Showing posts sorted by date for query stacey burke. Sort by relevance Show all posts
Showing posts sorted by date for query stacey burke. Sort by relevance Show all posts

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). 
 
 
 
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Wednesday, April 5, 2023

ICT Weekly Range Profiles | Michael J. Huddleston

 
 
 
These profiles are conceptual models that describe typical patterns in 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. 
 
The weekly price movement in financial markets follows a recurring pattern of consolidation, expansion, reversal, expansion again, consolidation, and a potential reverse or retracement:
  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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Tuesday, March 14, 2023

Pump and Dump Patterns after Major News Release | Stacey Burke

 
Position yourself AFTER Major Red News Releases (NFP, CPI, PPI, PMI, FOMC etc.) with 
either a Pump & Dump or a Dump & Pump trading setup for 25, 50, 75 or more pips.

 
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Thursday, March 9, 2023

Trading Inside or Outside the Daily and Weekly Range | Stacey Burke

When a market opens outside of the previous day's range and then auctions around the open, one's first impression is that there is no directional conviction present. In reality, the mere fact that the opening is beyond the previous day's range suggests that new other time frame activity has caused price to seek a higher or lower level. Given that the market has opened out of balance, there is a greater chance that directional conviction will develop than if the market had opened and auctioned within the range. An Open-Auction outside of range has the potential to be a big day, while an Open-Auction within value usually lacks conviction.
 
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.

[...] In the large majority of cases, activity during any given day has direct and measurable implications on the following day. It is only on the relatively rare occasion when a market moves extremely out of balance that there is no correlation between two consecutive days. Understanding these implications enables a trader to more successfully visualize developing market activity.

The salient concept here is market balance. The relationship of the open to the previous day's value area and range gives valuable clues to the market's state of balance and what kind of risk/opportunity relationship to expect on a given trading day. In short, the greatest risk and opportunity arise when a market opens outside of the previous day's range. This indicates that the market is out of balance.

When a market opens out of balance, the potential for a dynamic move in either direction is high. Conversely, a market that opens and is accepted (auctions for at least one hour) within the previous day's value area embodies lower risk, but also less opportunity. The acceptance of price within the previous day's value area indicates balance, and therefore reduces the potential for a dynamic move.

Quoted from:
 
[The Value Area is a range where approximately 70% of the prior days volume traded. 
The range is derived from one standard deviation on either side of the mean which is roughly 70%.]
 
 
See also:
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Monday, February 13, 2023

The Arithmetic of Pump & Dump Patterns | Jesse Livermore


Jesse Livermore was born in 1877 in Shrewsbury, Massachusetts, to a poverty-stricken farmer family. He learned to read and write at the age of three-and-a-half. At the age of 14 his father pulled him out of school to help with the farm. However, with his mother's blessing, Livermore ran away from home to begin to live on his own behalf and responsibility aged 14 as a quotation board boy at a Boston stock brokerage business earning $5 per week. By 1923 Livermore was one of the richest people in the world. He was, he believed, particularly suited to his first job because of his strong abilities in mental arithmetic and number memorization.
 
The 1870 census in the US found that 1 out of every 8 children below 14 years old
was a wage slave. By 1910 it was 1 out of 5.
 
Stock and commodity prices came into his broker’s office on a ticker tape, a continuous strip of paper. It was Livermore’s job to read, to memorize and to transfer all the price numbers as they come in to the quotation board outside for all the broker’s different clientele crowds in and around the trading pits and lobbies to be seen and to animate them to act in that very specific foolish way they were expected to act: buying and selling and placing buy-, sell- and stop orders at certain levels. This is exactly what generates these constantly repeating tremendous opportunities, profits and cuts for the broker and for the invisible Composite Operator over there in New York and in Chicago. He realized that for the rest of his life his destiny became aligned to this information of the ticker tape and his ability to understand the message of the algorithm. Livermore literally saw patterns in the waves of numbers that flowed each day from the tape and aligned his activity accordingly. He began to write those numbers in his own notebook and tested himself, predicting the direction that different stock prices would take at certain levels, times and days. 
 
Patterns in the Waves of Numbers:
Arithmetic of the Pump and Dump.
 
