Our Methodology
Understanding the Momentum Cycle Model
What is the Momentum Cycle Model?
The Momentum Cycle Model (MCM) is a framework for understanding how forex markets move through predictable phases. Instead of seeing price action as random noise, MCM identifies four discrete states that markets cycle through:
1. Accumulation
Consolidation phase
2. Markup
Uptrend phase
3. Distribution
Topping phase
4. Markdown
Downtrend phase
"When momentum aligns, we move." Our reports identify which phase each pair is in and the most likely next phase, giving you actionable context for trade decisions.
The Momentum Cycle Model
The Four Market Phases
Phase 1: Accumulation
Market Characteristics: Low volume, tight trading range, horizontal price action. Smart money quietly builds positions without moving price significantly.
What You'll See:
- Tight consolidation range
- Low volatility (narrow ATR)
- Volume declining over time
- Support/resistance well-defined
- Price respecting range boundaries
Trading Strategy:
- Mark accumulation range boundaries
- Wait for breakout confirmation
- Avoid trading inside the range (chop)
- Watch for volume increase on breakout
- Prepare for next phase (Markup or Markdown)
Example: EUR/USD trading between 1.0850-1.0950 for 2 weeks with declining volume. Breakout above 1.0950 with volume spike signals transition to Markup.
Phase 2: Markup
Market Characteristics: Trending upward with higher highs and higher lows. Volume increases on rallies, decreases on pullbacks. Smart money lets retail chase.
What You'll See:
- Series of higher highs and higher lows
- Volume expanding on upward moves
- Demand zones holding on pullbacks
- Bullish candle patterns dominating
- Moving averages sloping upward
Trading Strategy:
- Buy dips to fresh demand zones
- Trail stops below higher lows
- Take partial profits at supply zones
- Avoid shorting against the trend
- Watch for distribution signs (exhaustion)
Example: Gold rallying from 2,650 → 2,720 → 2,780 over 5 days with strong volume on each leg up. Pullbacks to 2,710 and 2,745 held as fresh demand zones.
Phase 3: Distribution
Market Characteristics: High volume but no upward progress. Price makes multiple attempts at highs but fails. Smart money exits positions into retail buying.
What You'll See:
- Choppy price action near highs
- High volume but no breakout
- Bearish divergence (price up, momentum down)
- Wicks rejecting higher prices
- Lower highs starting to form
Trading Strategy:
- Take profits on long positions
- Avoid buying near distribution highs
- Look for short entries on failed rallies
- Tighten stop losses
- Prepare for Markdown phase
Example: USD/JPY attempting to break 152.00 three times with high volume but failing each time. Each rejection creates supply zones. Eventually breaks down to 150.50.
Phase 4: Markdown
Market Characteristics: Trending downward with lower highs and lower lows. Volume increases on selloffs. Stop losses cascade. Smart money already exited or shorting.
What You'll See:
- Series of lower highs and lower lows
- Volume expanding on downward moves
- Supply zones holding on rallies
- Bearish candle patterns dominating
- Moving averages sloping downward
Trading Strategy:
- Short rallies to fresh supply zones
- Trail stops above lower highs
- Take profits at demand zones
- Avoid buying the dip too early
- Watch for accumulation signs (basing)
Example: EUR/USD falling from 1.1050 → 1.0950 → 1.0850 over 3 days. Rallies to 1.0980 and 1.0920 both rejected at supply zones with volume.
Supply & Demand Zone Analysis
Supply and demand zones are price levels where institutional orders create significant support or resistance. We rate zones based on strength and test history.
Demand Zones (Support)
Price levels where buying pressure overwhelms selling:
- Fresh zones (untested): Highly likely to hold
- Tested once: Likely to hold
- Tested 2-3x: Possible to hold (weakening)
- Tested 4+x: Possible break (degraded)
Identification: Sharp price rejection UP with bullish engulfing candle or hammer pattern. High volume spike on bounce. Proximity to current price matters (within 1-2% = actionable).
Supply Zones (Resistance)
Price levels where selling pressure overwhelms buying:
- Fresh zones (untested): Highly likely to hold
- Tested once: Likely to hold
- Tested 2-3x: Possible to hold (weakening)
- Tested 4+x: Possible break (degraded)
Identification: Sharp price rejection DOWN with bearish engulfing or shooting star pattern. High volume spike on rejection. Fresh zones more reliable than tested zones.
Important: Zones created during news spikes have lower conviction than zones formed on organic price action. Our reports note which zones are news-driven vs. legitimate institutional activity.
Supply & Demand Zones in Action
Price bounces from demand zone (support) and rejects at supply zone (resistance)
Liquidity Hunt Mapping
Liquidity hunts occur when institutions sweep clusters of stop-loss orders above resistance or below support before reversing direction. Understanding where stops cluster helps you avoid getting caught in these moves.
