Mastering Hurst Cycle Analysis – Book Review
In this brand new book Christopher Grafton, an experienced trader and member of the Market Technicians Association, tackles the cycles analysis work of J.M. Hurst and provides a meticulous guide for starting out with this technical analysis approach through to using it to analyse cycles yourself and place your own trades.
J.M. Hurst was an American aerospace engineer in the 1960s. He applied his understanding of mathematics, computing and engineering to market cycles. The workshop-style course he produced in the early 1970s described in detail the practical application of his cyclic principles to real trading. However, very few copies of the course were produced and his work all but disappeared.
Twenty-five years later Traders Press republished Hurst?s original work. The problem here was that because Hurst?s course was written before personal computers were widely available the techniques are rather difficult for the modern market technician, who is accustomed to working almost solely with computers, to implement. So, while Hurst?s original work makes worthwhile and fascinating reading for all technicians, it needed to be brought up to date to enable modern technicians to make the best use of his analysis tools.
This is where Mastering Hurst Cycle Analysis comes in. Grafton has taken Hurst?s approaches and updated them for the computer age; by following the step-by-step process in this book traders will learn how to quickly perform a cyclic analysis of any financial instrument on their own systems.
MHCA begins with a look at the theory of market cycles and how they interact and combine in financial markets. This is important groundwork for the rest of the book. The concepts of amplitude, period, phase and proportionality are all explained.
The book then moves on to the tools of Hurst analysis itself. The important features that are outlined, in careful detail, are the Valid Trendline (VTL) and the Future Line of Demarcation (FLD). The VTL provides traders with a more effective measure of trend than that which is provided by many other methods ? Grafton explains how and shows how to utilise it. The FLD can be used to identify past and future reversals, project prices and reveal underlying trend ? again Grafton shows how to construct the tool and use it in these ways.
One of the great strengths of Grafton?s book is that, although a lot of new terms and concepts are introduced, he keeps unnecessary jargon to a minimum and explains everything in detail, so those new to Hurst analysis are not overwhelmed with technical language. And so, as more new important concepts that are central to Hurst analysis are introduced in the next chapters of the book, these being cycle envelopes, phasing models, spectral analysis and peak translation, the reader is able to follow the text with ease and build up their understanding of the subject.
When all the requisite tools of Hurst?s approach have been introduced and thoroughly explained, the focus of the book moves to the practical and it is shown how to apply the tools in market analysis. Readers are shown how to select, set up and enter trades, as well as how to use Hurst techniques to control risk and manage open positions before exiting the trade with the intention of having made a profit. Grafton also explains how to use Hurst cycle analysis alongside RSI and Elliott Wave technical approaches, so as to produce a more powerful and effective set of trading tools, leading to improved results.
Finally, at the end of the book, there are a set of appendices that include diagrams of Elliott Wave patterns and programming code for the Hurst indicators in Updata and TradeStation languages ? this code is also available from the author by email or online. A reasonable assessment is that Grafton has left no stone unturned in this comprehensive guide.
The positive reviews that MHCA has received from experts in the technical analysis field tell their own story. Robin Griffiths and Julie Dahlquist have both praised Grafton?s work, saying that the book is a source of ?significantly enhanced market understanding? and that the book ?makes Hurst cycle analysis accessible to today?s trader? respectively.
Overall this is a carefully constructed, thorough and extremely readable guide to a complicated area of technical analysis. It is well presented and illustrated throughout with 120 legible diagrams and financial charts, showing real examples from the markets. Hurst?s work and its application are brought up to date for the modern trader, with the benefit that this is an additional tool a traders can add to their armouries as they approach the markets.
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