Exploring Ilian Yotov's Quarter Point Theory: Refine Your Entry
The quarters theory challenges the notion that financial markets are chaotic and that market prices are random by demonstrating constant orderly movement of price from one Quarter point to the next. In this publication, I will delve into the fundamentals of Yotov's Quarter Point Theory, its significance, and how it can be applied effectively in forex trading.
What is Quarter Point Theory by Ilian Yotov?
Ilian Yotov's Quarter Point Theory is a technical analysis strategy used in forex trading to identify potential entry and exit points. The theory is based on the observation that currency prices tend to gravitate towards specific levels known as "quarter points," which are key psychological and technical levels in the market.
Key Concepts of Quarter Point Theory
• Quarter Points: These are price levels that divide a currency pair's price range into four equal parts. For example, if a currency pair is trading between 1.2000 and 1.3000, the quarter points would be 1.2250, 1.2500, and 1.2750.
• Psychological Levels: Quarter points often act as psychological barriers where traders tend to place buy or sell orders, causing price reactions at these levels.
• Support and Resistance: Quarter points can act as support and resistance levels, where prices may consolidate, reverse, or experience significant movement.
Identifying Quarter Points
To apply Quarter Point Theory, traders need to identify the high and low of a currency pair's price range. These values are then divided into quarters to determine the quarter points.
The quarters theory focuses on the 1000 pip range between major whole numbers in currency exchange. Each 1000 pip range can be divided into 4 equal parts called Large Quarters
Each Large quarter has exactly 250 pips (1000/4 =250).
A Large Quarter Point (LQP) is a price that marks the beginning and the end of each Large Quarter (250 pips range).
Large Quarter Points that coincide with Major whole numbers are called Major Large Quarter Points (MLQP). MLQP signals the end of a 1000 PIP range and the beginning of a new 1000 pip range.
A Major Small Quarter point is simple the number that coincides with a whole number, for example, 1.30, 1.31, 1.32, 1.33, 1.34…. Each of these numbers mark the beginning of a 100 pip range.
Here is an illustration of this:
Using Quarter Points in Forex
When you study price around this theory, you may notice that price has a tendency to print the high of the day or low of the day around quarter point levels. Here is a example of this over a 5 day period on EURUSD:
With this new-found knowledge, you could integrate this into your strategy. Once you have a directional bias for the day and you have an AOI for entry, you simply need to identify the quarter point within that range and anticipate a reaction at that level.
For a deeper dive into this theory, I highly recommend reading the original work by Ilian Yotov's. If you would like a free pdf copy, drop me a message or leave a comment, I'd be happy to share this with you.
Happy Trading
