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Quarterly Theory is a unique approach to trading that revolves around time division into quarters across various timeframes. This theory is highly inspired by Michael J. Huddleston’s ICT Mentorship. It offers traders a structured way to interpret market cycles.
The core idea behind Quarterly Theory is that time is fractal and price movement follow a predictable sequence of accumulation, manipulation and distribution within defined time-based quarters. Understanding and identifying these cycles helps traders anticipate liquidity grabs and trend reversals with higher accuracy.
This article explores Quarterly Theory, its breakdown into yearly, monthly, weekly, daily, and session-based timeframes.
Core Concept of Quarterly Theory
Quarterly Theory states that all timeframes operate under a four-phase cycle. It is also known as AMD-X:
AMD is basically derived from ICT Power of Three. ICT Quarterly Theory is based on Accumulation, Manipulation and Distribution. However, the last X in Quarterly Theory indicates continuation or reversal.
In Q1, Accumulation of Buy or sell order takes place. Price consolidates in a range that sets the stage for a liquidity grab.
In Q2, manipulation (also known as Judas Swing in ICT Concepts). Price moves above or below the consolidated range in order to trigger stop-losses. In bullish scenarios, price move below the range and capture stop-loss orders. In bearish market, price moves above the range and capture stop-loss orders.
In Q3, after clearing stop-losses orders, price moves in its intended direction. This forms a clear trend in the market. In bullish scenarios, price after clearing stops below the range continue its upside price movement. In bearish scenarios, price after clearing stops above the range continue its downside price movement.
Lastly, in Q4, the X represents continuation or reversal. Price either extends the trend or reverses it.
Alternatively, if a cycle starts with Q1 as continuation or reversal, followed by accumulation, manipulation, and distribution (X-AMD) instead. The key is that price follows a predictable algorithmic flow. By aligning trades with these quarters, traders can increase their accuracy significantly.
Time as Fractal Concept in Quarterly Theory
One of the most powerful concepts of quarterly theory is that time operates fractally. This means that each timeframe follows the same quarterly structure.
We start with Yearly Quarters. This gives us a bigger picture and macro structure of a financial asset. Q1 includes January, February, and March. The Q2 includes April, May, and June. The Q3 includes July, August, and September. Lastly, the Q4 includes October, November, and December. The April open serves as the True open for the year.
For monthly quarters, the four weeks are divided into four quarters. In all these Qs, Mondays are taken as our reference points. Q2 starts on second Monday. The second Monday’s open act as the True Open for the month, defining the dominant trend.
For Weekly Quarters, we can follow the weekly profiles of ICT as well. In quarterly theory, the first four days are included and the Fridays is excluded. Q1 includes Monday. Q2 includes Tuesday. Q3 includes Wednesday. Q4 includes Thursday. Friday is excluded because it typically serves as a profit-taking and rebalancing day.
Daily quarters are important for understanding intraday market flow. For better trading in the prominent session, quarterly theory helps in catching significant price moves. Q1 includes the Asian session. Q2 includes London Session. Q3 includes New York AM Session. Q4 includes New York PM Session. The London Session open serves as the true open for the day.
Remember each session is further divided into 90-min quarters. This allows traders to pinpoint entry opportunities with extreme precision.
True Opens: The Key to Bias Determination
True opens act as the most critical reference points in Quarterly Theory. They help traders determine whether price is in a manipulative phase or a distributive phase within any given cycle.
- In Yearly cycle, the opening price of 1st Monday of April is the true open.
- For monthly cycle, the opening price of 2nd Monday of the month is the true open.
- For weekly, Monday at 18:00.
- For daily, 00:00 Midnight (London Open)
- For Asian, 19:30.
- For London Session, 01:30.
- For New York AM Session 7:30
- For New York PM Session 13:00
It is important to mark true open for better trading. If we have a bullish bias, we take entry in the market below the true open. Conversely, if we have a bearish bias, we take entry in the market above the true open. True Opens serves as institutional price levels where liquidity pools exist. These are the ideal zone for entries.
Market Manipulation and the Judas Swing
In Quarterly Theory, Q2 phase is important for market manipulation. The manipulation is also referred to as Judas Swing. It occurs in Q2 of any cycle (Weekly, Daily, or Intraday). The purpose of Judas Swing is to trigger stop orders (both buy stops and sell stops).
Smart Money uses it to induce liquidity before moving in the real direction. For example, Monday sets a narrow range, On Tuesday (Q2, True Open) creates a false break out (Judas Swing). Wednesday see price move in the intended direction (distribution). Thursday either continues or reverse the trend.
Plan your trades by identifying key liquidity levels near the true open. After that wait for a false break out (manipulative move). Lastly enter a trade in the opposite direction during Q3.
Higher Timeframe PD Arrays and Liquidity Inducement
Quarterly Theory aligns perfectly with Premium-Discount Arrays. We have to look for the following considerations:
- If you are trading on 1-min chart, you PDA reference level should be on 15-min chart.
- Trading on 5-min chart requires 1-hour PDA.
- Trading on 15-min chart requires 4-hour PDA.
- Trading in 1-hour chart requires daily PDA.
- Lastly trading on 4-hour chart requires Weekly PDA.
By ensuring that our trades are aligned with higher timeframe PD Arrays, traders can maximize precision and risk reward ratios.
Final Note
Quarterly Theory provide structural approach to market cycles by dividing time into specific quarters. By using accurately in our trading enhances trade precision. Remember, it is not an ICT trading concept. Rather it is highly inspired and used along with ICT trading method. Trading is highly risky and past performance does not guarantee future results.
Before trading in forex and other financial markets, traders should conduct thorough research, apply proper risk management, and never risk more than they can afford to lose. This content is for educational purposes only and should not be considered financial advice. Always consult with a professional before making trading decisions.
FAQs
What is Quarterly Theory in trading?
Quarterly Theory is a market timing concept that divides time into quarters (yearly, monthly, weekly, daily, and session-based) to identify market cycles. It aligns with ICT’s Power of 3 (Accumulation, Manipulation, Distribution) to provide structured trade entries and exits.
What are the key components of Quarterly Theory?
The theory contains the following concepts: Time fractals, True Opens, and AMD Setup. In time fractal divides the year, month, week, day, and session into quarters. True opens are important price levels that act as benchmarks. Lastly, AMD setup is the ICT power of three containing accumulation, manipulation, and distribution.
Can Quarterly Theory be used for all timeframes?
Yes, since time is fractal, the concept applies to all timeframes, from yearly cycles down to intraday trading sessions. It is universal and works with various trading styles.
I’m Abdullah Shah, a content writer with three years of experience in crafting engaging and informative content. My background in market analysis complements my work, allowing me to create content that resonates with audiences. I’m also a seasoned practitioner in the forex and crypto markets, with a strong foundation and deep interest in finance. My passion for the financial world drives me to produce content that is both insightful and valuable for those interested in understanding market trends and financial strategies.
