JAY FOREX HOUSE

POWER OF THREE
CONTINUATION & REVERSAL PATTERN
ICT, SMART MONEY PATTERNS AND WYCKOFF SIMPLIFIED.

DISCLAIMER
I [JAYFX] made this notes based on my understanding of Smart Money Concept, I.C.T. and Wyckoff. This
was drafted using MULTIPLE laws based off on ICT, supply and demand (CHoCH, law of cause and effect,
smart money patterns) and Wyckoff Schematics and not assumptions so it's recommended to have basic
knowledge of the above stated.
https://t.me/JayFxHouse

INTRODUCTION TO P.O.3
We all understand that price is fractal right, but can only make 3 different moves, either a
TREND, REVERSING OR CONSOLIDATING. When it comes to technical analysis, data is needed
and we all understand this is why the higher timeframe is important because they present more
data for more accurate future predictions of the market. Now this patterns where created to
aid in simplifying the higher timeframe date for technical data.

HOW THIS PATTERNS WHERE DRAFTED

According to Wyckoff, the market can be understood and anticipated through detailed analysis
of supply and demand, which can be ascertained from studying price action, volume and time.

Smart money concept; on the other hand is a concept of supply and demand which basically
from my understanding is a concept based on 3 major points; Market structure, Price Range
(order flow) and liquidity.

Market structure; Market structure is defined as the simplest form of price movement reading
from a swing high to a swing low creating internal (mini) structures along the way. Market
structure is a trend following tool so it's read off the trend of the market creating a HH and LH
or a LL and HL.

Trend Range; When it comes to understanding Price Range, I‘m not talking about the logic
behind the movement of price, this would come in later. Here I am talking about how price
moves from one point to another forming a strong high, weak low or a strong low, weak high.
From my understanding we have strong highs and lows and weak highs and lows. Strong highs
and lows are areas we look to trade away from. Weak highs and lows are areas we look to
target. And once there’s a break of structure, a new range is formed. Break of structure, this
only comes when a strong/weak high or low is broken from the strong high/low it means a
reversal in trend is upon us, if a weak high/low is broken it means a continuation of the trend.
In the creation of this, from the strong high/low to the weak high/low is called a trend range, a
new range is formed after every break of structure.

Liquidity: They are two types of Liquidity in the market. Internal & External liquidity.
The Internal: is defined as every internal or sub structure high/low created within a range after
a break of swing high or low (strong or weak). This becomes a target for retracement as the
institutions stop's out the retails in the same process tricking retails into a fake reversal as they
focus on the sub structures, while they mitigate off a premium or discount major structure
(Supply or demand zone).
The external: This is defined as the weak high or low created against the trend after swing
high/low was broken which commenced counter trend retracement to grab Internal Liquidity,

2
https://t.me/JayFxHouse

from my observation Market moves in a repeating circle of the routine stated above over and
over again.

ABOUT THE POWER OF THREE PATTERN

The power of 3 is a system mainly used for higher timeframe trend confirmation, but with
proper understanding can be used on the lower timeframe as confirmation also. This was
created to help in spotting an internal liquidity grab (retracement) from a reversal and to
simplify the Wyckoff method of trading to be able to spot the right trend, change in structure
for joining the right trend in a continuation, and spotting a reversal from an internal liquidity
grab in an early stage. This concept was derived first from the ICT market maker method
concept of 3 and tested on Wyckoff Schematics and SMC Liquidity concept.

DRIVE OF P.O.3 PATTERNS

This concept was derived off the concepts of 3 by ICT in the market maker method, which
states that "Every schematic has 3 drives before a change in trend or structure, if price fails to
reverse after the 3rd drive the trend can continue". This concept simplifies a lot and made
identifying continuation trend on the smart money concept a lot easier. When later tested on
Wyckoff it gave a reversal concept which developed the patterns presented on this book which
are the major basic patterns. With greater understanding, probably more patterns could be
formed, as I am currently testing the on Elliot wave and falcon method of trading (probably get
a lower timeframe based pattern who knows). My aim is to develop a system less complicated
and easily understandable method of trading for both beginners and pro traders. THIS IS NOT
BASED ON LINE CHARTS MOVEMENTS but presented by the present price order flow. (E.g)
Change in trend, law of supply & demand, law of cause & effect, liquidity poll, and higher
timeframe structure/trend. It’s possible for anyone to modify a pattern off this theory if
following the rules correctly.

