Lecture: Open High Low Close and the Power of Three

Introduction

• Presented by Dexter Lab
• Collaboration between Monster Lab and Edu Detroit

Key Concepts

The Power of Three Phases

• Opening Phase: Also called the accumulation phase. Determines the starting price of a candle.
• Manipulation Phase: Known as the weak high phase; this is where the price may be manipulated to highs/lows.
• Distribution Phase: Forms the body of the candle; the price adjusts and closes in the weak low phase.

Candle Representation

• Every candle includes opening price, manipulation (weak high/weak low), body (distribution), and closing price.
• The phases help in identifying time and price movements within a trading day.
• Multiple time frames can be used (e.g., monthly, weekly, daily, 4-hour candles for intraday purposes).

Detailed Analysis

Time and Price Elements

• Time elements include specific opening/closing hours (e.g., 2 a.m., 6 a.m., etc. for index futures).
• Price elements involve specific price points (e.g., gaps, breakers, PDRA—Price Delivery and Rejection Areas).
• Focus is on 4-hour candles for intraday purposes:
  • 2 a.m. to 6 a.m.
  • 6 a.m. to 10 a.m.
  • 10 a.m. to 2 p.m.
  • 2 p.m. onward
• Different time frames for Forex vs. Index Futures.

Internal Dynamics

• Within the representation of a candle are various smaller dynamics (retracements, internal moves).
• A single move (e.g., low to high) often involves several smaller internal movements.
• Tools like Smart Money Tools (SMT) and correlations between markets help in confirmation.

Frameworks for Trading

Framework 1: Continuation Profile

• Identifies opening and manipulation phases, using standard deviations for projection.
• Multiple candles may be involved, with unfinished business in the higher time frames needing additional moves to complete.
• Example: A 6 a.m. opening followed by a 10 a.m. continuation.

Framework 2: Reversal Profile

• Used for identifying potential reversals instead of continuations.
• Focuses on different moves within a single candle and across multiple candles to predict changes in price movement.
• Examples: 2 a.m. opening followed by a 6 a.m. for reversal.

Practical Examples

Example 1: Continuation Profile

• A 6 a.m. candle moves towards higher time frame PDs and expects continuation at 10 a.m.
• Uses SMT to confirm low/high points and predict price behavior.

Example 2: Reversal Profile

• Involves identifying high-probability zones for price retracements and metaphorical business.
• Uses deviations, internal dynamics, and higher time frame PDs to predict reversals.

Understanding Price Moves

• Each price move includes opening price, weak high/low, body development, and closing price.
• The interaction of time (open/close) and price (levels/retracements) forms complete market dynamics.
• Time and internal dynamics are closely linked; specific PD areas may have different price behaviors based on the time frame.

Conclusion

• These frameworks provide a comprehensive view of market dynamics.
• Effective for understanding all market moves within the simplified power of three representation.
• Emphasis on past candle behaviors informs future projections for improved trading decisions.