{"id":2594,"date":"2019-08-27T17:37:00","date_gmt":"2019-08-27T17:37:00","guid":{"rendered":"https:\/\/analystprep.com\/cfa-level-1-exam\/?p=2594"},"modified":"2025-05-07T08:00:43","modified_gmt":"2025-05-07T08:00:43","slug":"use-of-cycles-examples","status":"publish","type":"post","link":"https:\/\/analystprep.com\/cfa-level-1-exam\/quantitative-methods\/use-of-cycles-examples\/","title":{"rendered":"Use of Cycles for Technical Analysis"},"content":{"rendered":"\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"VideoObject\",\n  \"name\": \"Technical Analysis (2023 Level I CFA\u00ae Exam \u2013 PM \u2013 Module 7)\",\n  \"description\": \"This video lesson covers the key concepts of technical analysis for CFA Level 1, including its principles, chart types, indicators, and relationship with behavioral finance. It also explores trends, support\/resistance lines, intermarket analysis, and how technical tools can be applied to portfolio management. Ideal for mastering the relevant Learning Outcome Statements.\",\n  \"uploadDate\": \"2021-12-27T00:00:00+00:00\",\n  \"thumbnailUrl\": \"https:\/\/img.youtube.com\/vi\/aIFkX46UShE\/maxresdefault.jpg\",\n  \"contentUrl\": \"https:\/\/www.youtube.com\/watch?v=aIFkX46UShE\",\n  \"embedUrl\": \"https:\/\/www.youtube.com\/embed\/aIFkX46UShE\",\n  \"duration\": \"PT59M32S\"\n}\n<\/script>\n\n\n\n<p>[vsw id=&#8221;aIFkX46UShE&#8221; source=&#8221;youtube&#8221; width=&#8221;611&#8243; height=&#8221;344&#8243; autoplay=&#8221;no&#8221;]<\/p>\n<p>Cycles are trends or patterns that may be exhibited by the securities market. The trends or patterns directly affect prices, leading to seasonal or periodical fluctuations that may recur over and over again. Cycles may also lead to some securities outperforming others.<\/p>\n<p><!--more--><\/p>\n<h2><strong>Breaking Down Cycles<\/strong><\/h2>\n<p>Cycles exhibited within a particular industry may be induced by regulations or even a certain innovation. It\u2019s common to find companies operating within the same industry experiencing similar growth patterns in terms of revenue and profits.<\/p>\n<p>Market cycles rarely have an identifiable beginning or endpoint. However, experienced traders contend they exist, and many of them take buying and selling positions that they believe strategically put them in line for big profits. Capital markets, in particular, have recurring cycles of various frequencies.<\/p>\n<p>A cycle can last anywhere between a couple of weeks to a few years. The&nbsp; type of market in question is one of the main determinants of the duration. For instance, an equity trader may see up to four or five complete cycles within a single day. Cycles in real estate can last up to 20 years or even more. Let\u2019s now look at a few well-known cycles:<\/p>\n<h2><strong>The Presidential Cycle<\/strong><\/h2>\n<p>The presidential cycle is perhaps one of the best examples of cycles that directly affect the stock market, bonds market, as well as the real estate and commodities market. Of utmost focus among market analysts is the United States\u2019 four-year presidential cycle. Put simply, the theory about this cycle states that it\u2019s during the first two years when most administrations make economic \u201csacrifices.\u201d In the latter two-year period leading to the ballot, administrations have been observed to unleash every weapon in their economic boost arsenal in an attempt to stimulate the economy, create jobs and introduce a state of economic well being. This is particularly common when the president is seeking re-election.<\/p>\n<p>The presidential theory explains why mortgage brokers and real estate experts advise clients to schedule mortgages to mature just before an election. The argument is that interest rates come down just prior to an election, hence reducing the repayment burden.<\/p>\n<h2><strong>The 18-year Cycle<\/strong><\/h2>\n<p>The 18-year cycle mostly affects the real estate sector, although it also has connections with equities and other capital markets. A short term recession occurs at the mid-point of the cycle, and a longer one is anticipated at the end-point.<\/p>\n<h2><strong>The Decennial Pattern <\/strong><\/h2>\n<p>The decennial pattern has connections with the average stock market returns, depending on the last digit of the year. According to the pattern, years ending with a 0 have historically been the worst-performing while those ending with a 5 have always been the best. In fact, market analysts consistently observed the pattern from 1885 until 1995. It took a 0.6% decline in 2005.<\/p>\n<p><em>Reading 56 LOS 56f:<\/em><\/p>\n<p><em>Explain how technical analysts use cycles.<\/em><\/p>\n<div class=\"notes_inv\">\n<hr>\n<p><em><a href=\"https:\/\/analystprep.com\/cfa-level-1-exam\/portfolio-management\/learning-sessions-curriculum-portfolio-management\/\">Portfolio Management \u2013 Learning Sessions<\/a><\/em><\/p>\n<\/div>","protected":false},"excerpt":{"rendered":"<p>[vsw id=&#8221;aIFkX46UShE&#8221; source=&#8221;youtube&#8221; width=&#8221;611&#8243; height=&#8221;344&#8243; autoplay=&#8221;no&#8221;] Cycles are trends or patterns that may be exhibited by the securities market. The trends or patterns directly affect prices, leading to seasonal or periodical fluctuations that may recur over and over again. Cycles&#8230;<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[2],"tags":[],"class_list":["post-2594","post","type-post","status-publish","format-standard","hentry","category-quantitative-methods","blog-post","no-post-thumbnail","animate"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.9 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Cycles in Trading with Examples | CFA Level 1<\/title>\n<meta name=\"description\" content=\"Learn how market cycles impact security prices, identify trading patterns, and apply cycle analysis for better investment decisions.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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