Quarterly Theory ICT 03 [TradingFinder] Precision Swing Points

🔵Introduction

Precision Swing Point (PSP) is a divergence pattern in the closing of candles between two correlated assets, which can indicate a potential trend reversal. This structure appears at market turning points and highlights discrepancies between the price behavior of two related assets.

PSP typically forms in key timeframes such as 5-minute, 15-minute, and 90-minute charts, and is often used in combination with Smart Money Concepts (SMT) to confirm trade entries.

PSP is categorized into Bearish PSP and Bullish PSP:

Bearish PSP: Occurs when an asset breaks its previous high, and its middle candle closes bullish, while the correlated asset closes bearish at the same level. This divergence signals weakness in the uptrend and a potential price reversal downward.

Bullish PSP: Occurs when an asset breaks its previous low, and its middle candle closes bearish, while the correlated asset closes bullish at the same level. This suggests weakness in the downtrend and a potential price increase.




🟣Trading Strategies Using Precision Swing Point (PSP)

PSP can be integrated into various trading strategies to improve entry accuracy and filter out false signals. One common method is combining PSP with SMT (divergence between correlated assets), where traders identify divergence and enter a trade only after PSP confirms the move.

Additionally, PSP can act as a liquidity gap, meaning that price tends to react to the wick of the PSP candle, making it a favorable entry point with a tight stop-loss and high risk-to-reward ratio. Furthermore, PSP combined with Order Blocks and Fair Value Gaps in higher timeframes allows traders to identify stronger reversal zones.

In lower timeframes, such as 5-minute or 15-minute charts, PSP can serve as a confirmation for more precise entries in the direction of the higher timeframe trend. This is particularly useful in scalping and intraday trading, helping traders execute smarter entries while minimizing unnecessary stop-outs.


🔵How to Use

PSP is a trading pattern based on divergence in candle closures between two correlated assets. This divergence signals a difference in trend strength and can be used to identify precise market turning points. PSP is divided into Bullish PSP and Bearish PSP, each applicable for long and short trades.

🟣Bullish PSP

A Bullish PSP forms when, at a market turning point, the middle candle of one asset closes bearish while the correlated asset closes bullish. This discrepancy indicates weakness in the downtrend and a potential price reversal upward.

Traders can use this as a signal for long (buy) trades. The best approach is to wait for price to return to the wick of the PSP candle, as this area typically acts as a liquidity level.

f PSP forms within an Order Block or Fair Value Gap in a higher timeframe, its reliability increases, allowing for entries with tight stop-loss and optimal risk-to-reward ratios.






🟣Bearish PSP

A Bearish PSP forms when, at a market turning point, the middle candle of one asset closes bullish while the correlated asset closes bearish. This indicates weakness in the uptrend and a potential price decline.

Traders use this pattern to enter short (sell) trades. The best entry occurs when price retests the wick of the PSP candle, as this level often acts as a resistance zone, pushing price lower.

If PSP aligns with a significant liquidity area or Order Block in a higher timeframe, traders can enter with greater confidence and place their stop-loss just above the PSP wick.

Overall, PSP is a highly effective tool for filtering false signals and improving trade entry precision. Combining PSP with SMT, Order Blocks, and Fair Value Gaps across multiple timeframes allows traders to execute higher-accuracy trades with lower risk.





🔵Settings

Mode:

• 2 Symbol: Identifies PSP and PCP between two correlated assets.
  
• 3 Symbol: Compares three assets to detect more complex divergences and stronger confirmation signals.
  

Second Symbol: The second asset used in PSP and correlation calculations.
Third Symbol: Used in three-symbol mode for deeper PSP and PCP analysis.

Filter Precision X Point: Enables or disables filtering for more precise PSP and PCP detection. This filter only identifies PSP and PCP when the base asset's candle qualifies as a Pin Bar.

Trend Effect: By changing the Trend Effect status to "Off," all Pin bars, whether bullish or bearish, are displayed regardless of the current market trend. If the status remains "On," only Pin bars in the direction of the main market trend are shown.

Bullish Pin Bar Setting: Using the "Ratio Lower Shadow to Body" and "Ratio Lower Shadow to Higher Shadow" settings, you can customize your bullish Pin bar candles. Larger numbers impose stricter conditions for identifying bullish Pin bars.

Bearish Pin Bar Setting: Using the "Ratio Higher Shadow to Body" and "Ratio Higher Shadow to Lower Shadow" settings, you can customize your bearish Pin bar candles. Larger numbers impose stricter conditions for identifying bearish Pin bars.

🔵Conclusion

Precision Swing Point (PSP) is a powerful analytical tool in Smart Money trading strategies, helping traders identify precise market turning points by detecting divergences in candle closures between correlated assets. PSP is classified into Bullish PSP and Bearish PSP, each playing a crucial role in detecting trend weaknesses and determining optimal entry points for long and short trades.

Using the PSP wick as a key liquidity level, integrating it with SMT, Order Blocks, and Fair Value Gaps, and analyzing higher timeframes are effective techniques to enhance trade entries. Ultimately, PSP serves as a complementary tool for improving entry accuracy and reducing unnecessary stop-outs, making it a valuable addition to Smart Money trading methodologies.