Sunday, May 28, 2023

Trading the Pump & Dump Pattern | Cameron Benson

I'm going to show you that pattern that I use every single day on every single trade, whether I'm going long or short. The pattern that I'm referring to is the pump & dump and the dump & pump pattern. Every single market movement is either a pump & dump or a dump & pump pattern, and all trade setups are based on these two patterns.
 
 
Markets are fractal, and this pattern is going to occur on the weekly and the daily time frame, on the 4 hour, the 15-minute, the 30 second chart, etc. It doesn't matter: whatever you're looking at, this pattern is going to occur.


I use larger setups and then I start to break things down: I look at the date and day in the month, I look at the three-week cycle, at the three-day cycle, at what day are we in the week, and I look at the weekly range, what is the high and the low of the week. Are we working the low, are we working the high? 
 

Any unidirectional move – up or down - ends with a consolidation, followed by a break in market structure and a continuation to anther pivot level and/or it is followed by a reversal.
 
 
Three pushes to a high, a sideways consolidation, a break in market structure to the downside, then the dump. A lot of times the market will return down at least to the 50% retracement level or down to the level where the pump started or even below.


See also:
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Sunday, May 21, 2023

The ‘Khaldun Curve’ | Nima Sanandaji

Ideas change the world. A good example of this is how the global view of taxation quietly began shifting one afternoon in 1974. That afternoon, the American economist Arthur Laffer met with Dick Cheney and Donald Rumsfeld, who both were working for the Nixon-Ford Administration at the time. The topic at hand was taxes, a pressing matter at a time when the highest marginal tax rate in the US was fully 70 per cent.
 

During the meeting, Laffer explained that the relationship between the tax revenues and the tax rate was not as simple as one would expect. Doubling the tax rate, for example, does not double the tax revenues, because higher taxes disincentives people from working. To illustrate his point, Laffer famously sketched a curve on a napkin. It showed that both a tax rate at zero per cent and one at hundred per cent would yield no tax revenues.
 

 
A tax rate of zero per cent would logically mean zero revenues, and one at 100 per cent would disincentives people completely from working, which also means zero revenues. The implication, Laffer noted, is that somewhere between zero and hundred per cent, there is a tipping point. Above this point, raising the tax rates would actually lead to such a damaging effect on economic incentives, that the collected taxes would actually be lower after the tax rate was raised.
 
[...] The funny thing is that Arthur Laffer’s theory was far from new. He was rediscovering a concept that had been acknowledged during the Islamic Golden Age period of free market policy. Laffer has himself explained that he didn’t invent the curve, but took it from Ibn Khaldun, a 14th-century Muslim, North African philosopher. Indeed, many of the ideas we today associate with Western free-market thinkers originated in the Islamic world.

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Sunday, April 30, 2023

Unshakable Fearlessness | Daisetsu Teitaro Suzuki

Unshakable fearlessness as such already amounts to mastery, which, in the nature of things, is realized only by the few. 
As proof of this I shall quote a passage from the Hagakure, which dates from about the middle of the seventeenth century:

Yagyü Tajima-no-kami was a great swordsman and teacher in the art to the Shogun of the time, Tokugawa lyemitsu. One of the personal guards of the Shogun one day came to Tajima-no-kami wishing to be trained in fencing. The master said, “As I observe, you seem to be a master of fencing yourself; pray tell me to what school you belong, before we enter into the relationship of teacher and pupil.” The guardsman said, “I am ashamed to confess that I have never learned the art.”
 

“Are you going to fool me? I am teacher to the honorable Shogun himself, and I know my judging eye never fails.” “I am sorry to defy your honor, but I really know nothing.” This resolute denial on the part of the visitor made the sword master think for a while, and he finally said, “If you say so, it must be so; but still I am sure you are a master of something, though I do not know of what.”

“If you insist, I will tell you. There is one thing of which I can say I am complete master. When I was still a boy, the thought came upon me that as a Samurai I ought in no circumstances to be afraid of death, and I have grappled with the problem of death now for some years, and finally the problem of death ceased to worry me. May this be at what you hint?”

