The Daily & the Weekly Market Maker Cycles | ICT Intraday Trading Templates

All financial markets are dominated by investment banks, so called institutional traders or smart money. To be more precise: All financial markets are dominated by JP Morgan, Deutsche Bank, Citi, XTX Markets, UBS, State Street Corporation, HCTech, HSBC, BoC Merrill Lynch and Goldman Sachs. Their positions represent up to 80% of the total volume of the Forex market, the bonds market, the stock market and the commodity market. And yes, they also do take their own speculative positions. But the vast majority of their volume is simply called 'market making activity' because they are buying and selling for their clients. Their main clients are hedge funds, pension funds, commercial banks, corporations, other financial institutions and central banks. In fact central banks are their dearest clients. They practically own the markets. The sheer volume of their orders could never be bought or sold in single lots in any market. Hence the 'market making' and hence the 'liquidity provision'. Big banks do this for commission and they risk their client's money for market manipulation and extra profit.  

This is critical information for the small retail trader as it tells one very important clue: If the big banks are primarily market makers and liquidity providers then they will by default drive the market at will to and from areas of liquidity. Intention, logic, strategy, measures. Price is not random and price levels are predictable. Michael J. Huddleston, the Inner Circle Trader (ICT) and author of most of the smart money trading concepts, comments: 

"There is always a puppeteer. There is always someone pulling the strings. It's never being left to randomness of buying and selling. There is no support and resistance in the marketplace. These are all notions that promote the idea of free trade. When it comes to the truth of the markets: It's complete and utter control and manipulation. It's a very simple approach. It's about price: It's the open, the high, the low, and the close of the daily, weekly, monthly and quarterly bars. It's not support nor resistance what is moving the price order flow. It's all about where the money is. The retail textbooks will never teach you this: Price moves to where the money is. And the money is at the levels where most retail traders have their entry and stop loss orders - just to get harvested by the smart money during false moves and false breakouts." 

The good news is that the market makers continuously leave footprints in their accumulation-manipulation-expansion-distribution framework: order blocks, imbalances, fair value gaps and liquidity voids, liquidity pools, stop runs, and equilibrium (HERE - HERE - HERE)

Big banks do not use a lot of indicators and they employ more software engineers and programmers than technical analysts. Both for one good reason: Market making and order processing is completely automated by algorithms that guarantee maximum return. They use daily, weekly, monthly, quarterly and yearly charts, and completely ignore popular retail indicators, forecast methods, and trading systems. Their market making strategy is exclusively focused on how to break down huge orders into tiny chunks, how to buy and sell these continuously and most efficiently and on how to fool the retail trader crowd most profitably. Smart money drives the markets in daily and weekly cycles around the clock and accumulation, manipulation, expansion and distribution is the business model. The typical weekly market maker cycle looks like this: 

(1.) The week starts with a trap move on Sunday night or early Monday morning. 

(2.) Then follows an 'accumulation phase' and the setting up of an initial high and an initial low in the Asian session, during which price is usually held in a narrow range. 

(3.) The accumulation phase is followed by what Wyckoff coined the 'spring', an engineered false breakout against the real intention of the market maker to 'support or resistance levels' to harvest the retail traders' entry and stop loss orders there. The market maker considers these levels as 'liquidity pools'.

(4.) Next the market maker initiates the actual planned market move. This results in the formation of a trend that can be slow and steady, or it could be swift and furious. In the cash market a trend can be just a few hours, in the futures market up to 8 or 10 hours. On the chart the trend will be seen as a series of drives or pushes in the market maker's intended direction.

(5.) Towards the end of the day or the end of the session, there will be a corrective distribution phase and pattern of some type (wedge, pennant, head and shoulders, M or W formation), when price pulls back from the high or the low of the day because the market maker liquidates positions (see also HERE).

There are very high odds for the weekly low or high to form before the opening of the New York session on Wednesday. The odds further increase between Tuesday and Wednesday, focusing on Tuesday's London session to Wednesday's opening of the New York session. Even the market maker doesn't have infinite amounts of capital. Therefore he has to orchestrate retracements to book some profit before to continue. This is why sudden aggressive pullbacks seemingly occur out of nowhere.  

