The Three Day Cycle & Parabolic Trade Setups | Stacey Burke

There are only three things price can do:
1. Breakout from a Range and Trend.
2. Breakout from a Range and Reverse.
3. Trading Range between Highs and Lows.

 

 1. Structure / Pattern

•  Do we have any larger geometrical patterns?
•  Head and Shoulders / Sell (Reverse Head and Shoulders / Buy)
• Descending Triangle (Sell) Ascending Triangle (Buy)
• Double Bottoms (Buy), Double Tops (Sell)
• Rectangles (Continuation / Reversal)
• Helps us identify geometric patterns for potential measured move profit targets for asymmetrical risk / reward.

I am mainly focused on horizontal ranges no matter what the geometrical pattern is. (The high and the low of the structure, typically this will be numbered “boxes” of 25-50-100 pips.) Numbers are horizontal. I DON’T TRADE DIAGONAL TREND LINE BREAKS.

2. High of the Day (HOD) / Low of the Day (LOD)

 

Where is the high, where is the low? There is a high and a low that the market is trading inside of. The market is either in a consolidation or a break out. The current HOD and LOD may be inside of a larger rectangle.

3. Timings

 

My focus is on the 3 hour window. 1 hour before the equity markets open, the hour of the equity markets open, and the hour after the equity markets open. Hence 12 - 15 minute candles.

• ASIA 8-11 pm NY EST
• EUR / LONDON 2-5 am NY EST
• NEW YORK 8-11 am NY EST

This allows me to have laser-like focus for some simple recurring setups that occur frequently enough for selling, buying or trend trading setups. This repeatable cycle is recurring in all three 12 candle windows. Whether or not the range, the pattern and a good risk / reward trade setup is in each window is unpredictable.

4. Round Numbers

 

Typically these trades will come off of round numbers, specifically 00’s and 50’s. The quarter levels, 25 and 75 will often be a “stop hunt” extension of a 50 or 00 trading box.

5. Price Behaviour for Trade Setups

 

I look for engulfments and pin hammers. These can be “with trend” trades, or reversals, for stop hunts or in a trading range.I look to ENTER the majority of my trades “AT OR NEAR” number, i.e. 25, 50, 75, 00. Sometimes I may limit order these trades, others I may just get filled at market.

• “M” PATTERNS - TYPE 1,2,3
• “W” PATTERNS - TYPE 1,2,3

6. Risk Management / Profit Targets

 

My average STOP LOSS is 1 ATR. For most of the pairs it will be 20 pips. The GBPAUD, GBPNZD may be 25. Depending on the level of volatility on the day, on the pair, it may be a bit more or less give or take. Typically though, I am looking for a 1 bar stop. Position sizing can depend on the type of setup, and the size of stop loss.

The minimum PROFIT TARGET is usually 50 pips. Sometimes a market may hit a previous day’s high or low, or the current day’s high or low, OR SIGNIFICANT ROUND NUMBERS, 00, 50, and the market may stop there. I may only be up 40 pips. When those levels are prominent, it may be necessary to adjust that target on the day, based on HOW PRICE BEHAVES when it gets to those levels. Other trades (Measured Moves) may be in the area of 50-75 or a 100 or more pips. Again, depending on the setup and how that pair is trading on the day.

7. Trade Management / Self Management

 

Once I am in the trade, I will fight every urge that I have to interfere with it. I review the trade setup and thesis that I have for the trade. I monitor the behaviour initially based on my thesis. I will typically leave the screen, or watch, and monitor myself, self talk, do meditation, and possibly review the other pairs to identify any other setups.

 

I will normally NOT ADJUST my stop loss to BREAK EVEN UNTIL, the market has broken a high or low boundary, ( I wait for the 15 min candle to close) OR it has CLOSED 30 pips or more, breaking into the next quarterly range. At 40 pips, depending on if the market has moved (fast or creeping) I will potentially look to LOCK IN 40 pips if the market has “two-sided” trading occurring near my profit target. So, to clarify, if it has spent 30 minutes near my target without hitting it, I will be watching closely to “LOCK IN” profits, in case the market is preparing to reverse. When you are up 40 pips, YOU NEED TO GET PAID.

 

Quoted from:

 Stacey Burke - 50 Pips a Day - Basic Rules - 12 Candle Window - 15 Minute Charts.

 

 Dump & Pump Pattern.

 Pump & Dump Pattern.

 

Reference:

Stacey Burke Trading - YouTube Channel.

Stacey Burke (2022) - Best Trade Setups Playbook.

Stacey Burke related articles on TPR.

Aksel Kibar (Jan 01, 2022) - Classical Chart Patterns in Global Equity Markets.

Peter L. Brandt & Bruce Babcock Jr. (1990) - Trading Commodity Futures with Classical Chart Patterns.

 

Stacey Burke - Three Day Trading Setups.

 

Aksel Kibar - Type 1 Breakout: Breakout NOT followed by Pullback.

 

Aksel Kibar - Type 2 Breakout: Breakout followed by Pullback.

Aksel Kibar - Type 3 Breakout: Breakout followed by hard Re-Test of Pattern Boundary.

And then there is the so called 'Failed Breakout' when price fails to continue

moving in the breakout's direction and instead reverses course.

Nasdaq 100

Nasdaq 100 (monthly bars). Yearly, Quarterly, Monthly Highs and Lows and Targets. First month up.

Cup & Handle pattern? No.  

 

 

 

 Nasdaq 100 (weekly bars). Four weeks up. Current inside.

Nasdaq 100 (daily bars)

 

Nasdaq 100 (1 hour bars) - Last week narrow range. This one still inside. Close above balance line. 