“Exactly!” exclaimed Tajima-no-kami. “That is what I mean. I am glad that I made no mistake in my judgment. For the ultimate secrets of swordsmanship also lie in being released from the thought of death. I have trained ever so many hundreds of my pupils along this line, but so far none of them really deserve the final certificate for swordsmanship. You need no technical training, you are already a master.”

Quoted from: 
Daisetsu Teitaro Suzuki (1938) - Zen Buddhism and Its Influence on Japanese Culture. 
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Thursday, April 27, 2023

The 3 Day Cycle | Cameron Benson

 
 
The 3 Day Cycle  is a recurring market cycle, that when identified, can be the groundwork of a trade setup. It consists of 3 days, and begins with a false break at the current weeks high or low. In his Best Trade Setups Playbook Stacey Burke described the 3 Day Cycle setups as either pump and dumps, or dump and pumps: "They [the market makers] pump, pump, pump, go sideways and drop a bit, one more small pump, then a dump. The dump can go straight down, fast. The pump up, may often be hard to trade on the first day, the price action can be choppy, and back and forth, a slow grinding auction. Other times, you are forced to "chase the move."  

 
Finding Day 1:
Look for a false break above or below a previous day's high or low AT THE HIGH OR LOW OF THE WEEK.

Attributes of Day 1:
1. Breaks Below/Above Previous Days High or Low at the high of the week, and the day closes back inside of previous days range.
a. Sub Variation: Breaks through previous days level and days closes above/below that level. 
The following day, price comes back inside of the the range from 2 days ago and closes.
2. Can become a First Green Day or First Red Day (Signal for following day).
3. Day 3 sometimes turns into Day 1 at the close of the day.

 
 
 Attributes of Day 2 of the 3 Day Cycle:

Day 2 can be either
1. Continuation in direction of false break; or:
2. It can turn into ...
    a.) a First Red Day (FGD)
    b.) a First Green Day (FRD)
    c.) an Inside Day
    d.) a Trend Day

Areas of Interest:
1. High of the Day/Low of the Day (HOD/LOD)
2. High of the Session/Low of the Session (HOS/LOS)
3. Outside Day/Inside Day (Was there a false break?) (Act as Support/Resistance)
4. Low Bear/High Bull (Support/Resistance)

Day 2 Trade Setups:
- Long/Short Squeeze
- Parabolic Trend Trade
- High of the Session/Low of the Session (HOD/LOD) Trade
- High of the Day/Low of the Day (HOD/LOD)
- Low Hanging Fruit (LHF) Continuation (Trend Trade)

Method:
1. Support/Resistance References:
a. Low Bear/High Bull
b. Previous Days High/Low
c. HOD/LOD
2. Measure 3 Levels of rise/fall from Low/High of day for potential strike zone.
3. Use Support/Resistance References as additional confluence.
 
 
Attributes of Day 3 of the 3 Day Cycle:

1. Day 3 is the last day of the 3 Day Cycle.
2. A lot of times Day 3 can turn into Day 1, either on the current day or the next day 
(Reset of the Day Count).
3. Day 3 can either become a blow off trend continuation day (in the direction of the trend) or a reversal day.

Trade Setups:
1. Parabolic/Capitulation Trend
2. Reversal HOW/LOW
3. LHF Continuation (Trend Trade)

Areas of Interest:
1. Low/High of week
2. Previous Days High/Low (Support/Resistance/Trapped Volume)
3. High/Low of Day
4. High Bull/Low Bear (Support/Resistance)
5. OD/ID (Outside Day/Inside Day)

Reference:
 
 
See also:
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The 3 Week Cycle | Cameron Benson

 
There are multiple ways of Week 1 taking place: 

1.) Price breaks out and fails at the High/Low of the month above or below a previous weeks high/low.
2.) A 3 Week Cycle has completed (gone through week 1,2,3), but has not reversed on week 3. 
I refer to this as a "revolving door" style a.k.a. Trending Model of the 3 week cycle.
3.) A breakout occurs above/below previous weeks level, and on the following week reverses back above/below that level.
4.) On week 3 the market reverses BUT on the following week the market continues in the previous direction (a.k.a. Reset). 
 
