TLDR;
This video explains the quarterly theory, a concept developed by Trader Day, and how it can be used to improve trading strategies. The theory divides time into quarters across different cycles (yearly, monthly, weekly, daily, and 90-minute cycles), with the 90-minute cycles being the most important for day trading. The key takeaway is understanding how accumulation, manipulation, distribution, and trend reversal/continuation (AMD/X) patterns occur within these 90-minute cycles, particularly in relation to the true open (the beginning of the second quarter of each session).
- Price is fractal, meaning patterns repeat across different timeframes.
- The most important cycle for trading is the 90-minute cycle, dividing each trading session into four quarters.
- Each quarter can be associated with accumulation, manipulation, distribution, or a trend reversal/continuation (AMD/X).
- The "true open," the start of the second quarter of each session, is a key level for identifying potential long and short entries.
Introduction to Quarterly Theory [0:00]
The video introduces the quarterly theory, crediting Trader Day for the concept. The presenter aims to explain the theory in simple terms, detailing its underlying principles, its application within existing trading strategies, and key elements for understanding it. The video promises live chart examples and a bonus tip at the end.
Understanding Quarterly Theory: Fractal Nature of Price [0:58]
Quarterly theory involves dividing time into quarters, based on the fractal nature of price. This means patterns observed on higher time frames can also be seen on lower time frames, and vice versa. The yearly cycle is divided into four quarters: Q1 (January to March), Q2 (April to June), Q3 (July to September), and Q4 (October to December). Similarly, the monthly cycle divides each month into four weeks, and the weekly cycle divides each week into quarters: Monday (Q1), Tuesday (Q2), Wednesday (Q3), and Thursday (Q4). Friday is excluded from the weekly cycle due to its unique function.
90-Minute Cycles: The Most Important Concept [3:22]
The most important aspect of quarterly theory is the 90-minute cycle. Each trading session (Asia, London, New York, and PM) is divided into four 90-minute quarters. These times are based on the New York time zone. Each quarter can be associated with accumulation, manipulation, distribution, or a trend reversal/continuation (AMD/X). If the first quarter shows accumulation, the subsequent quarters are likely to be manipulation, distribution, and then either a trend reversal or continuation. Conversely, if the first quarter shows a trend reversal or continuation, the following quarters may be accumulation, manipulation, and distribution.
Applying AMD/X Patterns and the Kill Zone [4:35]
To use quarterly theory effectively, traders should note the times of each 90-minute quarter and identify whether the first quarter of a session shows accumulation or a trend reversal/continuation. Based on this, they can anticipate the AMD/X pattern for the remaining quarters. The manipulation and distribution phases are considered the "Kill Zone," with specific times for New York (7:30 to 10:30) and London (1:30 to 4:30). It's advised to focus on trading during the manipulation and distribution phases.
The True Open: Key Level for Entries [7:07]
The "true open" is the starting price of the second quarter of each session and is a critical element of quarterly theory. The strategy suggests only considering short positions above the true open and long positions below it. This level serves as a key reference point for potential entries, aligning with the anticipated market direction.
Live Chart Examples: Euro USD Trade [7:35]
The presenter analyzes a Euro USD trade, combining quarterly theory with other strategies. The analysis indicates a bullish bias based on market structure and a fair value gap on the H4 timeframe. A point of interest (POI) is identified on the M15 timeframe. The quarterly theory indicator is used to display the 90-minute cycles. During the London session, the first quarter shows a continuation pattern, followed by accumulation in the second quarter within the POI. The third quarter shows manipulation (a dip before a rally), and the fourth quarter shows distribution. The true open for the New York session is at 7:30. The manipulation phase goes below the true open, providing a long entry opportunity in the discount, targeting buy-side liquidity.
CPI Example and London Session AMDX Pattern [12:10]
Another example is provided during a CPI release, where the price dipped below the true open (7:30 New York time) before rallying upwards, aligning with a bullish bias. A final example illustrates an AMDX pattern during the London session. The first quarter shows accumulation, the second shows manipulation (a dip), the third shows distribution (a significant upward move), and the fourth shows a continuation of the trend.
Conclusion and Advice [14:05]
The presenter advises using quarterly theory in conjunction with an existing trading strategy, such as market maker buy/sell models, high timeframe outlook, and high timeframe bias. Combining quarterly theory with other strategies can improve trading outcomes.