 

To get a more detailed picture of how the smart money's manipulation actually works on a day-to-day basis, Michael Huddleston elaborated six ICT Intraday Trading Templates. They provide an idea of when to expect what, clues related to the daily and weekly bias and range, and a perspective on the internal structure of the daily and weekly market maker cycles: 

1. The Classic Buy or Sell Day Template: This is the best template to make money since it is a wide range trending day that unfolds mostly on Monday, Tuesday and latest on Wednesday during the London session. The New York session will eventually give a retracement to continue with the trend that was set during the London session. The daily range will last for 7 to 8 hours once the profile is established. 

Mostly it will give a rally or drop from the daily opening price to the low or high of the day during the London session. The trend usually lasts into 11:00 EST.

2. The London Swing to Z Day Template: This template is found in the middle of a larger price swing when the trend is exhausted after a large explosive move. It is a narrow range day and ideally occurs on Thursday. 

Price will initially drop below the opening price, then run above the opening price and go back to the range into consolidation. It first appears to unfold as the Classic Buy or Sell Template. But if it continues consolidating, do not look for continuation into the New York session. Take profits.

3. The London Swing to New York Open / London Close Reversal Template: The bullish version of this template always begins like a Classic Buy or Sell template with a decline below the opening price before price starts rallying. Once price drops, a buy entry forms, price rallies to a higher time frame Point of Interest (POI), e.g. a bearish order block (OB), into a Fair Value Gap (FVG), etc. If this happens during the New York session, it indicates a classic market reversal. 

The template is used to either reach for a bearish order block on a higher time frame, for a turtle soup raid or to close a range. On a bullish day it will first create an initial low of the day during the London session, run up and create the high of the day during the New York session around the London Close, then run back down and clear the initial low that was created during the London session. Ideally it can pan out after the market is in exhaustion based on the higher time frame's dominant trend.

4. The Range to New York Open / London Close Rally Template: Generally this template is to be expected on days with high or medium impact news events like interest rate announcements, etc.

Ahead of these events price will remain in consolidation during the Asian and London sessions. Lows will be cleared initially and after the news price explodes into a directional move.

 

5. The Consolidation Raid on News Release Template: Unfolding during the New York session on days with high impact news, mostly FOMC press releases. During and shortly after the news old highs and lows of prior consolidation levels will be taken out. Ideally buy when a low is taken out and sell when a prior high was breached.

 

 

 

6. The London Swing to Seek & Destroy Template: This is the kind of day that won’t make you money. The Market Makers clear intention is to take out both buyers and sellers. Initially it would give you a London Open opportunity and setup, but very likely that won’t come to fruition. The narrow range zig-zag template lasts throughout the New York session and will oftentimes create an inside day. The template is usually applied in the middle or at the end of a larger price swing. 

 

 

References:

The Inner Circle Trader

 Stacey Burke - Simple Method to look at Weekly Market Maker Template

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

Market Makers Method 

3 Bar Patterns | The Smallest Fractals of Market Structure

"Any time there is a daily low with higher lows on both sides of it, that low will be a short-term low. We know this because a study of market action will show that prices descended in the low day, then failed to make a new low, and thus turned up, marking that ultimate low as a short-term point. A short-term market high is just the opposite. Here we will see a high with lower highs on both sides of it. What this says is that prices rallied up to the zenith of that middle day, then began to move back down, and in the process formed a short-term high. For our purposes in identifying short-term swing points, we will simply ignore inside days and the possible short-term points they produce." This is how Larry Williams defined market structure. His concept is universal and applies to all bars of all time frames.

• A Short-Term High (STH) is a bar with a high greater than or equal to the high of the bar to the left and greater than the bar high to the right. Neighboring bars should not be inside. If they are inside bars, the bars that follow them should be analyzed.
• A Medium-Term High (MTH) has Short-Term Highs to the left and and to the right that are below the high of this bar.
• A Long-Term High (LTH) has Medium-Term Highs to the left and and to the right that are below the high of this bar.
  

And for the lows it’s all vice versa: 

• Short-Term Low (STL) = bar with higher lows on both sides
• Intermediate-Term Low (ITL) = higher STL on both sides
• Long-Term Low (LTL) = higher ITL on both sides

In other words: 3 bar patterns are the smallest fractals and building blocks of market structure. Since price is always either in consolidation, in an uptrend or in a downtrend 3 successive price bars must form either a directional pattern (higher highs, higher lows or vice versa), a continuation pattern (inside bar) or a reversal pattern (outside bar, pin bar, head & shoulder, M&W patterns) (see also HERE):

 

  

References:

 Larry Williams (1990) - Long-Term Secrets to Short-Term Trading

Arthur A. Merrill (1980) - M & W Wave Patterns

 Bill Williams (1995) - Trading Chaos

3 Bar Fractal Break  

Alex's Options - What is #TheStrat?

