Quarterly theory and basic ICT concepts
Quarterly theory states that time must be divided into quarters to correctly interpret market cycles. By combining quarterly theory and basic ICT concepts, trading accuracy can be improved.
Quarterly theory states that time must be divided into quarters to correctly interpret market cycles. By combining quarterly theory and basic ICT concepts, trading accuracy can be improved. Understanding the Quarterly Theory allows you to be flexible, it is suitable for any trading style as it is universal for all timeframes.
What I like most about this theory is that it eliminates ambiguity by giving specific time reference points to aim for when entering a trade. Before implementing this theory into your trading, you need to understand that time is fractal.
The annual cycle consists of four quarters of three months each:
First quarter - January-March
Second quarter - April-June
Third quarter - July-September
Fourth quarter - October-December
The monthly cycle consists of four quarters of one week each (as for the monthly cycle, we start counting the quarters from the first full week, i.e. if the first week referring to a traditional month is incomplete, it is omitted and treated as a distortion)
The first quarter is the first full week of the month
Second quarter - second week
Third quarter - third week
Fourth quarter - fourth week
The weekly cycle consists of four quarters, one day in each quarter:
First quarter is Monday
Second quarter - Tuesday
Third quarter-- Wednesday.
Fourth quarter is Thursday
Friday is not included in the weekly cycle because it has its own specific function.
The daily cycle consists of four quarters of six hours each, which fully coincides with the four trading sessions of the trading day.
The first quarter is the Asian session
Second quarter - London session
Third quarter - New York session.
Fourth quarter - afternoon session
Each session consists of four quarters of 90 minutes each. We refer to them as 90-minute cycles (time is GMT-4 New York time zone).
As for the Asian session, the 90-minute cycles are as follows:
First quarter - 18:00-19:30
Second quarter - 19:30-21:00
Third quarter - 21:00-22:30
Fourth quarter - 22:30-00:00
As for the London session, the 90-minute cycles are as follows:
First quarter - 00:00-1:30
Second quarter - 1:30-3:00
Third quarter - 3:00-4:30
Fourth quarter - 4:30-6:00
As for the New York session, the 90-minute cycles are as follows:
First Quarter - 6:00-7:30 a.m.
Second quarter - 7:30-9:00
Third quarter - 9:00-10:30.
Fourth quarter - 10:30-12:00
As for the session in the afternoon, the 90-minute cycles are as follows:
First quarter - 12:00-13:30 pm.
Second quarter - 13:30-15:00
Third quarter - 15:00-16:30
Fourth quarter - 16:30-18:00
Now that we have realized that time is fractal, we can begin to look at the functions of some quarters. Price is generated by an algorithm, so there must be some inputs that are used to make decisions throughout each cycle.
Function Q1 (first quarter) to determine subsequent quarters, that is, we use Q1 as a barometer to predict market conditions in subsequent quarters of each cycle we consider. If Q1 is overly extended, we would expect consolidation in Q2 (Q2), and if Q1 trades in a narrow range, we would expect expansion in Q2. This is where things get interesting.
True open is a major component of the quarterly theory that there are certain price openings that serve as a temporary filter to determine Judas Swing or Stop-Hunts. True opens are the beginning of the second quarter of each cycle.
If you are bullish on a particular cycle, you should buy below its true opening.
If you are po-bearish within a particular cycle, then you should sell above its true opening.
This will greatly improve your accuracy, as key levels are usually located above or below the true opening.
Each cycle also has its true opening (time is GMT-4 New York time zone):
The true opening of the year is the first Monday of April
The true opening of a month is the second Monday of the month.
The true opening of a week is Monday at 6:00 p.m.
The true opening of a day is 00:00 midnight.
The Asian session true opening is 19:30.
The London Session True Opening - 1:30 am
New York session - 7:30 am
Day Session True Opening - 1:30 pm
The image on the left shows how a true opening occurs in a bull market.
We will now take a look at the Quarterly Theory cheat sheet. Quarterly Theory Cheat Sheet. There are two sets of instructions that an algorithm typically follows. We denote them as AMDX & XAMD.
The chart on the right gives a visualization of AMDX. You can see how Q1 forms a narrow range, after which the price manipulation phase begins. ICT calls it Judas Swing. According to its algorithmic theory, the purpose of this false move is to take traders out of the game, after which the real move occurs.
After the manipulation phase comes the next phase - the distribution phase. This phase is usually the easiest to trade because the cycle trend has already been established in the previous quarter.
Fourth Phase - X, which can either continue the established cycle range or reverse. In this example, the fourth quarter is a reversal. As you can see, price reverses at the HTF PDA or key levels. Liquidity is induced when price breaks old lows and holds when trading at key levels.
If you are trading at 1m TF, you need a 15m PDA
If you are trading at 5m TF, you need a 1h PDA
If you are trading on a 15m TF, you need a 4h PDA
If you are trading on 1h TF, you need 1D PDA
If you are trading at 4h TF, you need 1W PDA
To summarize AMDX, it can be written as:
Q1. (A)ccumulation - Consolidation
Q2. (M)anipulation - Judas Swing (trade)
Q3. (D)istribution - LRLR (trade)
Q4. (X) - Continuation/Reversal of previous Q
Now let's talk about XAMD, его template will look like this:
Q1. (X) - Continuation/Reversal of previous Q
Q2. (A)ccumulation - Consolidation
Q3. (M)anipulation - Judas Swing (trading)
Q4. (D)istribution - LRLR (trade)
The first quarter is a continuation or reversal of the previous quarter of the previous cycle. Using what we have learned from the Q1 function, accumulation should occur in the Q2 phase leading to high range price action.
Q3 would then become the manipulation phase. However, the rules of true discovery are static, they do not change. Q2's opening price will always be its true opening.
So, if the profile you are considering is XAMD, even if the accumulation occurs in Q2, you will use the Q2 opening price, which is the true opening, to value Judas Swing, which is more likely to occur in Q3.
The last phase would be the distribution (distribution) phase, which is the easiest phase to trade with respect to XAMD.
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This material is written based on a video from the creator of this theory, you can view the original source by following this link: