Three-Phase Trading Strategy

The Three-Phase Trading Strategy is a novel approach to trading, which is based on a profound comprehension of the three distinct stages of market price action: Contraction, Expansion, and Trend-setting. Unlike other trading strategies that one may come across online or elsewhere, this strategy has only been utilized by institutional traders and is now being shared by ex-members of the system who have their own establishments. The goal of this strategy is to shed light on the ways that institutional traders benefit from retail traders and present retail traders with the chance to imitate their approach. By following the three-phase plan illustrated in this strategy, traders can gain a thorough knowledge of the market and possibly attain success in their trading efforts.

What is the Three-Phase Trading Strategy?

The Three-Phase Trading Strategy is a method of trading that takes advantage of the three stages of the market: Contraction, Expansion, and Trend-setting. As the market contracts, there is a decrease in institutional volume and a narrowing of prices that form ranges. During the expansion phase, institutional traders start to build up their positions by driving prices down or up, creating “false breakouts.” The trend-setting phase is when institutional traders start selling off or longing their positions. This makes prices move quickly, which takes out retail traders from the market in the process. This strategy helps traders figure out when these phases are happening and aims to give them the same edge as institutional traders.

Three-Phase Trading Strategy Strategy

The Three-Phase Trading Strategy is an exclusive trading approach that attempts to replicate the moves made by institutional traders. It allows us to comprehend the three stages of price movement: contraction, expansion, and trend-setting phases.

For a long trade setup, traders should first identify a sideways trading range with horizontal trendlines signaling a contraction phase. Then, when the price breaks either up or down, it’s an expansion phase where institutional traders start buying. After this, when a bullish reversal candlestick pattern appears, traders may enter a long position.

For short trade setups, traders need to anticipate a small phase of expansion before the trend-setting phase. If the price breaks down, it means that institutional traders are selling their positions, and traders can enter a short position.

No indicators need to be used for this approach, and it can be used in any timeframe though it is best for higher timeframes.

Buy Signal

Three-Phase Trading Strategy BUy Signal
Three-Phase Trading Strategy BUy Signal
  • Scan through the price chart for sideways trading (contraction), especially one forming a rectangular pattern.
  • Wait for a price decline resembling a downside break, which is the phase of expansion likely to entice retail sellers into the “bear trap.”
  • Be on the lookout for a bullish reversal candlestick pattern, which indicates that institutional traders are prepared to profitably close their longs.
  • You may enter the trade at the opening of the candle following the reversal candle.
  • Place a stop-loss order beneath the entry candle, or depending on your money management strategy.
  • Traders may close their positions based on a predetermined risk-to-reward ratio or when the price reaches a significant level of resistance.

Sell Signal

Three-Phase Trading Strategy Sell Signal
Three-Phase Trading Strategy Sell Signal
  • Look for a small contraction phase followed by a small expansion phase in the upward direction. If institutional traders want to sell the asset, the
  • expansion phase is likely to be brief and serve as a “bull trap.”
  • Be on the lookout for a bearish reversal candle pattern, a sign that institutional traders are preparing to offload their positions.
  • You may open a sell position on the next candle after the bearish reversal candle.
  • Place a stop-loss order above the entry candle or in line with your money management plan.
  • Traders can get out of their positions when the price hits a key support level or when the risk-to-reward ratio is met.

Three-Phase Trading Strategy Pros & Cons


  • The Three Phase Trading Strategy is based on an understanding of how market prices move, leading to a more informed way of trading.
  • There are no indicators needed for the strategy, which can make trading easier.
  • This strategy intends to imitate the trading practices of institutional traders, which may increase profitability.


  • Executing the strategy requires skill and experience, as traders need to correctly identify the three phases of price action.
  • Implementing a strategy can be tough when markets are unsteady or when news events arise that disrupt the predicted price changes.
  • This strategy does not guarantee success and could result in losses if traders don’t comprehend and stick to the trading regulations.


In conclusion, trading with the Three Phase Trading Strategy is an innovative technique that takes advantage of the market’s three distinct phases of price movement. Traders can learn to spot opportunities to buy or sell like institutional traders, who are known to be among the most successful traders in the market, by understanding the dynamics of the contraction, expansion, and trend-setting stages. The method can be used by traders of any skill level because it is straightforward and does not involve the use of indicators. Keep in mind that no trading method is foolproof, therefore traders should always use caution and good risk management to limit their exposure to significant losses.

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