 
 
See also:
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Wednesday, April 5, 2023

Unity and Source | Seyyed Hossein Nasr

Omnia in uno sunt, et in omnibus unum.
All things are in one, and in all one.
Athanasius Kircher (1663)
 
» Ultimate Reality is at once Absolute and Infinite, the source of all being, of all consciousness and of all life. Itself beyond form, it speaks to mankind through revealed forms which, while externally bound and limited, open up inwardly towards the Boundless. Through revelations of this Word or Logos come into being the sacred traditions which although outwardly different are inwardly united into a Center which transcends all forms. They are, however, the bridge from the periphery to the Center, from the relative to the Absolute, from the finite to the Infinite, from multiplicity to Unity. «

Seyyed Hossein Nasr

Quoted from:
Seyyed Hossein Nasr (1976) - Ultimate Reality. 
Foreword to Keith Critchlow - Islamic Patterns. An Analytical and Cosmological Approach.
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Only the Right Side | Jesse Livermore


» It takes a man a long time to learn all the lessons of his mistakes. 
They say there are two sides to everything.
But there is only one side to the stock market; and it is not the bull side or bear side but the right side.
It took me longer to get that principle fixed firmly in my mind 
than it did most of the more technical phases of the game of stock speculation.
 
 I have heard of people who amuse themselves conducting imaginary operations in the
stock market to prove with imaginary dollars how right they are. 
Sometimes these ghost gamblers make millions. 
It is very easy to be a plunger that way.
 
It is like the old story of the man who was going to fight a duel the next day.
His second asked him, "Are you a good shot?"
"Well," said the duelist, "I can snap the stem of a wineglass at twenty paces," and he looked modest.
"That's all very well," said the unimpressed second. 
"But can you snap the stem of the wineglass while the wineglass is pointing a loaded pistol straight at your heart?" «

Jesse Livermore

Quoted from:
Edwin Lefèvre (1923) - Reminiscences of a Stock Operator.
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ICT Weekly Range Profiles | Michael J. Huddleston

These profiles are conceptual models that describe typical patterns of how prices might behave during a trading week. Each profile has unique characteristics that can guide traders in anticipating potential market movements. However, it’s important to note that these profiles are not rigid predictions but rather frameworks to understand market tendencies. 

(I) Classic Tuesday Low of the Week = Bullish Profile
When price is bullish it may manipulate on Monday and hover above a higher a higher time frame discount array. Then on Tuesday it drops into Higher Time Frame Premium-Discount Arrays (HTF PDAs) to form low of the week. 
How to anticipate? To anticipate all this phenomenon you should know the HTF PDA. When the market fails to drop into the discount array on Monday then its most likely that Tuesday will se the drive lower to mark weekly low in London or New York session.
 
 
(II) Classic Tuesday High of the Week = Bearish Profile
When price is bearish it may manipulate on Monday and hover below a higher time frame premium, array. Then on Tuesday it rises into higher time frame premium array to form high of the week. 
How to anticipate? To anticipate all this phenomenon you should know the higher time frame Premium array. When the market fails to rise into the premium array on Monday then its most likely that Tuesday will se the drive higher to mark weekly high in London or New York session.

 
 
(III) Wednesday Low of the Week = Bullish Profile
When price is bullish it may manipulate on Monday and Tuesday and hover above a higher a higher time frame discount array. Then on Wednesday it drops into higher time frame discount array to form low of the week. 
How to anticipate? To anticipate all this phenomenon one should know the higher time frame Discount Array. When the market fails to drop into the discount array on Monday and Tuesday then its most likely that Wednesday will se the drive lower to mark weekly low in London or New York session.
 
 
(IV) Wednesday High of the Week = Bearish Profile 
When price is bearish it may manipulate on Monday and Tuesday and hover below a higher a higher time frame premium array. Then on Wednesday it rises into higher time frame premium array to form high of the week. 
How to anticipate? To anticipate all this phenomenon you should know the higher time frame premium array. When the market fails to rise into the premium array on Monday and Tuesday then its most likely that Wednesday will se the drive higher to mark weekly high in London or New York session.
 
