The Quarterly Theory | Jevaunie Daye

Time must be divided into quarters for a proper interpretation of market cycles. Blending the Quarterly Theory (not to be confused with the Quarters Theory) and basic ICT concepts leads to enhanced precision. Understanding Quarterly Theory allows to be flexible. It fits in with any style of trading, as it is universal to all time-frames. The Quarterly Theory removes ambiguity, as it gives specific time-based reference points to look for when entering trades. Before being able to apply this theory to trading, one must first understand that time is fractal:

Yearly Quarters = 4 quarters of three months each.
Monthly Quarters = 4 quarters of one week each.
Weekly Quarters = 4 quarters of one day each (Monday - Thursday). Friday has its own specific function.
Daily Quarters = 4 quarters of 6 hours each = 4 trading sessions of a trading day.
Sessions Quarters =  4 quarters of 90 minutes each.
90 Minutes Quarters =  4 quarters of 22.5 minutes each.

 

Yearly Cycle: Analogously to financial quarters, the year is divided in four sections of three months each.

Q1 - January, February, March
Q2 - April, May, June (True Open, April Open)
Q3 - July, August, September
Q4 - October, November, December

Monthly Cycle: Considering that we have four weeks in a month, we start the cycle on the first month’s Monday (regardless of the calendar Day).

Q1 - Week 1, first Monday of the month
Q2 - Week 2, second Monday of the month (True Open, Daily Candle Open Price)
Q3 - Week 3, third Monday of the month
Q4 - Week 4, fourth Monday of the month

Weekly Cycle: Daye determined that although the trading week is composed by 5 trading days, we should ignore Friday, and the small portion of Sunday’s price action.

Q1 - Monday
Q2 - Tueday (True Open, Daily Candle Open Price)
Q3 - Wednesday
Q4 - Thursday

Daily Cycle: The Day can be broken down into 6 hour quarters. These times roughly define the sessions of the trading day, reinforcing the theory’s validity.

Q1 - 18:00 - 00:00 Asia
Q2 - 00:00 - 06:00 London (True Open)
Q3 - 06:00 - 12:00 NY AM
Q4 - 12:00 - 18:00 NY PM

 

6 Hour Quarters/Sessions divided into four sections of 90 minutes each  (EST/EDT).

Asian Session

Q1 - 18:00 - 19:30
Q2 - 19:30 - 21:00 (True Open)
Q3 - 21:00 - 22:30
Q4 - 22:30 - 00:00

 London Session

Q1 - 00:00 - 01:30
Q2 - 01:30 - 03:00 (True Open)
Q3 - 03:00 - 04:30
Q4 - 04:30 - 06:00

NY AM Session 

Q1 - 06:00 - 07:30
Q2 - 07:30 - 09:00 (True Open)
Q3 - 09:00 - 10:30
Q4 - 10:30 - 12:00

NY PM Session 

Q1 - 12:00 - 13:30
Q2 - 13:30 - 15:00 (True Open)
Q3 - 15:00 - 16:30
Q4 - 16:30 - 18:00

 

Micro Cycle: Lastly, dividing a 90 Minute Cycle yields 22.5 Minute Quarters, known as Micro Sessions.

Asian Session

Q1/1 18:00:00 - 18:22:30
Q2     18:22:30 - 18:45:00
Q3     18:45:00 - 19:07:30
Q4     19:07:30 - 19:30:00
Q2/1 19:30:00 - 19:52:30
Q2/2 19:52:30 - 20:15:00  (True Open)
Q2/3 20:15:00 - 20:37:30
Q2/4 20:37:30 - 21:00:00
Q3/1 21:00:00 - 21:23:30
etc.    21:23:30 - 21:45:00
21:45:00 - 22:07:30
22:07:30 - 22:30:00
22:30:00 - 22:52:30
22:52:30 - 23:15:00
23:15:00 - 23:37:30
23:37:30 - 00:00:00