The Sun and the Moon | Jack Gillen

Jack Gillen (1979) - The Sun is an energy planet. It gives and takes energy. A solar cycle is 365.25 days. It affects the stock market every 30 days, as the Sun transits through the 12 signs of the zodiac. The Sun also has an 11-year solar cycle in which Sun-spot activity peaks, followed by five and a half years of solar flares, a period of more or less calm with respect to the Sun’s surface. And during this period the Sunspot areas emit a wide range of intense radio and electromagnetic radiation of various types, affecting people and conditions of the planet Earth. This has been researched not only by astrologers but by astronomers. It has a definite effect on the stock market, commodities, and other areas related to the stock market.

As in all living matters it seems to affect mundane things like corporations and the stock market in the same way. This is to say that with regard to the birth month and the birth date, six months prior to the birth date the solar cycle is high, giving energy and pushing the related company forward [Example 1]. The Sun also is a planet associated with the ego, appearance and personality. Six months prior to the birth date, the company is brought out before the public. The birth date to six months after, the energy flow is low it becomes weaker and this affects the stock market in the same way. 

As an example, the stock market was born May 17, 1792. So the months of May through November relate to low activity, affecting the market's price and structure. As we go from December through May, we go through the high cycle, the up period of the Sun. But there are many cycles of the Sun that affect different areas of the stock market as the Sun affects each house with relation to the buying public. In each six-month period of the year we will also find a close relationship between price. movement and volume from Aquarius to Leo, or from February to the last two weeks of July. Looking at example 1, we find that the birth month and the Sun cycle six months prior to the birth month is at a high level; six months after the birth date, it is at a low level.

In Example 2 we take the Midheaven aspect to the Ascendant. We can see in Example 2 that the chart of the stock exchange starts its up level in the sign of Aquarius and its down level begins in the sign of Leo. So these are the two breaking points within a year: under Aquarius and under Leo as the Sun transits these signs. The low part of the chart, which is the Nadir, is the sign of Libra. This will generally be the low point of the year, as October would always represent low price. low volume, in which the opposite point to the Midheaven is Aries. This would be affected by the planet represented at the Midheaven. However, in April, under no afflictions, this would be a great month where records would be set in the areas of volume and prices.

As we start with Aquarius, this would run from the last two weeks of January through the first two weeks of July. However, as the cycle proceeds through Pisces, which is a weak sign, it would represent a weak month for volume. From the latter part of March through April and May, and even into June, these could be above average months for prices and volume. Now, as the Leo portion is activated from July through October, these are very weak months. You cannot expect too much in the way of prices or volume. If there is any weakness in the market it will more or less have a breakdown during these months. Not only are we in the six-month period after the birth date but we also have the effect in the Leo portion of the house when the Sun is moving downward towards the Nadir, which is the cusp of the fourth house. The Midheaven is always the cusp of the tenth house. 

So the low points in this pattern would mainly be in February through Aquarius and in August when it drops down, with a peak at the Midheaven which would be in April under the sign of Aries.

The six-month cycle tends to extend from the Aquarius portion to the Leo portion and, again, from the Leo point to the February point prices tend to follow the volume curves from these aspects, with the weaknesses in the February-March, July-August and October-November periods. Therefore, in judging the stock market as to whether it will turn up or down, it is best to look at the Sun and the aspects pertaining to the Sun. If the Sun is under heavy affliction, these periods represent a bearish market. In good aspect, it will be bullish. In the good periods moving upward toward the Midheaven, it will be higher than normal. Moving toward the lower section, it will be lower than normal. This is why there will be so many depressions, recessions, panic and fear in the stock exchange in the latter part of the year as October approaches.

