Special Situations: 3-I Days

[Soultrader 12]

A 3-I day includes an initiative buying tail, initiative buying TPO's, and initiative buying range extension. What makes this characteristic interesting is that prices tend to open within or above value after a 3-I day.

 

A 3-I day offer traders the opportunity to hold a trade overnight to exit at a profit the next trading day within the initial 90 minutes. In Mind Over Markets, Dalton mentions that 3-I Day offers a high probabilitytrading setup that almost has to be taken.

 

I am curious to know different strategies people may use to trade this setup. What I am most interested is hearing about setups that deal with the following days opening action. Thank you.

[ant 10]

Can you clarify what initiative buying TPO's are? I never full understood this. It sounds different than the TPO count that is used in rotating markets to determine whether buyers or sellers are in control. That is, if the number of TPOs below the POC is greater than the number of TPOs above the POC, then the buyers are in control (reverse for determining seller control). Thanks.

[Soultrader 12]

Hey Antonio,

 

I think you are correct about TPO counts. Initiative buying TPO's are simply TPO's favoring the trend. This would mean more TPO's above the POC for an uptrend and more TPO's below the POC for a downtrend.

[ant 10]

No wonder I couldn't find too many examples of 3-I days. Below is a chart with an example of a 3-I day. I just want to make sure I have it right, since I would like to be aware of these days when they occur.

 

[Soultrader 12]

Nice chart That is precisely a 3-I day. It is a great example because price usually trade within or above value for the first 90 minutes of trading. I am trying to work on a strategy to trade this type of day since it offers a high probability trading opportunity to the long side.

 

Note: How do I spot out a single print tail on the MP indicator you designed?

[ant 10]

Single prints will show up as two consecutive price levels with a single TPO. each. Buying range extension are two consecutive price levels with a single TPO above the IB (so this could show up in the middle of the distribution). On a 30min chart, just look at the price levels with one TPO which is a line that extends to the next bar. See the chart above for an example.

[ant 10]

Looks like Friday was a day after a 3-I selling day in the YM...

 

[Soultrader 12]

Very powerful information Antonio. This is because I was waiting for the markets to bounce after it opened right below the value low pivot on Friday. I eventually went short at the break of the 9/21's low.

 

However, going short right at the open would of offered a high probability trade. I will be studying this type of day carefully to see what kind of setups I can take the following day after a 3-I day. Thank you for this.

[Soultrader 12]

Hey Antonio,

 

Just wanted to ask you how you got those TPO count on the TS indicator? Thank you

[nasdaq5048 10]

I have found Dalton and Steidlmayer disagree on this topic. On page 164 of Steidlmayer on Markets ( I have the 2nd edition), Steidlmayer said after a trend day the market has a great probability of moving sideway or retrace. He even suggest taking profit on the position after a trend day. A initiative trend day got to have the 3-I charateristics. Any thoughts?

[Soultrader 12]

Very interesting point nasdaq5048,

 

I have been mainly a student of Dalton so can not completely comment on this. But from my years of observation, there is a higher probability that the markets will consolidate or retrace after a trend day. However, I do think it is up to market conditions. If the past few months, we have had a semi-euphoric stage with a decent uptrend ever since May (for the Dow). During such conditions, trend days followed by trend days were common.

 

I like to look at the %TREND. Anytime the markets have a high %TREND, I look for a market with a lower %TREND the following day. Also, after a strong trend day, I like to watch carefully at the morning session. If there is price acceptance above value in the morning, I try to look for long setups.