Many stock traders believe that time cycles play an important part in market movement. There are many different time cycles that exist simultaneously, from a short 5-day cycle to Kondratieff's 54-year cycle. Time cycles are repetitive and can be measured, which makes it possible to determine the approximate times when market trend tops and bottoms will occur.

We won't go into any lengthy explanation of cycles here, but what's important is to understand that moving averages can be adjusted to fit the dominant cycles in each market.

There's a definite relationship between moving averages and cycles. As an example, the best known cycle operating throughout the commodities market is the monthly cycle. A month has 20-21 trading days. Cycles are related to their next longer and next shorter cycles harmonically, or by a factor of two. This means the next longer cycle is double the length of the cycle (multiply the average's days by two), and the next short, half the length (divide the average's days by two).

The monthly cycle may very well explain the popularity of the 5-, 10-, 20-, and 40-day moving averages. The 20-day average equals the number of days in the monthly cycle. The 40-day is double the 20; the 10-day is half of the 20, and the 5-day is half of the 10 day. Many of the more commonly used moving averages, including the 4-, 9-, and 18-day averages can be explained by cyclic influences and the harmonic relations ships of neighboring cycles.

Andy Swan is co-founder and head trader for DaytradeTeam.com.  To get all of Andy's day trading, swing trading, and options trading alerts in real time, subscribe to a one-week, all-inclusive trial membership to DaytradeTeam by clicking here.