Price delivered by Composite Man for the broker through the broker to the broker's different clientele crowds. Livermore realized that scheme generates more profit than any other business activity ever known to man. For the Composite Operator. Hence he aligned himself to the tune of the invisible Composite Operator's price algorithm coming in on the ticker tape from New York and Chicago. The cumulative price range of all one minute price bars of any instrument traded by any broker on any given day nowadays exceeds what is called The Average Daily Price Range by the factor of fifty. Fifty times the so called average daily trading range during each and every single trading day. Up and down. Every day. Say the average daily price range of a given instrument is 1,000, the cumulative price will range around 50,000 during any trading day. Up and down. From balance to imbalance back and forth in this very specific manner and sequence through time and price.
 
He used breakouts to a high degree of success. He would wait for price to break above a certain pivot level and then go long to ride on the emerging trend. Daily and weekly highs and lows, session highs and lows, measured moves and Floor Trader's Daily and Weekly Pivot Point Levels provide all clues for Livermore's pivotal levels. He would exit a trade only when a similar breakout occurs in the opposite direction, signifying a potential reversal in trend after a peak formation high or low, that is a change of structure and direction of price. If the reversal signal is strong enough, he would take a short trade and ride the bear market.
 
"Many years of my life had been devoted to speculation before it dawned upon me that nothing new was happening in the stock market, that price movements were simply being repeated, that while there was variation in different stocks the general price pattern was the same." Livermore used to say: "Whatever happens in the stock market today has happened before and will happen again". 
 
In his notebook Livermore fills prices into columns headed Secondary Rally  -  Natural Rally -  Up Trend  - Down Trend  -  Natural Reaction, and Secondary Reaction.
 
Trend Change Rules

Livermore’s approach to swing trading required two filters: (1.) a larger swing filter and (2.) a penetration filter of one-half the size of the swing filter. Penetrations were significant at price levels he called pivot points. A pivot point is defined in retrospect as the top and bottom of each new swing. The pivot points in the below swing chart are marked with letters. Positions are taken only in the direction of the major trend. A major uptrend is defined by confirming higher highs and higher lows, and a major downtrend by lower lows and lower highs, and where the penetration filter (swing filter) is not broken in the reverse direction. That is, an uptrend is still intact as long as prices do not decline below the previous pivot point by as much as the amount of the penetration filter. Once the trend is identified, positions are added each time a new penetration occurs, confirming the trend's direction. A stop-loss is placed at the point of penetration beyond the prior pivot point. Unfortunately Livermore never revealed how the penetration point was calculated. It seems however to be a percentage of the current swing size (e.g. 16%, 20%, 25%, 33%,50%) . 
 
Failed Reversal in the Livermore Method

In Livermore's system the first penetration of the stop-loss (a swing high or low depending on the direction of the trade) calls for liquidation of the current position. A second penetration is the necessary confirmation for the new trend. If the second penetration fails (at point K) it is considered a secondary reaction within the old trend. The downtrend may be re-entered at a distance of the swing filter below K, guaranteeing that point K is defined, and again on the next swing, following pivot point M when prices reach the penetration level below pivot point L. It is easier to re-enter an old trend than to establish a position in a new one.
 
This is Jesse Livormore's insight and conclusion:
  1. Markets are never wrong opinions often are. Back your judgment and don't trust your opinion, until the action of the market itself confirms your opinion.
  2. Few people ever make money on tips, beware of inside information. If there was easy money lying around, no one would be forcing it into your pocket.
  3. Money is made by sitting, not trading. It takes time to make money. Don't give me timing; give me time.
  4. Buy right, sit tight. Big movements take time to develop. Men who can both be right and sit tight are uncommon.
  5. Money cannot consistently be made by trading every day or every week during the year.
  6. Nothing new ever occurs in the business of speculating or investing in securities and commodities.
  7. Never average losses.
  8. The human side of every person is the greatest enemy of the average investor or speculator. Wishful thinking must be banished.
 

References:
Richard D. Wyckoff (1920) - Jesse Livermore's Methods of Trading in Stocks.
Edwin Lefèvre (1923) - Reminiscences of a Stock Operator.
Jesse Livermore (1940) - How To Trade In Stocks.
Jesse Thompson (1983) - The Livermore System. In: Technical Analysis of Stocks & Commodities. 
Mark B. Fisher (2002) - The Logical Trader.
 Richard Smitten (2005) - Trade Like Jesse Livermore.
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