Buy-Stop Clusters
Retail traders place buy-stops above resistance:
- Above previous swing highs
- Above round numbers (Gold: 2700, 2750, 2800)
- Above trendline resistance
- Just above supply zones
Hunt Pattern: Quick spike up → sweep stops → immediate reversal down
Sell-Stop Clusters
Retail traders place sell-stops below support:
- Below previous swing lows
- Below round numbers (EUR/USD: 1.0000, 1.0500)
- Below trendline support
- Just below demand zones
Hunt Pattern: Quick spike down → sweep stops → immediate reversal up
How We Use This:
Our reports identify high-density stop clusters and rate the hunt likelihood (highly likely, possible, unlikely). If a hunt is highly probable, we note the expected pattern (spike → reversal) and adjust entry zones accordingly.
Fear Factor Meter (1-10)
The Fear Factor Meter aggregates four key market indicators to gauge overall sentiment. This helps determine whether we're in a risk-on (greed) or risk-off (fear) environment.
FEAR [🔴🔴🟠🟠🟡🟢🟢⚪⚪⚪] GREED
▲
Score: 1-10
Inputs (weighted):
- DXY (30%): Dollar strength/weakness
- VIX (25%): Volatility index (fear gauge)
- US10Y (25%): Treasury yields (risk appetite)
- COT Positioning (20%): Institutional sentiment
Interpretation:
- 1-3 (Extreme Fear): Capitulation, possible buy opportunity
- 4-6 (Neutral): Mixed signals, wait for clarity
- 7-10 (Extreme Greed): Euphoria, possible distribution
Example: DXY rising (+0.5%), VIX spiking to 22 (+15%), US10Y falling (-5 bps), COT net short Gold → Fear Factor: 3/10 (Risk-off environment, USD strength likely, Gold pressure possible)
How We Frame Our Reports
Authoritative Without Bias
Our reports use probabilistic language to convey conviction levels without making absolute predictions. Markets are probabilistic, not deterministic—we give you the odds, you make the decisions.
✅ We DO:
- Use qualitative terms: "highly likely", "probable", "possible"
- Present both bull AND bear scenarios
- Assign conviction levels to each scenario
- Use conditional logic: "IF X → likely Y"
- Note invalidation levels clearly
- Integrate fundamentals + technicals
❌ We DON'T:
- Make absolute predictions ("will", "must", "definitely")
- Use hype language ("moon", "crash", "rocket")
- Show directional bias without evidence
- Ignore fundamentals for pretty chart patterns
- Chase narratives or confirmation bias
- Give financial advice (education only)
Probability Language Hierarchy:
- Highly likely / Strong probability → Highest conviction
- Likely / Probable → High conviction
- Possible / Could / May → Moderate conviction
- Less likely / Lower probability → Weak conviction
- Unlikely → Very weak conviction
Example Report Framing:
"Gold highly likely to test 2750 resistance. IF break confirmed with volume → possible extension to 2780. IF rejection → probable retest of 2720 demand. Retail Sales Wednesday presents moderate risk—IF beats consensus, possible liquidity hunt below 2700."
Daily Report Structure
Each daily session report (Asian, London, NY) follows an 11-section framework designed for quick decision-making:
Session Snapshot
Factual data: OHLC, current Momentum Cycle phase, volume context, news catalysts
Fundamental Drivers
Economic events, central bank policy, macroeconomic context (2-3 sentences)
News Risk Assessment
Event risk level (None/Low/Medium/High), next major event, safe trading windows
Momentum Cycle State
Current phase + probable next phase with conviction level
Supply/Demand Zones
Key support/resistance zones with strength ratings and hold probability
Support/Resistance Matrix
Specific price levels with distance from current price and conviction ratings
Liquidity Hunt Map
Stop cluster locations above/below price with hunt likelihood assessment
Fear Factor Meter
1-10 sentiment score with inputs (DXY, VIX, US10Y, COT) and interpretation
Directional Bias
Primary scenario (base case) + Alternate scenario with triggers and conviction levels
Action Zones
Specific trade setups with entry, TP1/TP2, SL, R:R, and conviction ratings
Momentum View
ONE sentence integrating all analysis (Momentum Cycle + levels + events + risk)
OHLC Candlestick Visualization
Every report includes Session Snapshot data (Open, High, Low, Close) with an adaptive candlestick visual showing price action at a glance:
Bullish Candlestick Example
Close > Open = Bullish (green filled body)
Upper wick shows rejection of highs
Lower wick shows support found
Bearish Candlestick Example
Close < Open = Bearish (red hollow body)
Upper wick shows resistance met
Lower wick shows buying pressure
Risk Disclosure
This analysis is for educational purposes only. Markets are probabilistic, not deterministic. Even "highly likely" scenarios can fail. Always use proper risk management, position sizing, and stop losses.
Past performance does not guarantee future results. Forex trading carries substantial risk of loss. Never trade with money you cannot afford to lose. This is not financial advice—consult a licensed advisor before trading.
Ready to See It in Action?
Explore daily session reports applying the Momentum Cycle Model to 8 forex pairs.
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