VIDEO
HIGHLIGHT
Log InSign up
ICT Mentorship Core Content - Month 02 - Market Maker Trap False Flag
SummaryTranscriptChat

ICT Mentorship Core Content - Month 02 - Market Maker Trap False Flag

Lesson 7: Market Maker Trap of False Flags

In this lesson, the speaker discusses the market maker trap of false flags. False flags are patterns that classic chartists and pure chart pattern traders fall victim to. The speaker explains how to identify potentially bearish bull flags and false bear flags.

Introduction to False Flags

  • A false flag is a pattern that classic chartists and pure chart pattern traders will fall victim to.
  • As a new trader being introduced to the markets, the speaker fell victim to this particular pattern a lot as well.
  • The speaker explains how studying classic chart patterns is important in understanding continuation patterns like bull flags.

Understanding Bull Flags

  • A bull flag is a continuation pattern where sudden price rallies move into short-term consolidation before another leg higher.
  • Not all sudden price rallies that move into short-term consolidation are bull flags.
  • Retail traders often see this as a classic continuation by pattern but many times it results in a reversal.

Identifying Bearish Bull Flags and False Bear Flags

  • In mature bull trends or higher time frame distribution levels, price will post false bull flags.
  • Retail traders often see these as classic continuation buy patterns but they can result in reversals.
  • Understanding higher time frame charts and premium markets can assist in identifying potentially bearish bull flags or when not to expect another leg lower but instead a buy signal.
  • In mature bear trends or higher time frame accumulation levels, price will post false bear flags which retail traders often see as classic continuation sell patterns but many times they will reverse.

Graphic Depiction of Bull Flag Pattern

  • A graphic depiction of a bull flag shows that generally, there is a price leg up followed by small consolidation slanting lower before another impulse swing higher.
  • The first leg up in price is viewed as the flagpole and the small consolidation slanting lower is called the flag portion.
  • The measured move of a bull flag is calculated by measuring the flagpole on the first leg up and adding that to the move out of consolidation.

Understanding False Bull and Bear Flags

In this video, the speaker discusses how markets can give false bull and bear flags, which can be taken advantage of. The speaker explains how to identify these patterns and what to look for in higher time frame charts.

Identifying False Bull Flags

  • False bull flags can occur when a market is in an area of accumulation or when the trend is mature.
  • These patterns may materialize near the low and be seen as a continuation pattern, but they may not go down or only go down slightly before reversing abruptly and going higher.

Example of a False Bull Flag

  • A classic up where the market has moved up aggressively suddenly moved up higher with a small consolidation after that immediate rally up higher.
  • This would be viewed as a classic bull flag, but if we're just looking at one time frame and only focusing there, we have to have a certain measure of top-down analysis using higher time frame charts monthly weekly daily and at least a four-hour but preferably a daily chart that will give us indications that there's going to be more information that needs to be considered.
  • Unfortunately, this spool flag was the opposite; it gave us no advancement higher. The only thing it did was just breached above a previous area of consolidation.

Why Did the Bull Flag Fail?

  • We need to focus primarily on the bodies of the candles and price action first. