Correlation Cycle Indicator

Parameters: period = 20 (10–200) • lookback = 50 (20–500)

Overview

The Correlation Cycle Indicator analyzes the correlation of price with a cosine wave over a presumed wavelength of the cycle, helping traders identify market turning points as peaks and valleys form. This sophisticated tool is best used when the market is in cycle mode rather than trending, as it reveals recurring patterns in price movements consisting of accumulation, markup, distribution, and markdown phases.

What makes this indicator unique is its dual correlation analysis - it plots both the cosine wave correlation for cycle identification and the negative-sine wave correlation for rate of change. Crossovers of the negative-sine plot with the zero level help detect the beginning and end points of cycles, while the indicator also identifies market state: +1 for uptrend, -1 for downtrend, and 0 for cycle mode, making it invaluable for timing entries and exits in 2025's complex markets.

Interpretation & Trading Signals

Market Cycle Phases:

  • Accumulation: Market consolidates after downtrend - traders enter long positions
  • Markup: Upward trend begins - consolidation breakout with rising prices
  • Distribution: Market peaks with reversal signs - exit longs, enter shorts
  • Markdown: Downward trend accelerates - sharp price declines

Trading Signals (2025):

  • Buy Signal: Transition from accumulation to markup phase - cycle beginning
  • Sell Signal: Move from distribution to markdown phase - cycle ending
  • Zero Crossovers: Negative-sine crossing zero marks cycle turning points
  • Peak/Valley Match: Correlation peaks/valleys coincide with price extremes

Advanced Implementation:

  • Pair with Angle Study: Correlation Cycle Angle helps detect trending vs cycle modes
  • Multi-Timeframe: Short-term cycles on 5-15 min charts, longer on daily/weekly
  • Confirm with Trends: Use Moving Averages or MACD to verify cycle direction
  • Risk Management: Buy near troughs, sell near peaks with stops beyond extremes

Example Usage

Code examples will be available once the Rust implementation is complete.

Performance Analysis

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