London Session

00:00:00 - 00:22:30
00:22:30 - 00:45:00
00:45:00 - 01:07:30
01:07:30 - 01:30:00
01:30:00 - 01:52:30
01:52:30 - 02:15:00  (True Open)
02:15:00 - 02:37:30
02:37:30 - 03:00:00
03:00:00 - 03:22:30
03:22:30 - 03:45:00
03:45:00 - 04:07:30
04:07:30 - 04:30:00
04:30:00 - 04:52:30
04:52:30 - 05:15:00
05:15:00 - 05:37:30
05:37:30 - 06:00:00

New York AM Session

06:00:00 - 06:22:30
06:22:30 - 06:45:00
06:45:00 - 07:07:30
07:07:30 - 07:30:00
07:30:00 - 07:52:30
07:52:30 - 08:15:00  (True Open)
08:15:00 - 08:37:30
08:37:30 - 09:00:00
09:00:00 - 09:22:30
09:22:30 - 09:45:00
09:45:00 - 10:07:30
10:07:30 - 10:30:00
10:30:00 - 10:52:30
10:52:30 - 11:15:00
11:15:00 - 11:37:30
11:37:30 - 12:00:00

New York PM Session

12:00:00 - 12:22:30
12:22:30 - 12:45:00
12:45:00 - 13:07:30
13:07:30 - 13:00:00
13:00:00 - 13:22:30
13:22:30 - 13:45:00  (True Open)
13:45:00 - 14:07:30
14:07:30 - 14:30:00
14:30:00 - 14:52:30
14:52:30 - 15:15:00
15:15:00 - 15:37:30
15:37:30 - 16:00:00
16:00:00 - 16:22:30
16:22:30 - 16:45:00
16:45:00 - 17:07:30
17:07:30 - 18:00:00

 

The Monthly Cycle is comprised of four quarters, one week each. Start counting the quarters from the first full week, meaning if the first week relating to the traditional month is a partial week, it is omitted and viewed as distortion. The first full week of the month is the first quarter, the second week is the second quarter, the third week is the third quarter and the fourth week is the fourth quarter.

The Weekly Cycle is comprised of four quarters, one day each. Monday is the first quarter, Tuesday is the second quarter, Wednesday is the third quarter and Thursday is the fourth quarter. Friday is not included into the weekly cycle due to the fact that it has its own specific function.

The Daily Cycle is comprised of four quarters, six hours each, which perfectly aligns with the four trading sessions of a trading day. The first quarter is the Asian session, the second quarter is the London session, the third quarter is the New York session and the fourth quarter is the afternoon session. 

 

Each Session is comprised of four quarters, 90 minutes each. During the Asian session, the 90 minute cycles are as follows: 6pm to 7.30pm is the first quarter, 7.30pm to 9pm is the second quarter, 9pm to 10.30pm is the third quarter and 10.30pm to 12.00pm midnight is the fourth quarter. During the London session, the first quarter is 12.00am midnight to 1.30am. The second quarter is 1.30am to 3.00am. The third quarter is 3.00am to 4.30am. The fourth quarter is 4.30am to 6.00am. During the New York session, the first quarter is 6.00am to 7.30am. The second quarter is 7.30am to 9.00am. The third quarter is 9.00am to 10.30am. And the fourth quarter is 10.30am to 12.00pm. During the Afternoon session the first quarter is 12.00pm to 1.30pm. The second quarter is 1.30pm to 3.00pm. The third quarter is 3.00pm to 4.30pm. And the fourth quarter is 4.30pm to 6.00pm.

Now that we understand that time is fractal, we can begin to look into the functions of some of the quarters. Price is delivered by an algorithm. So there must be some initial input which is used to make decisions throughout each cycle. This is the function of Q1. Q1 dictates the quarters which follow, meaning Q1 is used as a barometer for forecasting market conditions in the subsequent quarters of each cycle. If the first quarter is overextended, expect the second quarter to consolidate, and if the first quarter is in a tight range, expect the second quarter to expand. 

