AMD within the trading day (power of three)

You can explain how the power-of-three idea maps the AMD phases onto one daily candle and why the shape is easy to see afterwards and hard to trade in advance.

A familiar daily shape

Look through a few months of daily candles, and a shape keeps appearing: a long wick on one side and a body running the other way. On a bullish day, the price first fell below the open, then rose and closed near the high.

In online trading education, this shape is often explained as AMD playing out within a single day, under the name power of three.

Open, fake, run

Power of three applies the AMD model from this chapter's first lesson to one trading day, or one daily candle:

Accumulation: around the open, the price moves in a narrow range, much like the opening range from chapter 8.
Manipulation: the price moves against the day's later direction. On a bullish day, it falls below the open, often through the early session's low, triggering stops.
Distribution: the main move in the other direction for the rest of the day.

In the fictional chart of one day in hourly candles, the price opens at 100.13. In the first hours, it falls to 99.02. From hour 8 on, it rises steadily to 101.94 and closes at 101.60.

The ingredients are familiar: an opening range, a sweep of stops below early lows, as in the lesson on liquidity grabs, and a trend for the rest of the day. The idea that the daily candle's open is a key reference point is reasonable, since it is where the day's trading started.

The model's popular presentation goes further: that large players deliberately push the price against the day's direction to collect stops before the real move. As in the earlier lessons, there is evidence that stops cluster and can cause fast moves. There is no evidence that a single daily pattern reveals anyone's plan.

One candle, three phases

Here is the same day as a single daily candle.

Open: 100.13.
Low: 99.02, reached in hour 6. On the daily candle, it is the long lower wick.
High: 101.94, in hour 20.
Close: 101.60. The green body runs from the open to the close.

Seen as one candle, the day is a strong bullish candle with a long lower wick, close to the hammer shape from chapter 2. Seen hour by hour, it is a fall followed by a rise. Afterwards, both views make the three phases obvious. In hour 6, though, a trader could not know whether the fall was the false move of a bullish day or the start of a bearish one. On a bearish day, the same early fall would simply continue.

Common mistakes

Reading the pattern before the day closes. It is defined by the close.
Buying every early dip below the open. On down days, the dip is the start of the move.
Forgetting the higher timeframe. The day's direction often depends on the bigger trend.
Believing a secret schedule. The phases vary in timing from day to day.

The takeaway

Power of three reads a daily candle as AMD. Hindsight makes it look easy.

Check yourself

Quick quiz

4 questions. Instant feedback, nothing is saved.

1Tap the hour that set the day's low.

Tap the chart.

Hour 6 reached 99.02, the day's low. In power-of-three terms, the end of the move against the later direction.
2How does power of three describe a bullish day?

The idea maps AMD onto a single day: accumulation near the open, manipulation below it, distribution upward.
3On the daily candle, where does the manipulation phase appear?

The early fall to 99.02 left a wick, while the main move from below the open to the close formed the green body.
4Why is the pattern hard to trade in real time?

On a bearish day, the same early move would simply continue. The shape is clear only after the close.

of 4 correct.

Sources

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