The Sun's aspect and influence on the market will also affect a lot of stocks because individual stocks are affected by the movement of the Dow-Jones Industrial. You have to relate a 50 percent mark-up on a bullish market and take away 50 percent of an individual stock if the market is bearish. You can only give a stock 25 percent on its own merit. This means if the market is bad and the stock shows an indication of moving up, the price ratio as far as at what price to sell should be at a 25 percent profit. There are other indications, though, at which you could go for a 50 percent profit if the earnings are extremely high. A lot of gold and silver stocks will generally do the opposite in a bad market, and go all the way up. But if the market is bad and the Sun cycle is moving into that low period, you want to go short, or short at 50 percent from its point at that degree at that time, when the market shows indications of falling backwards. The Sun is a minor influence in relation to the overall picture of the market; however, it affects the market every year and there will be a pattern to each period of the year as far as the Sun’s transit through that sign. This will also relate to individual stocks, which will show the same pattern. So do your homework. Any time you select a stock, find the month in which to buy it and the month in which to sell the month in which it is usually at its highest point. You can relate this to the Moon for its exact day for buying or selling.

The market is always influenced by the Sun pattern and it will happen year after year. From January to the last two weeks in July, market prices will trend upwards, and in the latter part of the year after the influence of Leo, the market will be down in price. This is the average trend that will always occur and it affects volume as well as prices. However, it is important to realize the influence of the Sun in the chart of the New York Stock Exchange, and the Sun’s complete cycle.

Also, any corporation will be affected by certain cycles of the Sun through these signs. It is important to backtrack about 12 years during the pattern of the Sun’s cycle in order to see the pattern on which the company is being activated as far as the solar cycle.

The period of the Sun in Aries is usually from March 20 through April 19, Taurus, April 20 through May 20; Gemini, May 21 through June 20; Cancer, June 21 through July 22; Leo, July 23 through August 22; Virgo. August 23 through September 22; Libra, September 23 through October 22: Scorpio, October 23 through November 21; Sagittarius, November 22 through December 21; Capricorn, December 22 through January 19; Aquarius, January 20 through February 15; and Pisces, February 19 through March 20. These are the twelve signs with the transit of the Sun.

Again, let me stress the importance of the aspect of the Sun during these periods. If it involves a combination that relates to panic, crashes, recession or depression, then these months will be more intensified as far as the effect. If the transit is in a trine or a good aspect then the movement will be fess severe than under normal conditions.

There is one more important point to the solar cycle which is really the result of another cycle. This is the 19-year cycle of the motion of the plane of the Moon's orbit. It is the solar eclipse cycle. Although there is partial or total eclipse each year. usually there will be an eclipse near the same degree of the zodiac once every 19 years. This is a major eclipse. This major eclipse does have an effect on changes within the stock market and these changes have been reflected year after year during these cycles. Since this eclipse involves the Moon, it represents changes in relation from a Moon-Sun characteristic.

In this cycle the Sun makes a complete circuit of the sky and reaches the same Node at the same place on the ecliptic as shown in diagram 3. This length of time is 6585.32] solar days, which is 48 years, 11.33 days. The shortest time required for the Sun to travel from and return to the same node is 346.6 solar days, an interval known as an eclipse year. It is listed on the calendar year because of the effect of the session which is known as a slow regression of the nodes around the ecliptic. Nineteen of the eclipse years contain 6585.4 days, which is precisely 223 synodic months, This is when the Nodes themselves become important in the predictions on the stock market.

The Moon affects changes and emotions. The daily influence on the stock market is related to changes of the Moon as it transits through each sign. Its effect on individual corporations would be the same. The Moon works in association with the planet Saturn. The Moon's phase cycle is from 28 to 29.5 days. Saturn’s cycle is 28 to 29,5 years, So, where it takes Saturn 2.5 years to transit one sign, it takes the Moon 2.5 days. If the Moon shows weakness in one sign as to where a stock would drop rapidly during that time, then when Saturn is also in the sign this would cause a 2.5 year downtrend for the stock. For example. if the Moon goes into Taurus and the stock goes up or down, it will do the same when Saturn is in that sign. So ever though a lot of aspects related to the Moon are minor, such as a stock might drop one-eighth to one-half, during its transit through any one sign, it does relate 10 a longer trend with the effects of Saturn.

In judging the daily influence of the Moon's dominance over a certain stock, bear in mind the influence of a transit of the Sun. If the Sun’s movement shows a high point for the Dow-Jones averages, then the Moon as a negative factor on the Dow-Jones will not have that much influence. If they are both at a high point, then the stock would rise extremely high on that day. So use the Moon as a daily indicator together with the 30-day movement of the Sun in each sign.