 

 

True Opens are the main components of quarterly theory. There are specific openings of price which serve as a time-based filter for gauging manipulation swings or stop-hunts. True opens are the beginning of Q2 of every cycle.  True Opens are defined by these times:

• Yearly True Open = 1st Monday of April.
• Monthly True Open = 2nd Monday of the month.
• Weekly True Open = 6:00 PM EST every Monday.
• Daily True Open = 12:00 P.M (Midnight) EST time.
• NY Session True Open = 7:30 A.M EST time.
• Asian Session True Open = 7:30 P.M EST time.
• London Session True Open = 1:30 A.M EST time. 

 

Buy below True Open. Sell above True Open.

 

 

It is a simple concept to understand. If you are bullish within a specific cycle, you want to buy below its true open, and if you are bearish within a specific cycle, you want to sell above its true open. This will increase your accuracy tremendously, as key levels usually rest above or below true opens. Every cycle has its own true open. The true year open is the opening price of the first Monday of April. The true month open is the opening price of the second Monday of the month. The true week open is Monday at 6 p.m. The true day open is 12 o'clock midnight. The true open of the age on session is 7 30 p.m. The true open of the London session is 1 30 a.m. The true open of the New York session is 7 30 a.m. And the true open of the afternoon session is 1 30 p.m. The image to the right depicts how true opens function during bullish market environments.

There are two sets of instructions that the algorithm follows:  

AMD-X and X-AMD

 

A = Accumulation (required for a cycle to occur)
M = Manipulation
D = Distribution
X = Reversal or Continuation

After a tight Q1 range the Q2 Manipulation Phase begins. ICT calls this the 'Judas Swing'. According to his algorithmic theory, the purpose of this fake move is to get traders offside. After Q2 the real move takes place: the Q3 distribution phase and is usually the easiest to trade as the previous quarter has already established a trend of the cycle. The fourth phase is X which can either continue to establish range of the cycle or reverse. In regards to this example, the fourth quarter is reversal. As you can see, price reverses at Higher Time Frame Premium-Discount Arrays (PDAs) or key levels. 

 

 The AMD-Principle is represented in every bar of every time-frame (monthly, weekly, daily, 4 Hour, etc.) 

with a price value at which it starts trading (opening price), the highest price value (high), the lowest (low), 

and  a value of the time it ends trading (close).

Liquidity is induced when price breaches old highs and old lows while trading into key levels. If you usually trade with the one minute chart, you need a 15 minute PDA. If you usually trade with the five minute chart, you need a one hour PDA. If you usually trade with the 15 minute chart, you need a four hour PDA. If you usually trade with the one hour chart, you need a daily PDA. And if you usually trade with the four hour chart, you need a weekly PDA. 

 

Regarding X-AMD, the first quarter is the continuation or reversal of the previous Q. Of the previous cycle, using what we understand from the function of Q1, Q2 should then accumulate, resulting in high range price action. Q3 would then be the manipulation phase. However, the rules for the true opens are static. They don't change. The opening price of Q2 will always be its true open. So if the profile that you're looking at is X-AMD, even though accumulation takes place during Q2, you will use the opening price of Q2, which is its true open to gauge, the Judah swing, which will present itself more times or not in Q3. The last phase will be the distribution phase, which will be the easiest phase to trade in regards to X-AMD. 

 

Dividing a 90 Minute Cycle into 22.5 Minute Quarters (Micro Sessions).

 

Reference:
Jevaunie Daye on Twitter/X @traderdaye
ICT Concepts (2023) - Quarterly Theory and True Open. (video)

Daye's Full course / Quarterly Theory.

 

Daye (April 14, 2023) - Introduction to Quarterly Theory 

(Something You Shouldn't Know).

 

 Jevaunie Daye (2023) - Deeper Dive into Quarterly Theory.

 

Kirsten Boersma (September 10, 2023):

Quarterly Theory - the Hack of the Algorithm?

