Technical traders guide into Quarters theory|Time Fibs
My journey into technical treading started with foreign exchange trading. Throughout this journey, I have been through various ups and downs in the markets, and what it has taught me the most is that one should always keep a learner mindset while approaching the markets.
The currency systems we have today works on the decimal system i.e, decimal (Lat. Decimus) means “tenth,” decimate means “reduce by a tenth,” and denary (Lat. denarius) means the “unit of ten.”
Currency decimalization has caused the main unit of currency to be divided into 100 subunits. (e.g., 1 USD = 100 Cents).
Price interest points, when the main unit of a currency is divided into 100 additional subunits, we get the smallest unit of the price of a foreign currency called the pip. (e.g., for EUR/USD one PIP — Price Interest Point equals .0001 U.S. dollar)
Major Whole Numbers
Quarters theory considers benchmark numbers for exchange rates between currencies, for example, an exchange rate of exactly $1.0000 for the EUR/USD, if the exchange rate changes by additional 10 cents, the rate will be $1.1000.
So we get an idea that these sections of 10 cents, like 1.1000 the dollar tens, 1.2000 the dollar twenties mark the end and the beginning of a new set of ten numbers 1.11, 1.12, 1.13, …, 1.19.
These starting and ending points hold a lot of significance in quarters theory, thus are known as Major Whole Numbers(MWN). Notice that between two MWN, we have 1000pips. The distance between the subunit called the Whole Numbers is 100pips.
A quarter is one of four equal parts of anything, so taking the 1000pip range between MWN, we divide them into four equal parts of 250pip each and get the number called Large Quarters(LQ).
The LQ that coincides with MWN is called Major Large Quarter point. The midway point of the 1000pip range is called the Major Half Point.
Thesis of Quarters theory
The theory believes that the daily price action of currency pairs is not random, and these numbers act as constant support and resistance levels.
I like to call these price points magnets to the price, and they serve as very good price targets for taking profits.
So why aren’t these points so visible?
According to the theory, price volatility conceals these points, thus sometimes price might overshoot or undershoot. This range is of 25pips each side from the point.
So what I like to do is create is a range of 25pip around these points and view them as areas of consolidation, this helps me to filter out a lot of noise in the price action. It also helps to identify real breakouts as they will be the ones that move beyond this range.
According to quarters theory, for a transition between LQs to be considered as completed, the price action must reach within this range of 25pips, can either undershoot or overshoot.
Large Quarter transitions and Hesitation zones
Whenever the price tries to enter a new region of tens (like GBP/JPY 150–160), the quarter theory defines ways to confirm whether it’s a true transition. For this, it defines something called the hesitation zone, i.e, a range of 75 pips around the points.
If price enters a new region and upon pullback does not break the hesitation zone, then it is considered a successful transition.
Such price traping techniques can help one to avoid getting stuck in accumulation zones, reversal zones can help in setting medium-term trends bias and price targets for completion of the trade.
I use large quarter-point charts to set my trend bias and look for swing opportunities which are then executed on the whole number point-based chart, this helps me to find tight stop loss controlled entries which allow me to use larger lot sizes with the same risk and also helps me monitor the extent of the move and if possible giving me the opportunity to twin trade with trailing SL thus even better risk to reward.
In my experience, they are better suited as price targets as they act like magnets to the price to taking profits, instead of using them as support and resistance.
Time plays a very important cyclical role for bitcoin, be it the 4yr halving cycle, weekly market swap cycle, daily Asian NY cycle, or if you have noticed more.
After catching the 20th July short squeeze, which I discussed in the earlier case study, I started to look for leveraged trading & profit-taking opportunities for the portfolio. This May time mania did teach me the importance of timing for these assets, which also pulled more closer to finding out ways to trade with time in a more technical way. This led me to use time fibs. They indicate a likelihood of price reversal when crossed.
This is one of the very first swing long positions I took looking at the structure being maintained around both the halfway point, 200emd 2hr, 0.382 fib retracement, and also aligned with the time fib.
Yet again, the time fib was tested, that too mainly the 1.272 vertical level. The way to use it is to retrace from the start of the current leg of the Elliot wave to the top of the latest pullback. Just to show you that I did take this setup.
With another successful entry, I was pretty convinced that time fibs do make technical sense and tried to backtest it for finding out long investing and profit-taking opportunities as well. As so far, I was predicting the Elliot wave bottoms, but in order to find profit-taking opportunities, I wanted to time wave highs.
This is my 20th August analysis, according to which the market was supposed to go bearish sometime on 23rd August, which, if you see your charts are spot on.
Since I have been waiting for a pullback on the daily time frame as per my strategy, I could now map out a time range(sort of a time stop) for taking profits, selling some shit coin holdings, and wait for opportunities to put those fund back into work at the completion of the daily pullback.
Not as per time fib, just a drawing
Looking into the fact that in 2013 bull run, also, September was a bearish month, also a lot of people still believe that its a bear market, and all the governance fud flying around in the air, it is possible people start to see this accumulation as a head and shoulders pattern and call the retest I have been waiting for a break of the neck and bearish continuation, thus an opportunity for another short squeeze? Oh, well, you never know.