Recently, many friends have been asking me about cycles, including which cycle to use, whether to use a single cycle or multiple cycles, how to coordinate between cycles, and how to trade when the directions of large and small cycles are different, etc.

Today, I will specifically write an article to comprehensively explain the issues related to cycles.

I believe everyone has heard of multi-cycle resonance, a simple and practical trading logic that has performed well in different trading markets.

Today, I will discuss these points:

1. How to divide cycles and how to choose cycles?

2. Why do multi-cycle resonance?

3. 4 practical methods for multi-cycle resonance.

1. How to divide and choose cycles?

There are 9 time cycles on MT4, which are monthly, weekly, daily, 4-hour, 1-hour, 30-minute, 15-minute, 5-minute, and 1-minute. Futures and other trading software may have more cycles, but here I will use the cycles on MT4 as an example to explain.

What is cycle resonance?Many people often hear the trading logic of "looking at the big to do the small," which essentially involves the method of cycle resonance.

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So-called cycle resonance is based on the assumption that the larger cycle is trending. If the smaller cycle aligns with the direction of the larger cycle, one can enter a long or short position.

For example, once the trend is confirmed to be bullish on the 4-hour chart, if both the 1-hour and 15-minute charts also show a bullish pattern, we can enter a long position.

Common combinations of large and small cycles are:

Long-term trading: Weekly - Daily - 4-hour

Medium-term trading: Daily - 4-hour - 1-hour

Short-term trading: 4-hour - 1-hour - 15-minute

Intraday trading: 15-minute - 5-minute - 1-minute

The above combinations are classified based on my personal experience. There is no absolute standard in the market; everyone can choose according to their own trading habits.

How to choose the right time frame for yourself?Firstly: Assess your own trading time and energy.

If you are a full-time trader, you have ample time and energy, and you can engage in short-term or intraday trading. If you are a part-time trader, or have limited energy, you should opt for medium-term or long-term trading.

Secondly: Match with your own personality.

If you have a quick temper and poor patience, you should choose short-term or intraday trading, where you can see results relatively quickly. If you have a more patient temperament and can hold onto positions, you should engage in medium to long-term trading; otherwise, short-term trading may cause you to be flustered and hinder profitability.

2. The advantages of multi-timeframe resonance in going long:

A: It can increase the win rate

In a clear trend with multi-timeframe resonance, the success rate of trend-following trades is significantly higher than that of counter-trend trades.

In a 4-hour downtrend, the time spent in bearish movement is noticeably longer than the time spent in bullish retracements. In the downtrend, there are 67 four-hour candles, while in the bullish retracement, there are 26 four-hour candles, a difference of nearly 2.5 times.

Using a multi-timeframe resonance strategy for trading, with a 1-hour filter and entering with a 15-minute chart, the success rate of only going short and not going long will definitely be higher than not using timeframe resonance and trading both long and short throughout the entire trend.

B: It can improve the risk-reward ratioIn multi-period resonance trading, trading in the direction of the resonance can yield a higher profit-to-loss ratio. For instance, once a long-term trend is established in the larger cycle, even though there are downward corrections during the bullish phase, the space for the long side will definitely be greater than that for the short side. At this time, choosing to only take long positions that resonate in the smaller cycle will have a better profit-to-loss ratio than trading both long and short simultaneously.

In the chart that everyone sees, it is a 4-hour candlestick chart of gold. The price broke through the double bottom formation, and the moving averages also formed a golden cross, establishing a bullish trend. After the establishment of the bullish trend, there were three upswings and two corrections.

The spaces of the three upswings were $76, $90, and $110, respectively, while the spaces of the two corrections were $42 and $36. The space for the long side is twice that of the short side. In this 4-hour trend, when entering the market with a 15-minute resonance to go long, the profit-to-loss ratio is significantly greater than that of going short without resonance.

Therefore, choosing period resonance in trading can result in a better profit-to-loss ratio.

C: It can reduce ambiguity, making operations simpler and more precise.

Many people trade in a chaotic manner, mainly because they are not clear about the direction of long or short. All trends have correction waves, and the correction waves in a 4-hour long-term trend will have a very clear trend in the 15-minute chart.

This 15-minute trend looks tempting, but in fact, the correction wave space is small, the trend is complex, and the trading difficulty is high. However, many greedy traders do not want to miss any opportunity to make money, so they try to catch the small corrections of short positions in a clearly bullish market, resulting in a chaotic trade with both long and short positions fighting against each other.

Under the multi-period resonance trading strategy, only one direction will be taken, which is clearer, simpler, and more accurate. Maintaining a single direction judgment at all times in trading, keeping a clear mind during correction waves, and patiently waiting can help to more accurately find the turning point of the correction wave and execute orders well.