Is this proof of the algorithm existing or not? I do think so;-) 

And it's mind blowing how this fractal quarterly theory happens over and over again. 

The Three-Day Rolling Pivot Level | Mark B. Fisher

 

Mark Fisher is no ordinary trader. The ACD trading system (an opening range breakout concept) he described in his 2002 book The Logical Trader is the one he and his 75-plus traders at MBF Clearing Corp. still use to make a living on the New York markets day in and day out. Does it work? Ask anyone at Fisher's firm, and they'll tell you it does. Unlike many in the business of helping traders, Fisher is happy to share his system because he believes the more people there are using it, the more effective it will be. However, the following is not specifically about Fisher's ACD system, but about his Three-Day Rolling Pivot concept (from the same book) and the general function of balance levels in daily and weekly market maker templates, about the market maker algorithm, and the origins and basic rationale of short-term trading. The 'rolling pivot' is an extension of Fisher's pivot range concept. 

 

In the charts above a Six-Day Moving Average defines a mathematically exact balance level for all segments of the weekly and daily market maker cycles. The same is true for the balance levels defined by Fisher's Three Day Rolling Pivot, by the Weekly Pivot and by the Daily Pivot. All four govern market structure and price action within and between the trading days inside the weekly cycle. Balance levels, market structure and price action reflect the market maker logic and the process of auctioning the order flow. These balance levels can be utilized in many ways, such as to determine entry points, stops and trailing stops. Is the current price out of balance, what is the distance towards these balance levels? Price is always being moved between 'liquidity pools' and (re-) balance levels. Across hours, sessions, days and weeks the market maker orchestrates the exact same eternal recurrence of the accumulation-expansion-distribution-retracement-cycle between round numbers or levels (e.g. 0, 25, 50, 75; 0, 10, 20, 30 or 0, 20, 40, 50) also known as the pump & dump cycle.

 

3 Bar Patterns - the smallest fractals of market structure. Inside bars are ignored, the last bar of a fractal becomes
 the first of the next. Where are the round number levels, the breakout levels, liquidity, the balance levels?

Identify in the above charts day-trading, short-term trading and swing trading setups. Define price targets, entry-, exit-, stop-levels, profit/loss ratios. Be sure everything is logically solid and proportionally related to daily and weekly highs and lows and the balance levels.

 

» All my life I've been a 60/40 player, content to clear my 20%. «   -  Jesse Livermore

Programming the Livermore Market Key

Richard D. Wyckoff's Composite Operator a.k.a. Market Maker a.k.a Broker manages the order flow of 'buyers' and 'sellers' with a price generating auction algorithm realizing the highest mathematically possible return in 'dealing' with the flow of orders. Later on in life Wyckoff became a broker and market maker himself. His schematics and Jesse Livermore's tables illustrate the complete logic and algebra of the market maker's auction process and the pump & dump cycle. The auction algorithm works ever since it was invented. Livermore was able to do the math without calculator, paper and charts. Aged fourteen he started as a quotation board boy at a Boston brokerage business and literally saw patterns in the waves of numbers flowing each day from the ticker tape. Livermore came to understand that scheme generates more profit than any other business activity ever known to man. Fifteen year old Wyckoff had also begun as a broker’s runner to soon experience the exact same epiphany. Market makers were tremendously successful in multiplying their returns with the invention of electronic exchanges and with the invention of the daily global scheme between the 'Asian Session', the 'London Session', and the 'New York Session'. Wyckoff, Livermore and W.D. Gann were contemporaries, trading the same commodities, stocks and indices in the same exchanges. All were initiated into the auction algorithm. Wyckoff and Livermore were larger-than-life traders while Gann's true returns have always been subject of debates. He sold many expensive courses and forecasts. And what he sold to subscribers and students and how he actually traded for a living were very different things: Gann traded a double-tops-and-double-lows-in-the-direction-of-the-daily-trend-strategy - plain and simple pump & dump trading Wyckoff-Livermore style. What should we learn from all this? Maybe the lesson is to keep things as simple as possible as Tom Hougaard suggested.

