What is a commonality model?

The Principle of Commonality is one of the fundamental principles of Hurst’s Cyclic Theory.

The principle of commonality states that there is some “commonality” in the cyclic movements of every financial market.

Hurst proposed the construction of a commonality model which would take the result of many different analyses and find the commonality present in those analyses. To apply this process to Sentient Trader’s analysis, every time a user applies the commonality model or an expert model the resulting analysis is submitted to a database. That database has a record of each trough and its magnitude. For example, in many markets there is a big trough in March 2009 which is classified as an 18-month trough by some analysts and as a 54-month by others: both possibilities would be saved in different commonality models on the database. When a new analysis is submitted, the database compares it to its models from the longer cycles downward, either incorporating it into an existing model or creating a new one. There is a degree of flexibility regarding which troughs are incorporated into existing models and which are considered distinct (the date can vary by about a fifth of the nominal length of the relative cycle).

This database currently contains over 1,600 commonality models, each one comprised of countless analyses of many markets around the world. These commonality models are downloaded on startup and it is possible to receive messages about this by going to Tools> Options> Analysis tab and checking the option Show messages about commonality model contributions.

So how does one take advantage of these commonality models? First of all, if you are using the Trader edition of the software you need to go to Tools> Trade Settings and check the option Use Commonality model (& contribute) in the advanced tab. Analyst edition users on the other hand will need to go to Analysis> Commonality and check Use commonality model on active chart.

Once the option to apply the commonality model to the chart has been checked Sentient Trader will narrow down the possible models until it finds the one that best fits the data, adjusting the analysis to fit the commonality model. Bear in mind that using the commonality model will influence the analysis but it won't necessarily change it. In fact it may not change the analysis at all, but in that case you can rest assured that the analysis is in sync with the analysis of many other Sentient Trader users.

For more information on analysis and in particular on the Expert model feature take a look at our material on the Hurst Cycles Trading Academy. There is also more information to be found in the Online User Manual.