 
(V) Consolidation Thursday Bullish Reversal
When price is bullish it may consolidate on Monday through Wednesday then runs the intra-week low and rejects it forming a market reversal.
How to anticipate? To anticipate this you must know the higher timeframe discount array. And when price fails to drop into higher timeframe discount array then its likely that Thursday will see drive lower on market driver news or interest rate release late New York session around 02:00 PM (New York local time).
 
 
(VI) Consolidation Thursday Bearish Reversal
When price is bearish it may consolidate on Monday through Wednesday then runs the intra-week high and rejects it forming a market reversal.
How to anticipate? To anticipate this you must know the higher timeframe premium array. And when price fails to rise into higher timeframe premium array then its likely that Thursday will see drive higher on market driver news or interest rate release late New York session around 02:00 PM (New York local time).
 
 
(VII) Consolidation Midweek Rally = Bullish Profile
When price is bullish and consolidates Monday through Wednesday then runs into intra-week high and expands higher into Friday.
How to anticipate? When the price is bullish and has yet to run to premium array on the higher timeframe and it has recently rallied from a discount array and simply paused without any bearish reversal price action. This indicates price is about to expand higher for the premium array.
 
 
(VIII) Consolidation Midweek Decline = Bearish Profile
When price is bearish and consolidates Monday through Wednesday then runs into intra-week low and expands lower into Friday.
How to anticipate? When the price is bearish and has yet to run to discount array on the higher timeframe and it has recently declined from a premium array and simply paused without any bullish reversal price action. This indicates price is about to expand lower for the premium array.
 
 
(IX) Seek and Destroy Bullish Friday = Neutral-Low Probability Profile
When price consolidates Monday through Thursday running shallow stops under and above intra-week high, then runs the intra-week high and expands higher into Friday.
How to anticipate? When market is awaiting interest rate announcements or Non-Farm Payroll, it can create this profile in the summer months of July and August. Better to avoid trading in these conditions.
 
 
(X) Seek and Destroy Bearish Friday = Neutral-Low Probability Profile
When price consolidates Monday through Thursday running shallow stops under and above intra-week high, then runs the intra-week low and expands lower into Friday.
How to anticipate? When market is awaiting interest rate announcements or Non-Farm Payroll, it can create this profile in the summer months of July and August. Better to avoid trading in these conditions.
 
 
(XI) Wednesday Weekly Bullish Reversal = Bullish Profile
When price is bullish and consolidates Monday through Tuesday and drives lower into higher timeframe discount array on Wednesday to induce sell stops and then strongly reverses.
How to anticipate? When the market is trading at the long term or intermediate term low, price will pair institutional buying with pending sell side liquidity (sell stops raid).
 
 
(XII) Wednesday Weekly Bearish Reversal = Bearish Profile
When price is bearish and consolidates Monday through Tuesday and drives higher into higher timeframe premium array on Wednesday to induce buy stops and then strongly reverses.
How to anticipate? When the market is trading at the long term or intermediate term high, price will pair institutional selling with pending buy side liquidity (buy stops raid).
 
 
 
The weekly price movement in financial markets follows a recurring pattern of consolidation, expansion, reversal, expansion again, consolidation, and a potential reverse or retracement. For example:
  1. Sunday Open Consolidation: The week often begins with price consolidation on the Sunday open, reflecting a cautious approach as traders assess the weekend developments.
  2. Monday Expansion: As the trading week gains momentum, Monday is typically marked by an expansion phase. This reflects increased activity and movement as traders react to new information.
  3. Tuesday Reversal: The following day, Tuesday, often witnesses a reversal in price trends. This can be attributed to traders reassessing their positions after the initial expansion phase.
  4. Wednesday Expansion: Midweek, the market tends to experience another expansion phase. This reflects a renewed bout of activity and movement in response to evolving market dynamics.
  5. Thursday Consolidation: On Thursday, there’s often a consolidation phase. Price ranges may narrow as traders assess the overall sentiment and prepare for the end of the trading week.
  6. Midweek Friday Reverse or Retrace: As the week approaches its close, Friday may see a reversal or retracement in trends. Traders might adjust their positions before the weekend, leading to a shift in price direction.

This weekly cycle reflects the rhythm of market sentiment and participant actions throughout the trading week.
 
 
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