 

Market maker pump & dump levels.

The accumulated length of the intraday price swings in the 1-minute chart of any instrument exceeds the daily true range several dozen times every single day. Imagine the factor on sub-1 minute time frames without having to deal with slippage nor transaction costs. Let that sink in. How is that possible? Understand the opening range concept and the logic and purpose of 'breakouts' and 'false breakouts' from that range. Monday's high and low define the opening range for the week; the high and low during the first thirty minutes the opening range of a session; the first three trading days of a new quarter limit the quarterly opening range; and the range of the first trading week of the year becomes the yearly opening range. Know the logic, principles and precision of price action and of market structure as taught nowadays e.g. by ICT or Stacey Burke: Price moving in one direction always creates the exact same imbalance on the opposite side. Imbalances are re-balanced by retracements of at least 50%. Price expands in proportions of 1/8ths or 1:1, 2:1, 3:1 etc. Price is always timed and measured and moves across all times frames always proportionately to the above listed opening ranges towards (re-) balance levels. Three and nine minutes are fractals within the hour; three hours a fractal within a session and the trading day; three and nine trading days are fractals within and across weeks; three and nine weeks fractals within months and quarters. Ideally Wednesdays and Fridays are timed for ending and re-starting three day fractals within the weekly market maker template.   

 

Calculation of the Three-Day Rolling Pivot:

Three-Day Rolling Pivot Price = (three-day high + three-day low + close) / 3
Second number = (three-day high + three-day low) / 2
Pivot differential = daily pivot price – second number
Three-Day Rolling Pivot Range High = daily pivot price + pivot differential [omitted in above charts]
Three-Day Rolling Pivot Range Low = daily pivot price – pivot differential [omitted in above charts]

The Probabilistic Mindset of Successful Traders - Mark Douglas

Reference:
Mark B. Fisher (2002) - The Logical Trader: Applying a Method to the Madness.

Mark B. Fisher (2002) - Spotting Breakouts As Easy As ACD.

Jesse Livermore (1940) - How To Trade In Stocks. 

Richard D. Wyckoff (1931) - The Wyckoff Method of Trading in Stocks.

 

Mark B. Fisher

The ‘ICT Power Of 3’ Concept & ‘ICT Killzones’ | Rounak Agarwal

The ‘ICT Power Of 3’ concept is a key component of any trading strategy or model developed by Michael J. Huddleston a.k.a. 'The Inner Circle Trader' (ICT), and explained as under:

 

1. Typical Bullish Day

 

Figure 1

 

Price will go below the opening price at midnight [all times refer to New York local time] to lure retail traders into going short. This is the ‘accumulation phase’ where smart money traders (SMT) will buy the shorts placed by retail traders. Then, price will rally higher to take out ‘liquidity’, which is called the ‘manipulation phase’, during which SMT will either hold or sell a portion of their positions. Eventually, price will retrace and become range-bound in an area near the high of day and close near the high, known as the ‘distribution phase’, where SMT will sell the remaining positions to retail traders willing to go short.

2. Typical Bearish Day
 

Figure 2

 

Price will go above the opening price at midnight to lure retail traders into going long. This is the ‘accumulation phase’ where smart money traders will sell the buy orders placed by retail traders. Then, price will rally lower to take out ‘liquidity’, which is called the ‘manipulation phase’, during which SMT will either hold or square off a portion of their positions. Eventually, price will retrace and become range-bound in an area near the low of day and close near the low, known as the ‘distribution phase’, where SMT will square off the remaining positions to retail traders willing to go long.

