Overview
This lecture introduces the Precision Swing Point (PSP) concept in trading, explaining its significance, variations, and practical application within market frameworks to enhance trade filtering and decision-making.
Introduction to Precision Swing Points (PSP)
- PSP is a combination of a swing point and a Kraken correlation, commonly used with quarterly theory.
- A PSP occurs when two correlated assets show opposing candle closes at significant levels (one bullish, one bearish).
- PSP can be applied on any timeframe (daily, 4hr, 1hr, 15min, etc.).
- Confirming a swing point with SMT (Smart Money Technique) increases the probability of a reversal.
- PSP integrates both swing point and SMT for a logical and robust model.
Types & Variations of PSP
- Single-Stage PSP: Kraken correlation between candle one and candle two; confirmed by the PSP close.
- Two-Stage PSP: Correlation or SMT between candle one and two, then a PSP confirmation between candle two and three.
- Continuation PSP: Used after an expansion move as a retracement indicator, not a full reversal.
Application Frameworks for PSP
- PSPs should be used within a narrative or framework, not in isolation.
- Main frameworks: Internal to External, External to Internal, and Order Pairing Ranges.
- Internal to External: PSP at key level signals potential reversal.
- External to Internal: PSP at range liquidity suggests expected movement.
- Order Pairing Ranges: PSP used for trading failure swings with SMT confirmation.
PSP as Market Phase Triggers
- PSP can trigger new phases: expansion, retracement, or reversal.
- After a significant move, a PSP can indicate the start of retracement or further expansion.
- Context (candle profile, wick size, narrative) is crucial for accurate PSP application.
Strength Switch PSP & Asset Synchronization
- Strength Switch PSP: Occurs when the typically stronger asset closes against expectation—signals a potential reversal or catch-up move.
- Asset synchronization: Lagging asset may "catch up" following a strength switch PSP, often seen during SMT breaks.
Practical Examples & Case Studies
- Examples show PSPs and strength switches at major highs/lows, across various assets and timeframes.
- Demonstrates frequent occurrence of PSP and SMT at every significant retracement or reversal.
- Emphasizes the importance of context and filtering—do not trade PSPs indiscriminately.
Key Terms & Definitions
- Precision Swing Point (PSP) — A point where a swing formation and Kraken correlation coincide, confirmed by opposing closes on correlated assets.
- Kraken Correlation — Opposing closes in two correlated assets during the same period.
- SMT (Smart Money Technique) — Divergence between correlated markets used to confirm reversals.
- Strength Switch — When the strongest asset closes opposite its expected direction, indicating a potential trend switch.
- Order Pairing Range — A trading concept where one side of a range is manipulated to move price to the opposite side.
Action Items / Next Steps
- Review types of PSPs and their use in different frameworks.
- Practice identifying PSPs and strength switches in charts of correlated assets.
- Prepare for Part 2: Profiling and sequence trading with PSPs.