KEY FOCUS WHEN LOOKING FOR P.O.3

 Market Structure
 Weak and strong High/Low
 Premium and discount
 Supply and Demand
 Fair value GARP (FVG)
 Liquidity (Internal/External)

CONTINUATION PATTERNS
POINT 1 (P1): This is basically a Supply/Demand zone with a clear FVG below for supply and
above for demand zone which would be a center of attraction for price when retracing, created
within the range of a structure at premium in a downtrend and discount in an uptrend, before a
break of swing high or low.

3
https://t.me/JayFxHouse

POINT 2 (P2): First swing High/low test of premium or discount level after a break of swing
structure low/high which never completely cleared Internal Liquidity or never properly
mitigated the Supply or demand zone of (P1). In some scenarios point 2 could be a test of the
opening of the supply zone completely filling just the FVG, in some scenarios it could be just a
50% of the. This is marked as confirmation of the pattern as it creates the inducement needed
for the continuation of the trend, a point 2 clear's internal range liquidity and sometimes just
the 50% of it, but would always give an inducement so as not to complete the intensions of the
market makers and becomes an inducement to the closest supply or demand presented by
point 1 (P1). If point 2 (P2) should by chance complete the intensions by mitigating the P1, they
is a high probability that your markup isn’t correct and might be a reversal pattern on a higher
timeframe. And if verified correctly a stop hunt shouldn’t be rare in this scenario. Point 2 is
important because without it your pattern is completely wrong. Every point 1 mark up need’s
an inducement to be respected. In continuation pattern 2, point 2 clears out the weak low/high
before point 3 comes giving a fake CHoCH, and create a trap point 1 within the range of Point 2,
trapping agitated and anxious traders in the process. Personally I love pattern 2 playing out.

POINT 3: Point 3 also known as the mitigation or Entry point. It’s the 2nd swing/major
structure test of the premium or discount after point 2 which is expected to mitigate a
significant point (point 1) by clearing off point 2 as expected. This creates an area of focus
which gives us the confirmation on the lower timeframe for smart money confirmation entry or
whichever lower timeframe confirmation you personally use for trading.

BEARISH CONTINUATION PATTERN 1

LIVE CHARTS SCREENSHOT OF BEARISH PATTERN 1.

https://www.tradingview.com/x/bjJ11Sz6/1H
https://www.tradingview.com/x/x2bwQNzY/DAILY

4
https://t.me/JayFxHouse

BEARISH CONTINUATION PATTERN 2

LIVE CHARTS OF BEARISH PATTERN 2.

https://www.tradingview.com/x/1fUvgvmd/1H
https://www.tradingview.com/x/ps1jei0K/4H
https://www.tradingview.com/x/6vCfNx9m/DAILY

BULLISH CONTINUATION PATTERN 1

LIVE CHARTS OF BULLISH PATTERN 1.

https://www.tradingview.com/x/XspC6Qao/4H
https://www.tradingview.com/x/og1dYjgy/8H
https://www.tradingview.com/x/yGome09p/ Daily

5
https://t.me/JayFxHouse

BULLISH CONTINUATION PATTERN 2

LIVE CHARTS OF BULLISH PATTERN 2

https://www.tradingview.com/x/FveACUbX/ 8H
https://www.tradingview.com/x/xi78xcEY/ 4H
https://www.tradingview.com/x/zv3obcpk/ Daily

REVERSAL PATTERNS
With the understanding of continuation patterns been a smart money theory. Reversal patterns
come with the concept of Wyckoff theory, though it looks similar to the continuation patterns
but easily miscalculated when spotting a change in character. On the reversal pattern P.O.3 is
spotted twice, where the first is within the sub structure of the major trend from a higher
timeframe, where price Retraces back into a premium or discount zone of the major trend,
looking more like a higher timeframe continuation pattern, however on the reversal pattern
(P2) becomes the official low of the schematic as it moves into a demand/Supply zone clearing
off the official low of the major trend structure and also creates the mitigation point (point 3) of
the sub structure and also forms a new supply/demand zone within the reversal range for a
mitigation of p3 of the main structure, in the process of this (sub structure p3) presents a low
momentum reaction from the mitigated Sub structure P1 which brings in the presence of a
CHoCH (change of character), as Supply becomes stronger in a down trend and demand
becomes stronger in an uptrend.
In most scenarios the reversal pattern is higher timeframe P.O.3 continuation pattern of
which the reversal major structure P2is the higher timeframe P1. In the process of p3 of sub
structure being the P2 inducement the demand or supply zone is presented with a FVG within
the range of the structure which is formed by point 2, for a retracement back to form the major
trend (P3 re-test).
Explained and best understandable with the diagram below.

