happen to have two cycle dates coming up in close proximity to each other, whether their closeness covers a whole week or not is irrelevant. The key is to understand that a separate reversal is due to occur within each dates 'range'.

Suppose within the first cycle dates range a cycle top has formed. For someone who is trading a bullish trend, you will then be on alert for that cycle bottom to form within the range of the next date close by. As soon as you see enough evidence of this by whatever parameter you choose to use, that knowledge of a cycle bottom due within such a small range can be the difference of entering a new bullish move up as early as possible with minimal risk, and chasing a market that you were late in identifying a new run up.

Now look at the flip side. If the first close proximity date provided a cycle bottom in a bull trend, the odds are high that the next date will provide a cycle top. This may provide you with enough information to wait on entering long. To have a cycle high occur so quickly after a cycle bottom when you want to go long could be disastrous if you weren't expecting it.

Having 5 future reversal/cycle dates coming up does not translate into 5 trades. If they are close enough to alternate from top to bottom, you are only going to look to enter those that would have you go with the trend, and the rest to help you tighten stops or exit a trade. Even those dates forming bottoms in an up trend may not necessarily signal an entry, especially if you are only interested in cycle bottoms that form higher than the last cycle bottom, for example. It all comes down to the method and tools you choose to use.


CYCLE/REVERSAL DATES - A POWERFUL TOOL!
As we have already noted on market patterns, not all minor and major reversals occur in close proximity. But when they do, this is not a disadvantage but an advantage to the trader/analyst that understands how cycles work. Instead of the skeptical view that some have to think that the cycle analyst is trying to cover as many trading days as possible with dates so that a reversal has to occur within one of the dates, the valid view is that each date that is supplied will have to provide a real reversal within each dates separate 'range' for that date to be considered valid. Thus, using 3 dates to cover 9 days better produce 3 reversals, and those reversals better be spaced out to where each reversal occurs within it's own date range and not all within one or two of the 3 dates. Any date without a reversal is a bad call. To determine the accuracy of anyone's cycle/reversal dates requires isolating dates without reversals from dates with reversals. As long as you have around an 80% accuracy or greater in reversal dates, you can use them with other indicators to provide you with an edge.

Also, each cycle date should not be spaced out evenly to the next and next date. Even spacing for several dates is not valid, in that this is not characteristic of a distorted cycle pattern for which the market patterns from.

Note: About the Author
Rick J. Ratchford is President of ProfitMax Trading Inc. He is a full-time commodity trader for his own account as well as assisting other traders. He has been a computer programmer for more than 20 years and a trader since 1990.