By market cycles, we mean periods when prices move in a particular direction before reversing or consolidating. These cycles take no particular time to complete; they can last weeks, months, or even years. For the one in forex trading, noticing the general rhythm of these cycles will help him or her make decisions regarding entry or exit points.
Analysts often speak of currencies moving in waves, where idle periods of time are followed by rapid price movement. Recognizing these patterns is not to say that anyone can make a profit, rather to minimize the risk of utilizing emotion as the main decision-making criterion. Armed with decades of experience, analysts at churn out daily financial information that goes on to serve its traders in supporting their trading decisions.
Prices generally tend to follow three broad phases in any given cycle: accumulation, uptrend, and distribution.
Having some understanding of the phases may help in flashing signals regarding impending changes so that one does not witness a sudden reversal completely. For the clues as to what phase a market is in and for how long it might run, one may want to look Higher Trading Volume, Market Sentiment, and Larger Economic Indicators.