D: If the trading frequency is too high, multi-period resonance can reduce the frequency.Cyclical resonance is an excellent filtering tool. Many people trade too frequently, which can easily lead to mistakes such as incorrect positions, wrong varieties, forgetting to set stop-loss and take-profit orders, and potentially becoming overly involved in trading due to the high frequency.

At this time, multi-cycle resonance can be used to reduce the frequency of trading. By using cyclical resonance in this market segment, only long positions are taken and no short positions are made, resulting in only three long trading opportunities. Reducing from six to three, using cyclical resonance to filter trading signals is very effective.

3. Four methods of multi-cycle resonance

Method 1: Use the crossover of moving averages for multi-cycle resonance trading methods.

In practice, after the moving averages of the larger cycle form a golden cross or death cross to confirm the direction, the market unfolds a correction. After the correction ends, the moving averages of the smaller cycle also form a cross in the same direction to enter the trade.

After the 4-hour level forms a death cross, it establishes a bearish trend, and the two moving averages at the 1-hour level diverge downward, also in a bearish state.

The 1-hour market corrects upward to test the moving average and encounters resistance, entering the trade at the most right 5-minute level forming a death cross pattern.

The two moving averages used in the chart are: EMA60 and EMA15.

In this trade, the 5-minute moving average is used to enter, with a stop-loss space of 40 points. At the 4-hour level, the first wave of the market moving downward reached 800 points, and the risk-reward ratio is very reasonable.Method 2: Bollinger Bands Multi-Timeframe Resonance Trading.

The upper and lower bands of the Bollinger Bands serve as support and resistance levels. After the price at a larger scale tests the upper and lower bands, there is a possibility of a reversal in the market trend.

Trading is conducted when resonance is formed at the upper and lower bands of Bollinger Bands at different levels. For example, after the larger scale market tests the upper band, the next smaller scale and the smallest scale are also at the upper band, and the smallest scale forms a reversal pattern to enter a short position.

At the 4-hour level, after the price tests the upper Bollinger Band, both the 1-hour and 15-minute charts are under the pressure of the upper Bollinger Band. After a reversal candlestick pattern is formed on the 15-minute chart, a short position is entered.

For this trade, a 15-minute reversal candlestick is used to enter, with a stop-loss space of 40 pips. The 4-hour level downward trend has moved 600 pips, making the risk-reward ratio quite reasonable.

Method 3: Trend Line Breakdown Multi-Timeframe Resonance Trading.

Starting from the larger scale, trend line breakdowns in the same direction are formed in sequence, and entry is made at the smallest scale.

For example, after a downward trend line breakdown is formed at the 4-hour level, switch to the 1-hour level, where a similar downward trend line breakdown is formed. Finally, after a downward trend line breakdown is formed at the 15-minute level, entry is made, and the stop-loss can be set at the previous low point.

After the 4-hour level downward trend line is breached, the market forms a retest, and then a downward trend line breakdown is also formed at the intermediate 1-hour level.

After the 1-hour level breakdown, the market retests again, and entry is made when a downward trend line breakdown is formed at the 15-minute level, with the stop-loss set at the previous low point.Stop loss of 50 points upon a breakout entry, at the 4-hour level, the market has moved up by 460 points, resulting in a reasonable risk-reward ratio.

Method 4: MACD multi-timeframe resonance trading.

On the candlestick chart, when MACD tops and bottoms divergences in the same direction appear across different time frames, enter the trade from the smallest time frame.

For example, at the 4-hour level, if the 1-hour level is in a divergence, and at the same time, the 15-minute level shows a bottom divergence, enter the trade at the 15-minute level.

When both the 4-hour and 1-hour levels are in a bottom divergence, wait for the formation of a bottom divergence at the 15-minute level, and then enter using a reversal pattern.

The stop loss space is 50 points, and the market has moved up by 420 points, resulting in a reasonable risk-reward ratio.

4. Precautions for time frame resonance

(1) Two-timeframe and three-timeframe resonances are the most commonly used resonance trading logics. More time frame resonances can lead to over-filtering, increasing the difficulty of execution, and reducing the trading frequency, which is not conducive to implementation; be mindful of this.

(2) The entry pattern at the smallest time frame can be flexibly chosen, differing from the technical methods of the two larger time frames.

For instance, when both the 4-hour and 1-hour levels show a break of the downward trend line, when entering at the 15-minute level, one can use moving average crossovers or pattern breaks for entry, not necessarily a trend line break.However, the entry rules adopted in the trading system should be consistent and not be changed capriciously.