Price Action Madness, Part 3 - 2-22-17

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PRICE ACTION MADNESS

PART THREE!
Starting 1900 CT tonight

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Goals for Tonight

• Continuing last week’s “single timeframe” session on price
action by adding multiple timeframes
• Focusing on rules/structure for fractal timeframe price action
• Questions
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I: What are Fractals?

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“Fractal” means that

larger things are really
made up of a collection of
identical smaller things…..
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…with these “smaller”

things actually being
miniature versions of
larger things.
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This entire tree is

made up from a
main trunk, main
limbs, and smaller
branches, going all
the way out to the
leaves at the very
end.
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You can see in this

picture how the
larger “tree” is
made up of many
smaller, identical
limbs, larger to
smaller.
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Each “cone”. is made

up from a series of
progressively
smaller, identical
cones.
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This Fern leaf is made up

from a series of identical,
progressively smaller fern
leaves.
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Even the roadway

system is made up
from a series of
identical,
progressively-
smaller roads.
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Our circulatory
system is made up
from the same type
of Fractal structure.
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If you think about it, Financial

Markets can also be
considered an “organism.”
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It’s made up from millions of

individuals that collectively
bind together to form an
overall financial Market.
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And as we’ll see later, it

“breathes” and gets tired just
like a person.
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And you’ll also see how

financial Markets are
“Fractal” as well.
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Section Summary
• Fractals are just smaller things that combine to
create bigger things…..
• …and each of the smaller things is identical in
shape to the larger thing.
• We see these Fractal Relationships everywhere in
Nature.
• And we’ll also see them in Markets.
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II: How do Fractals

apply to Financial
Markets?
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Markets do the same thing as

what we see in nature, creating
“patterns within patterns” from
smaller timeframes to larger
ones.
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Larger timeframe swings are

comprised of several identical
smaller-timeframe swings.
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We use a “Factor of Five”

to break up the different
timeframes.
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Fractal Timeframe Series
Monthly
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Weekly
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Daily
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Intraday
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A Family of Timeframes
• Think of this as two “Parent”
Timeframes (Monthly/Weekly)
• And two “Child” Timeframes
(Daily/Intraday)
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Let’s see an example with

three timeframes with the XLI
(Industrials SPDR ETF).
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Monthly
Chart
If we just
examine this
one swing on
the Monthly
chart…..
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Notice how a
single swing
on the
Monthly chart
Weekly
shows
“patterns” on
Chart
the Weekly
chart?
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Daily Chart
And inside of
each Weekly
Swing we see
Daily patterns.
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And we could split the Daily

chart down to the next “5x”
multiple, (78 min)and see the
same patterns.
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It doesn’t matter what

instrument, or how we
view the chart….the 5x
relationship is there.
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For now I just want you to

understand that Markets are
Fractal and larger timeframe
moves have smaller timeframe
patterns inside of them.
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As we move forward, we’ll show

how those smaller-timeframe
patterns can clue you in to the
actions of the larger timeframes.
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Section Summary
• Fractals are just smaller things that combine to
create bigger things…..
• We define “bigger” and “smaller” with markets
based on a 5x multiplier.
• And we often (but not always) see five distinct
“waves” of the child timeframe inside one parent
timeframe price swing.
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III: Understanding
Trends with Price
Fractals
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There are two major rules

for Price Fractals:
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1) Larger Timeframes
establish and dominate
the trend.
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Larger Timeframes = Trend

The Monthly Chart, and
to a smaller degree the
Weekly Chart, establishes
the main trend of the
market.
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2) Reversals start from the

“inside-out” with smaller
timeframes first, and
propagate upwards.
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Reversals Start Small

Reversals start from the
very smallest
timeframes, and
“propagate” upwards.
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By understanding the
trend condition at each
Parent/Child timeframe on
the chart…..
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…I already have a much

better sense of where the
chart has been, and where
it’s likely to go.
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In fact, I could use only a

Fractal Chart Series to
trade from if I had to.
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Application 1: We will be able

to differentiate a “pullback”
on the daily chart vs. the
beginning of a correction.
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Pullbacks….
….vs.
Corrections.
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Application 2: We will be able

to read the “child”
timeframes to see when that
pullback is about to reverse.
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Application 3: We will also be

able to spot potential
reversals before they “change
polarity.”
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Potential
Reversals
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Let’s go back to our two

main price action rules.
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1) Larger Timeframes
establish and dominate
the trend.
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This means when a larger

“parent” timeframe trend is
in play, you will see pullbacks
on the “child” timeframes.
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2) Reversals start from the

“inside-out” with smaller
timeframes, and
propagate upwards.
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This means that we’ll see

this “change in polarity”
show up on the shorter
timeframe charts first.
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Fractal Reversals
• Trends/Reversals begin from the inside-out.
• The smallest Intraday timeframes will start the
move.
• Followed by Daily timeframes, propagating
to….
• Weekly Timeframe charts, and then finally….
• Monthly Timeframe charts.
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Confused about what to do from here?

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1) Define what your “signal” chart is. For swing

traders, this will generally be a Daily chart. For
Daytraders, this will be a smaller time-or-tick
chart.
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2) Add an “anchor” chart that is either 5x or

25x larger than your signal chart.
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3) Trade your signal chart as before, but trade

in the direction of the swings on that anchor
chart!
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4) Just stick to adding one additional

timeframe for now. No need to add a full
fractal series. Master that parent/child
relationship first before adding more.
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Let’s move over to the charts for a quick

example on the NQ….
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Questions?

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How do fractals apply to financial markets?

How do fractals apply to financial markets?

What are the two main rules for price fractals?

What are the two main rules for price fractals?

1

PRICE ACTION MADNESS

Starting 1900 CT tonight

Goals for Tonight

I: What are Fractals?

“Fractal” means that

…with these “smaller”

This entire tree is

You can see in this

Each “cone”. is made

This Fern leaf is made up

Even the roadway

If you think about it, Financial

It’s made up from millions of

And as we’ll see later, it

And you’ll also see how

II: How do Fractals

Markets do the same thing as

Larger timeframe swings are

We use a “Factor of Five”

Fractal Timeframe Series

Fractal Timeframe Series

Fractal Timeframe Series

Fractal Timeframe Series

Let’s see an example with

And we could split the Daily

It doesn’t matter what

For now I just want you to

As we move forward, we’ll show

There are two major rules

Larger Timeframes = Trend

2) Reversals start from the

Reversals Start Small

…I already have a much

In fact, I could use only a

Application 1: We will be able

Application 2: We will be able

Application 3: We will also be

Let’s go back to our two

This means when a larger

2) Reversals start from the

This means that we’ll see

Confused about what to do from here?

1) Define what your “signal” chart is. For swing

2) Add an “anchor” chart that is either 5x or

3) Trade your signal chart as before, but trade

4) Just stick to adding one additional

Let’s move over to the charts for a quick

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