# How to Trade Market Cycles Video Transcription

Welcome to the first lesson of the Day Trading One Touch Options Course. On this course we will start by defining what market cycle is and how we will use it to trade one touch options.

The study of price cycles has been one of the most important areas in technical analysis. To be able to correctly forecast directionality of an asset price, we need to know where these cycles begin and when they end. Not only is it important to know the direction of price, but we also need to understand that price moves in waves. The waves within a cycle can be calculated using the Fibonacci tools. And we will use the entire wave and market cycle principles to trade one touch options on a daily basis.

So let’s go to the charts so we can better understand what we are talking about here. This is the Euro/US dollar forward chart, and as you can see, we are in a steep up move, and it is very easy to say or to go and assume that the direction of this asset is up, because the boom has already ended.

The thing about this is how can you know, if you are here, for example, if this move will continue or not because . . . actually if we are here and if we see a deep retracement that takes out this low, we can actually think that we have ended with this up movement and now we are about to correct to the downside. But we actually go to the upside and continue the cycle all the way up here.

Now, the thing about this is that you need to understand the market price moves in cycles, and to do so we have highlighted these exacts right here.

We started with the low of the up move and went with the first high and we call this the first wave, okay? Then we have our retrace to this point to the end of second wave, the third wave ends on this high here, the fourth wave ends on this low, and the fifth wave ends on this high here.

When price retraces all the way down here this is called wave A or the first wave of the correction. Remember the overall move has five waves in it and the correction has three waves in it. Actually, this will mean that price could actually go to this low right here then correct to an area, let’s say, right here. Then retrace to an area all the way down here before continuing with another five wave movement to the up side. Okay?

Now, how can I be sure if this is true? Let’s have a look inside this first wave and see how price moved inside this first wave.

As you can see we have a high here, then a retrace all the way down here. So we could say that we have wave one, then we have wave two, then we have wave three to this high. Then we have wave four to this high and wave five to this high. So as you can see on the first wave which is the first wave of the up movement, we have a five wave movement inside of it and then we have a corrective wave to the down side.

As you can see if we move from this high to this low of the A wave, and then we have a small correction to the upside that will give us the B wave of the corrective move. Then the last wave of the corrective move because we only have three waves in a corrective move that will give us the C wave here before the movement continues to the upside.

The theory is correct and when we say that the main move has five waves in it and the corrective way has three waves in it of course we are completely stripping the theory to its most basic aspect because we will not go into much detail on this wave and market cycle principle, because what we want to do with this is to actually trade one touch options. The way we going to do it is to learn how to calculate how deep this correction will be, and how steep this move will be.

By calculating these two points, the one of the first correction and then the target of this movement, we can know if the price of the one option, if inside of this area, we can actually take the trade. If the price is above this area we will pass on the trade. Because these one touch options are time sensitive, if we are all the way down here and we are trading the 15 minute options and the price is all the way up here, very close to our target zone, we might not take the one touch, in this case, because we might not reach it.

By knowing how deep the corrections will be, we will also know how steep or how far the movement will go to the opposite side or to the side of the main movement. Okay? For this we will use the Fibonacci tools that we will learn on the next few lessons and we will end up this course by trading live a few one touch options. 