3 Day Cycle
Pips2Profit
Cameron Benson
What is the 3 Day Cycle?
1.
2.
3.
4.
Continuous market cycle.
Can be traded independently, or in combination with signal days (FRD/FGD, Inside Day, 3 Days
Breakouts) and the weekly templates.
Each Day has certain characteristics, and things that are looked for on that specific day of the cycle.
Recurring market behavior.
Frequently Asked Question:
●
●
Does Monday restart the cycle? NO!!
Does the 3 Day cycle continue from last week? YES!!!
THESE ARE 3 DIFFERENT THINGS!!!
Can Be Traded Together Or Separate
1.
3 Day Setup Using Signal Days
a.
b.
c.
d.
3 Days Previous Days High/Low
(AKA Day 1,2,3 Breakouts)
Inside Day
First Red Day
First Green Day
2. Day Count (Weekly
Template AKA
3. 3 Day Cycle (FAILED BREAKOUT at
High/Low of the CURRENT week Initiate Day 1
A.
B.
C.
a.
D.
E.
Monday=Day 1
Tuesday=Day 2
Wednesday=Day
3/1
Thursday=Day 2
Friday=Day 3
b.
c.
d.
Used in combination with previous 2
categories
Day 1= Failed Breakout/Trend
Continuation
Day 2= Trend
Day 3= Trend or Reversal
Failed Breakout Defined
●
●
Solid Candle Closure on the 15 Min Chart, above or below the previous days high/low.
Used to help identify failed breakout at the high/low of the week in order to restart the 3 day cycle.
False Break Reversal Defined
●
●
Wicks touching a previous days high or low, but does not close above or below the level (15 min chart)
DOES NOT Restart the 3 day cycle.
Finding Day 1 3 Day Cycle
1.
Scenario 1: Failed breakout at the high/low of the CURRENT week above or below the previous days.
Breakout Failure occurs on the same day. high/low.
Day 1 Continued
Scenario 2: Breakout occurs below/above a previous days high/low and FAILS on the following day.
Day 1 Continued
Scenario 3: Trending Model Of 3 Day Cycle in which there is no reversal or failed breakout on Day 3 and the market
continues the breakout. In this case, Day 3 will become day 1 at the close of that trading day.
Day 3 on an Inside Day
Scenario 4: Today is Day 3 in the 3 day cycle and has NOT touched either the previous days high or low, and then the current
trading day has closed.
The FOLLOWING Day would then become day 3 again.
If the following day ALSO becomes an inside day, you simply move Day 3 to the following day again.
Day 3 on an INSIDE DAY is the ONLY thing that will “pause” the 3 day cycle. Otherwise it is continuous.
Inside Day Day 3 3 Day cycle
If Day 2 (3 day cycle) Is An Inside Day, what happens?
●
●
Inside day is a signal day.
Next Day is Day 3 in the 3 Day Cycle.
Considerations: Details Matter
1.
A WICK to the the high or low of the previous days high (At high or low of the week) does
NOT restart the 3 Day Cycle
Considerations: Details Matter
2. MUST be at the high of the week. Market must BREAK the high/low of the current week.
The market must then CLOSE UNDERNEATH of the previous days high/low in order to restart the cycle.
Considerations: Details Matter
3. Market trades though previous days level, but does NOT break the high/low of the current week. 3 Day cycle continues as
NORMAL!
Considerations: Details Matter
On MONDAY, the only boundaries to work off of is the previous days high and low from FRIDAY. If one of those previous days
high/low area are BROKEN and the breakout FAILS, that will restart the cycle….ON A MONDAY.
Day 2 3 Day Cycle Characteristics
1.
Day 2 3 Day cycle can turn into…
a.
b.
c.
2.
FRD/FGD
Inside Day
Trend Day
Day 2 Trade Setups
a.
b.
Day 2 Trend Trade
i.
Parabolic Trend Trade
ii.
Short Squeeze/Long Squeeze
Day 2 Reversal (Less Common)
i.
Following Breakout of previous day High/Low, 3 levels of rise/fall coming into a session W/Market Structure Confirming
a.
Breakout level must NOT have been tested.
b.
Breakout level is the target (Traders still in profit)
ii.
Will come in the form of a…
1.
PB Trend Trade
2.
Short/Long Squeeze
Day 2 Trend Trade Example (PB Trend Trade)
Day 2 3 Day Cycle (Direction Not Confirmed)
1.
2.
Usually on Day 2, you look to take the trade in the the direction the market is currently trending, or in line with the
failed breakout at the HOW/LOW
However, this is not always the case. You always need to ask yourself:
a.
b.
Who is in the money?
Where are higher timeframe traders trapped in the market?
???
Day 2 Trend (Short/Long Squeeze)
Day 2 Reversal Example
Day 3 3 Day Cycle Characteristics
1.
Day 3 3 Day cycle will become day 1 in 2 different ways….understanding these reasons is super
important when making day 3 trading decisions.
a.
b.
Trend- On day 3 market breaks out of previous days high or low and stays broken out. Day 3 becomes day 1.
i.
On the following day, I consider the market structure and trapped volume to be of the utmost
importance. Are traders trapped at the high/low of the week?
ii.
I draw my breakout level as an area where the market may be trapping volume above or below a
previous days high/low.
iii.
If the market appears to (based off timing and market structure) to be about to continue the trend, I will
trade it as a trend trade.
Reversal- 2 different ways
i.
Market breaks out and fails on the same day.
ii.
Market breaks out and fails on the following day.
Day 3 Trade Setups
Setup:
1.
2.
Day 3 Trend Trade
Day 3 Reversal
Market Presentation:
1.
Parabolic Short/Long Squeeze
a.
b.
2.
Higher High followed by lower low BIS (3 pushes back into the high)
Lower Lower followed by higher high BIS (3 Pushes back into the low)
Parabolic Trend Trade
a.
Peak Formation High/Peak Formation Low W/Consolidation in the middle.
i.
Ascending Support/Descending resistance (Parabolic Channel/Capitulation Channel)
Considerations:
1.
From LOW/HOW
a.
b.
c.
Where is the volume trapped?
Market structure confirming the reversal thesis?
If a trend trade, has the market made a new extreme and is jamming back into the low or high for the trend trade (Short Squeeze/Long
Squeeze)
Day 3 Trend Trade
Day 3 Reversal
Day 3 Reversal Cont.
1. Consolidation Defined
2. Previous Days High and Low Defined
Consolidation- All Candlesticks that reside within a well defined high and low.
Previous Days High/Low- The highest and lowest point the price traveled on the previous day. This creates a
high and a low. AKA Consolidation…
Revist to 3 Pushes out of consolidation