6
https://t.me/JayFxHouse

BULLISH REVERSAL PATTERN

LIVE CHART OF BULLISH REVERSAL PATTERN

https://www.tradingview.com/x/Z33MEDrc/Daily
https://www.tradingview.com/x/2yH5ubnz/Daily

7
https://t.me/JayFxHouse

BEARISH REVERSAL PATTERN

LIVE CHART OF BEARISH REVERSAL PATTERN

https://www.tradingview.com/x/PsB676Vw/8h
https://www.tradingview.com/x/o9aWiRF3/DAILY

FACTS ABOUT MAJOR STRUCTURE P3 REVERSAL PATTERNS

 Market moves in 3 phases (trend, consolidation or reversal). It's advisable to avoid the
market when it’s in a consolidation phase. Now with the P.O.3 pattern you can always
understand the right direction of the market knowing if a continuation pattern fails to hold
it becomes a reversal pattern and if a reversal fails to hold it becomes a continuation on a
lower or high timeframe.
 This can be present in a form of (LSPY) test or a re-test after a (UTAD or spring) when
viewed on Wyckoff. The concept of the reversal confirmation pattern is based off Wyckoff
theory, so at the end of your pattern, it should be easy spotting the Wyckoff schematic an
accumulation for bullish and distribution for bearish, in some scenarios the reversal pattern
might look messy if this occurs and in alliance with the higher timeframe trend and
structure, it's only a re-accumulation schematic but should still be easily stopped with P.O.3
continuation patterns with just minor observation as presented in the charts below p.0.3
reversal should be easily simplified with Wyckoff.

8
https://t.me/JayFxHouse

P.0.3 bullish reversal pattern.

Wyckoff view of the same chart.

This was created to give you an understanding that the P.O.3 patterns isn’t just an observation
pattern but a theory which can still be manipulated by the market makers or the laws guiding
supply and demand, so make sure to confirm on a multi timeframes in line with a lower
timeframe CHoCH before taking an entry.

9
https://t.me/JayFxHouse

RARE CHARTS OF P.O.3 MANIPULATED.

 Bearish pattern 2 spotted on a reversal zone, where P1 was manipulated into a monthly
PO3 bearish pattern 2.(P3 zone)
https://www.tradingview.com/x/wSceH9Yz/
 A rare chart where p3 never occurred in a bullish continuation pattern 1.
https://www.tradingview.com/x/oMCIfryy/
 A rare chart where P.O.3 bearish reversal pattern, sub structure P3 presented over 300+ pips and
created major structure P3 without a clearing P2 sub structure.
https://www.tradingview.com/x/rcW6GX2s/
 A rare chart of bearish continuation pattern 1, where price moved without p3 clearing out p2.
https://www.tradingview.com/x/RNXwWCrt/

10
https://t.me/JayFxHouse

PRACTICE.

BULLISH CONTINUATION PATTERN 1. ( monthly PO3 and weekly bullish pattern 1.)

Play out.

11
https://t.me/JayFxHouse

BEARISH CONTINUATION PATTERN 2

Play out.

12
https://t.me/JayFxHouse

BEARISH CONTINUATION PATTERN 1

Play out.

13
https://t.me/JayFxHouse

DAILY REVERSAL PATTERN AT P2 LEVEL.

Play out 1

14
https://t.me/JayFxHouse

Play out 2

Play out 3

15
https://t.me/JayFxHouse

To know more about the Author of this file;

For video explanation about the power of three strategy subscribe to my YouTube channel link below;
https://youtube.com/channel/UC6H1kBkgPKYIAg5DSvqUMzw

My telegram channels for other educational contents and swing ideas.

Forex: https://t.me/JayFxHouse
Crypto: https://t.me/JayCryptohouse

POWER OF THREE
CONTINUNATION/REVERSAL PATTERN.
ICT, SMART MONEY PATTERNS AND WYCKOFF SIMPLIFIED.

16