3. Typical Bullish Week
 

Figure 3

 

Price will go below the opening price at Sunday’s opening to lure retail traders into going short. This is the ‘accumulation phase’ where smart money traders will buy the shorts placed by retail traders. Then, price will rally higher to take out ‘liquidity’, which is called the ‘manipulation phase’, during which SMT will either hold or sell a portion of their positions. Eventually, price will retrace and become range-bound in an area near the weekly high and close near the high, known as the ‘distribution phase’, where SMT will sell the remaining positions to retail traders willing to go short.

4. Typical Bearish Week
 

Figure 4

 

Price will go above the opening price at Sunday’s opening to lure retail traders into going long. This is the ‘accumulation phase’ where smart money traders will sell the buy orders placed by retail traders. Then, price will rally lower to take out ‘liquidity’, which is called the ‘manipulation phase’, during which SMT will either hold or square off a portion of their positions. Eventually, price will retrace and become range-bound in an area near the weekly low and close near the low, known as the ‘distribution phase’, where SMT will square off the remaining positions to retail traders willing to go long.

Another technical analysis concept from Michael J. Huddleston is ‘ICT Killzones’, which are the highest probability time-ranges for price to make big moves in the markets. This is an integral part of ‘ICT Power Of 3’ and both are to be used in conjunction to see the markets like the ICT. The researcher has dealt only with two of ‘ICT Killzones’ here, which are:

1. ICT London Open Killzone – 02:00 to 05:00 New York local time
2. ICT New York Open Killzone – 07:00 to 10:00 New York local time which is extendable to 11:00 due to release of important economic reports, news, Fed chairperson speeches, etc. scheduled at 10:00.

Some important things to bear in mind:

1. The researcher has considered market state to be bullish if the amount of difference from open to low is less than open to high. Similarly, market state is bearish if the amount of difference from open to low is more than open to high. Days and weeks with neutral market state, i.e., where the amount of difference from open to low was equal to the amount of difference from open to high, were omitted. They were very few and the researcher believes that the omission did not affect the findings to a significant degree.
2. Sunday was omitted in calculation of average daily movement and average hourly movement for each pair to prevent inconsistencies. For the same reason, it was not considered in finding out frequency of days when price made high/low of bearish/bullish week.
3. All time ranges, etc. have been considered in the form of New York local time, adjusted for Daylight Savings Time (DST).
4. Average Daily Movement – It is the average of the daily ranges (low to high) of that particular year.
5. Average Weekly Movement – It is the average of the weekly ranges (low to high) of that particular year.
6. Average Daily Movement during ‘Accumulation phase’ – It is the average range of the ‘accumulation phase’ (open to high/low) of ‘bearish’/’bullish’ days of that particular year.
7. Average Weekly Movement during ‘Accumulation phase’ – It is the average range of the ‘accumulation phase’ (open to high/low) of ‘bearish’/’bullish’ weeks of that particular year.
8. SMT – ICT terms smart money traders as ‘SMT’. These traders know how to keep themselves in line with the algorithm and profit from trading. On the other hand, retail traders, according to Michael J. Huddleston, are those who are not trading but ‘gambling’. These ‘traders’ do not have an understanding of the market which they can rely upon and not hop from strategy to strategy, indicator to indicator instead.
9. ‘ICT Killzones’ has been shown only in Figure 1 to serve as an example. The explanation provided with Figure 4 does not comply completely with the figure, and it is because ICT’s concepts are not fixed rules. Also, the main idea has not been invalidated, as we can see in the figure that the low of the week formed after the week’s high was formed.

Quoted from:

Rounak Agarwal (2023) - A study to assess the validity of Michael J. Huddleston’s

technical analysis concept (ICT Power Of 3) in the foreign exchange market.

 

See also:

Michael J. Huddleston (2023) - ICT Liquidity - The Financial Market's Zero Sum Game.

 Michael J. Huddleston (2023) - External & Internal Range Liquidity: Auction Process & Institutional Order Flow. 

Michael J. Huddleston (2023) - The ICT Power of 3. Accumulation - Manipulation - Distribution (AMD).

TPR (2022) - Daily Range = Accumulation + Manipulation + Expansion + Distribution (AMD).