There are three cycles related to the Moon. One is called a Moon return. This cycle occurs every four years, when the Moon returns to the same position. (Check the four-year cycles day by day of a stock.) Another cycle is 27.5 days by the sign itself and 28 or 29.5 days by phase. These are the cycles represented by the Moon. The pattern of the four-year cycle is more dominant in a long-term trend relating to the stock market. The Moon also has a period in which it is stagnant, or void of course. 1t is a period when the Moon is changing from one sign to another without being aspected. From research this is not a period to purchase stock as it represents changes indicating a complete reverse. It is an unstable period of the Moon.

You can also determine monthly trends by watching the Moon under each cycle. In a period of 28-29.5 days, if the Moon falls square, conjunction, or opposite to planets passing over the Midheaven, this will give you an indication of good or bad returns following the week in relation to the stock market itself. It generally relates to people's emotions. The Moon's Nodes are also prominent indicators as far as the movement around the zodiac. If an individual stock has the Moon's North Node going toward the Midheaven, this indicates it will have movement. If it falls below the Ascendant, this generally causes it to move downwards. However, again, you have to use the other planetary movements to make a complete judgment. You cannot do it by the Nodes themselves, but the Nodes would reinforce any conditions shown as a downtrend in a certain stock.

The Moon and Sun in relation to each other show a type of speed that a certain cycle is indicated to move under because the effects of the Sun, the Moon and Earth are the prominent factors relating to the movement during the year, The other planets more or less determine tong-tern trends.

The speed of the Moon is affected by the tidal deformation of the Earth which produces a gradual increase on the Moon’s orbital speed which in turn makes the Moon slowly recede, causing a fast or a slow Moon which does reflect the aspects as far as movement of a cycle. IF it’s fast, there's a lot of action in the market, or if it's slow, then a change is predicted. In Diagram 4 we have a plain view of the Moon's orbit, We show that the Earth-Moon gravitational inter-reaction generates two bulges, more or less like a plastic bubble. The Earth has an axial rotation which is faster than the orbital rotation of the Moon, and the effect of this frictional drag is that the bulges arc carried around the Earth's rotation until a balance is established between the drag and the tide generating force.

The pattern of the four year cycle is more dominant in a long-term trend relating to the stock market. The Moon also has a period which is stagnant. This is called the Moon void of course. It is a period when the Moon is changing from one side to another without being aspected. This is not a period to purchase stock as it represents changes that could go completely reverse. It is an unstable period of the Moon itself.

In diagram 4 we have equilibrium point 1. This is nearer to the Moon than point 2, and is therefore experiencing a stronger gravitational attraction than 2. Both 1 and 2 are displaced from the central line so that the forces along with 1 and 3 and 2 and 3 converge toward the center of the Moon. These two forces may be resolved at the Moon into components that act, in one case, along the central line toward the Earth; and in the other case at right angle into the direction of the Moon's orbit. The components acting toward the century add together, whereas the components in direction of the orbit are in opposition. Because the force along 1 and 3 is larger than along 2 and 3, this means a net unbalance force acting on the Moon in the orbital direction, which has the effect of accelerating its motion, moving it into an orbit of a larger radius; modern estimates indicate a recessional speed of about 3.2 cm. per year.

For accurate calculation, there are many Moon sign books and Moon calendars, that will give you the transit of the Moon each day, which you can relate to stock predictions. In the speed of a stock, we have the one-half cycle, the one-fourth, and the three-fourths, all of which indicate changes in relation to the up and down cycle price of each stock.

Reference:
Jack Gillen (1979) - The Key to Speculation on the New York Stock Exchange

 

See also:

TPR (2015-2018) - Jack Gillen's Sensitive Degrees of the Sun and the Moon 

Walter D. Pullen (2022) - Astrolog 7.50 Freeware Astrology Program

Astro-Seek.com - Monthly Transit Moon Aspects & Ingresses
Astro-Seek.com - Monthly Astro Calendar

true-node.com - Sun-Moon Ephemeris Generator

 

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.

Reference:
Cameron Benson (May 27, 2023) - 15 Minute Talk That Will Change How You View The Market [Pump And Dump].
Cameron Benson (May 27, 2023) - Pump And Dump & Dump And Pump [Pdf-Slideshow of the above video].

See also:

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

Stacey Burke (2022) - Best Trade Setups Playbook. 