 

Wednesday, Thursday, Friday 'Major Red News'.

 

 

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 Weekly Opening Range & ICT Weekly Range Profiles

The Weekly Opening Range is defined by Monday's range. Monday sets the Opening Range high and low for the entire week. Tuesday may extend that range. It could become a false break, a break and range extension, a reversal, or maybe an inside day. In a large majority of weeks, by the time Monday and Tuesday has traded, the high or low extreme is in place for the week, and one of these will tend to hold, the other may get broken.  

 

After Monday's Weekly Opening Range only three things can happen on Tuesday:

1. A Breakout from a Opening Range and Trend.
2. A Breakout from a Opening Range and Reverse into the Opening Range (false breakout or stop hunt).
3. A Trading Range between Highs and Lows of the Opening Range (inside day).

Coming into Wednesday, look for the following:

• Did Monday or Tuesday close as an inside day?
• Did Tuesday's breakout fail?
• Did Tuesday close outside of Monday's Opening Range (= Opening Range Breakout) or inside?
• Was Tuesday a First Red Day (FRD) or a First Green Day (FGD)?
• Has there already been 3 levels of rise or fall from the High or the Low of the Week (LOW/HOW)? This could indicate a daily reversal.
• Consider market structure! 

Here are some additional observations related to whether Wednesday will be a reversal or a trend continuation of the Monday-Tuesday initial balance:

• If the market closes outside of Monday's Opening Range on Tuesday, the probability that Wednesday continues the trend increases significantly (unless the breakout fails on Wednesday)
• On Tuesday the market breaks out of Monday's range, but pulls back and closes inside of  Monday's range (failed breakout). The probability of reaching for the other end of the Opening Range increases significantly.
• If Monday's breakout fails, and Tuesday's breakout also fails at the other end of Monday's range, there is  high potential for a Parabolic Trend Trade on Wednesday.
• 3 Pushes of drives out of the Weekly Opening Range coming into Friday has the highest potential for a large reversal.
• If there are only 2 drives out of the Opening Range coming into Friday, there is a higher probability for a Parabolic Trend Trade.
• If the breakout on Tuesday closes 3 levels of rise or fall out of the Opening Range, the potential for reversal throughout the week increases.
• In most instruments the Tuesday-Friday range extension from Monday's opening range is usually a multiple of 0.5, 1.0, 1.5, 2, 3, 4 or 5 of Monday's range.
• In most instruments the Average Weekly Range equals 1.8 to 2.3 times the Average Daily Range. 

 

Time Frames - Price Ranges - Time-Price Proportions | Some Observations

 

References:

Stacey Burke (2023) - Trading Inside or Outside the Daily and Weekly Range. 

Stacey Burke Trading - Pump And Dump Day Trading Setups. (YouTube Channel)

Stacey Burke (2022) - Best Trade Setups Playbook.

Cameron Benson (2023) - Day Trading Entries And Opening Range. (video)

Cameron Benson (2023) - Trading the Pump & Dump Pattern.

Michael J. Huddleston (2017) - ICT Weekly Range Profiles.  

Stacey Burke Style Trading in a Nutshell | Cameron Benson

Reference:
Cameron Benson (Sep 02, 2023) - Simplest Trading Strategy of all Time [Stacey Burke Style]. (video)

See also:

 Cameron Benson (Aug 20, 2023) - Three-Push Reversal Patterns.

Cameron Benson (May 27, 2023) - Trading the Pump & Dump Pattern.

Cameron Benson (Apr 27, 2023) - The 3 Day Cycle.
Cameron Benson (Apr 27, 2023) - The 3 Week Cycle.

Stacey Burke Trading - YouTube Channel.

Three-Push Reversal Patterns | Cameron Benson

There are a lot of varying opinions about how the market moves, such as the Wyckoff method, Elliott Waves, Stacey Burke Trading, Steve Mauro’s BTMM, etc. However, one thing that all of these methods and models have in common is that the market moves in three pushes.

 

In all timeframes price is always in some three-push pattern. Price develops in fractals, and everything happening on a higher time frame happens far more frequently on lower time frames. Be aware of Other Time Frame (OTF) traders, of previous monthly, weekly, and daily highs or lows. It helps us to identify liquidity areas. Where are the entry and the stop loss orders? Where is the money, at the upper or at the lower end of a range?

 

After the third push into one direction, price is going into consolidation. During the second push retail-traders believe that price is going to continue in the same direction, and everybody jumps in. This is the market maker’s trap to harvest entry and stop loss orders during consolidation. The third push is already part of a larger peak formation reversal pattern. 

 

Al Brooks: Wedges and other Three-Push Reversal Patterns.

There are four different variations of the three-push pattern that can be observed on all timeframes:             

 

          1.             3 Levels, also referred to as ‘stair stepping’.
            2.             3 Pushes:
                                a.   Stair Step.
                                b.   1, 2, Pause, 3.
                                c.   1, 2, 3.
                                d.   1, Pause, 2, Pause, 3.
                                e.   3 Burst Impulse Candles.
            3.            3 Pushes out of consolidation in any of the above listed variations.
            4.            Working Levels (3 Pushes)
                               a.   Triple Tops.
                               b.   Triple Bottoms.  

 

Quoted from:
Cameron Benson (2023) - Decoding the Market Movement Algorithm. (video)

 

Three Pushes and Levels out of consolidation:
The Bearish and the Bullish Market Maker Cycle.

See also:
Stacey Burke (2022) - Three-Push Patterns. (video)

Stacey Burke (2022) - Best Trade Setups Playbook. 

Al Brooks (2011-2012) - Trading Price Action: Ranges, Trends & Reversals.