I'm sure, if you're like me, you have heard all the clichés.

"History repeats itself," "Timing is everything," "Time is money," "Everything happens in 3's," and so forth.

Well, every one of those statements is true regarding the markets, as well as life in general.

Today, we are going to focus on only one of them – "History repeats itself."

Your first question may be, "Well, if that's true, what do I look for, and how do I apply what I find to the market?"

Good question and one this article will attempt to answer in the simplest fashion possible.

The example we will use here is a one-hour chart of the Eurodollar FX market.

The dates we will consider are February 5 to 9, 2010, and February 12 to 16, 2010.

Why did I pick these dates in particular? When I'm trading, I always look back several periods in the time frame in which I'm trading to see where and when history may have repeated itself.

In this case, the price action from February 12, 12:00 a.m. ET, through February 15, 2010, 5:00 p.m. ET, was very similar to the price action of February 5 through 8, 2010, 5:00 p.m. ET.

Look at the double chart setup on the hourly charts shown below to see what I'm talking about.

Notice what happened after 5:00 p.m. ET (the 2nd vertical blue line on the charts). The market continued up until at least 12:00 Noon ET on February 9 and 16, 2010.

I say at least until Noon because, as of the writing of this article, the trading session for February 16, 2010 had not yet ended.

So, what if you started your trading day the way I do by looking back in time? In this instance, I was trading on February 15 and noticed the market in a long consolidation period on the hourly chart.

I decided to look back in time a week (or February 8). I also looked back at the 5th.

When I did, I noticed a similar pattern, which gave me the confidence to take a trade in a long position on February 15. Mind you, this is not the only information I used to make my decision, but it was a major factor in my consideration of the trade.

I got in the trade at 3602. My target was 3761, which was hit on February 16, 2010, on the 12:00 Noon ET hourly bar, for a potential profit of 159 pips.

I did not make 159 pips on the trade because I decided to exit early. However, the target was not only hit but exceeded.

Now, just a couple warnings here:

First, not every trade goes as perfectly as this one did.

Second, there is one thing that can change everything when it comes to history repeating itself in the markets.

What is it? Cycle inversions!

Without getting into a lengthy explanation, I can tell you that markets sometimes do the exact opposite of what the historical data showed they did (that is, they invert).

Instead of seeing a high at approximately Noon ET, on February 16, 2010, we might just as easily have seen a low instead.

So, although this technique is very beneficial, as with all techniques in the market, it does not occur 100 percent of the time, and price action, although similar, will never be exactly the same.

For further explanation of this phenomenon, you can visit my website.

In the meantime: Trade on!

*Reprinted (and modified) with permission from Vincent Troncone. Learn more: http://www.livefuturestrading.com | info@livefuturestrading.com
Futures and options trading involve high risk, and you can lose a lot of money. When investing in futures, you may lose more than your original investment. When purchasing options, you may lose all of the money you invested. According to many experts, most individual investors who trade commodity futures or options lose money. There is a substantial risk of loss in trading futures and options. Do not risk money you cannot afford to lose. Past results are not necessarily indicative of future results. There is no guarantee that the information in this article will generate profits for the reader. All charts are provided by eSignal.