Al Brooks (2012) - Wedges and Other Three-Push Reversal Patterns.

The Four Guiding Principles of Market Behavior | Momentum & Trend

Principle 1:     Trend is More Likely to Continue its Direction than to Reverse

With price established in a clearly defined trend of higher highs and higher lows, certain key strategies and probabilities begin to take shape. Once a trend is established, it takes considerable force and capitalization to turn the tide. Fading a trend is generally a low-probability endeavor and the greatest profits can be made by entering reactions or retracements following a counter trend move and playing for either the most recent swing high or a certain target just beyond the most recent swing high. An absence of chart patterns or swings implies trend continuation until both a higher high and a higher low (vice versa for uptrend changes) form and price takes out the most recent higher high.

Be aware that recent statistical analysis of market action (from intraday to 20 day periods) over the last five years shows that mean reversion, rather than trend continuation is more probable in many equities/indices (as shown by more up days followed by down days than continuation upwards). For the current market environment, until volatility returns (as it may be doing now), this rule may be restated, “Trends with strong momentum show favorable odds for continuation.”

 

Principle 2:     Trends End in Climax (Euphoria/Capitulation)

Trends continue in push/pull fashion until some external force exerts convincing pressure on the system, be it in the form of sharply increased volume or volatility. This typically occurs when we experience extreme continuity of thought and euphoria of the mass public (that price will continue upwards forever). However, price action – because of extreme emotions – tends to carry further than most traders anticipate, and anticipating reversals still can be financially dangerous. In fact, some price action becomes so parabolic in the end stage that up to 70% of the gains come in the final 20% of the move. Markets also rarely change trends overnight; rather, a sideways trend or consolidation is more likely to occur before rolling over into a new downtrend.

 

Three Things Markets do:
1. Breakout and Trend.
2. Breakout and Reverse (False Breakout).
3. Trading Range (High and Low).

 

 

Principle 3:     Momentum Precedes Price

Momentum – force of buying/selling pressure – leads price in that new momentum highs have higher probability of resulting in a new price high following the next reaction against that momentum high. Stated differently, expect a new price high following a new momentum high reading on momentum indicators (including MACD, momentum, rate of change). A gap may also serve as a momentum indicator. Some of the highest probability trades occur after the first reaction following a new momentum high in a freshly confirmed trend. Also, be aware that momentum highs following a trend exhaustion point are invalidated by principle #2. Never establish a position in the direction of the original trend following a clear exhaustion point.

 

Principle 4:     Price Alternates Between Range Expansion and Range Contraction

Price tends to consolidate (trend sideways) much more frequently than it expands (breakouts). Consolidation indicates equilibrium points where buyers and sellers are satisfied (efficiency) and expansion indicates disequilibrium and imbalance (inefficiency) between buyers and sellers. It is much easier to predict volatility changes than price, as price-directional prediction (breakout) following a low-volatility environment is almost impossible. Though low volatility environments are difficult to predict, they provide some of the best risk/reward trades possible (when you play for a very large target when your initial stop is very small – think NR-7 Bars).

Various strategies can be developed that take advantages of these principles. In fact, almost all sensible trades base their origin in at least one of these market principles: breakout strategies, retracement strategies, trend trading, momentum trading, swing trading, etc. across all timeframes.

 

Concept Credit for arranging the four principles: 

Linda Bradford-Raschke (2000) - Swing Trading and Underlying Principles of Technical Analysis. 

In: Rick Bensignor (2000) - New Thinking in Technical Analysis: Trading Models from the Masters.

 

See also:

Richard W. Schabaker (1932) - Technical Analysis And Stock Market Profits: A Course In Forecasting.

Robert Edwards & John Magee (1948) - Technical Analysis of Stock Trends.

Arthuer A. Merrill (1980) - M&W Wave Patterns.

Peter L. Brandt (2011) - Diary of a Professional Commodity Trader.

Aksel Kibar (2021) - Three Types of Breakouts. 

Stacey Burke (2021) - Weekly Template - Three Things Markets do.

TPR (2022) - The Bullish & the Bearish Market Maker Cycle.
TPR (2022) - Daily Range = Accumulation + Manipulation + Expansion + Distribution (AMD).
TPR (2022) - Daily and Weekly Market Maker Cycles.
TPR (2022) - 3 Bar Patterns- The Smallest Fractals of Market Structure.

 

 

 

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.