JM Hurst Applied Rocket Science to Cyclical Trading Techniques
When one thinks about the inspirational work in the arena of cyclical trading
techniques, the names of Elliott and Gann are forever associated with applying
simple wave theory to discern predictable trading insights within our commercial
markets. The name of J.M. Hurst, however, is rarely remembered, yet his
contributions may prove to be more valuable over time since he came along later
in the process. Elliott and Gann arose from the Great Depression era, but Hurst
burst upon the scene in 1970 and took cyclical trading to an entirely new level.
Hurst, an aerospace engineer, was well acquainted with turbulence and
vibrational characteristics of rocket airfoils, a highly technical field where
wavelike properties abound. On a whim, he and his financial backers, a group of
wealthy investors, invested over 30,000 hours of computer time to unwind the
vagaries of movements in the stock market. He soon published his landmark book,
“The
Profit Magic of Stock Transaction Timing”,
followed by a “1,500+” page training course, that revealed the results of his
more modern technical analysis research. Claiming success rates in excess of
90%, his secrets have been the topic of study for interested traders that have
focused on stocks and bonds, as well as commodity, futures, and
currency trading.
The ultimate irony is that this “aficionado” of
timing detection
published his groundbreaking work at the time of a major bear market, not the
best of times to garner support for new stock trading ideas. Hurst, a bit of a
“techno-geek” at heart, was repulsed by the tepid reception of his theories by
the investment community and shyly withdrew into obscurity. His discoveries,
however, have drawn a following over time, and others have taken his “displaced”
moving averages and timing techniques to a new level of sophistication and
forecasting competency. The chart below is but one example:
Charting software, employing Hurst’s timing techniques, generated the above
plot, complete with moving averages and the “Yellow Circle”, well before the
prevailing trend had run its course for the popular “Nasdaq 100” ETF. The major
discovery by Hurst was not in proving that cycles exist or ferreting out their
exact formulas, but in using the cyclical data that is already present in basic
ticker information. While his book and training materials never explicitly
detail his methods, perhaps because he thought they were obvious, analysts have
been quick to extend his theories to practical and actionable trading
strategies.
For the uninitiated, reading
Hurst’s materials
can be a complex journey into Fourier series, intensive math analyses, and pure
“rocket science”. Perseverance is required, but newer software tools can make
the subject matter come alive. Many analytical types, however, may walk the
other way once they determine that Hurst distilled his complex theories down to
the nuances of his simple moving averages. How could anything as simple as the
oldest indicator known to man ever yield positive trading guidance? Hurst
supporters would shout an unequivocal “Yes” to that query.
Elliott and Gann have their avid enthusiasts, but the “band” that has recognized
the value of Hurst’s contribution is growing day by day. Several websites are
devoted to his methods, and customized software or ebooks are available for
those that wish to dig deeper into a relatively obscure technique. As with
Elliott and Gann, critics have been quick to discount any worth in cyclical
concepts that are not instantly understandable in easy to implement steps.
However, experienced traders have learned to appreciate complex trading models
that are not acceptable to a broad public audience. Secrets have more lasting
value when confined to a few.
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