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Momentum Loss Pattern
(Three drives/Multiple drives)
The pattern we see that causes directional shift in price
Commonly referred to as "Three Drives" but can be any number of moves. The number required for price to turn around is dynamic, not scripted
Never buy on the first drive down unless upside momentum is extremely high
Wait for downside momentum to be lost, then buy
Anatomy
Impulse move from takers sparks momentum
The majority of the time from an Open Interest wipe, causing toxic flow
Momentum sustains until takers exhaust into liquidity
Passive side soaks & takers give up
Why does this occur?
1. Spreads get blown out from toxic flows
- Orderbooks thin out because liquidity providers don't fight momentum. Makers will thin out liquidity to avoid getting run over & replenish the book depth once momentum fades. This makes it easier for price to move
2. Limit chasers - Informed traders & more directional liquidity providers will chase with limit orders as price moves. This supports & sustains the momentum
3. Faders - There's always someone trying to bet against & top tick a move. Once the trade goes against them they close out with market orders assisting momentum. More often than not these are the midwitt traders
4. Momentum algos - Once momentum begins, algos will pick up on this and join in. This often occurs in the form of twaps
5. Momentum apes - Informed discretionary traders that understand momentum, don't fight the flow but rather go with it. They use a combination of market orders/limit chase to execute & go with the flow
All of this logic applies to both top & bottom formations
I am not covering every detail to simplify somewhat & keep a bit of the spice for myself
Study multiple drives
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Hey @elonmusk will this party also include the limits to powers of these three letter agencies that are keeping an eye on entire internet. Without that there’s no privacy, no freedom of speech and no actual meaning of @DOGE! Efficiency doesn’t come from sneaking what others do!
I am done with gatekeeping for years!
The $25 - $1,000,000 challenge continues.
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16 trades to $1M+
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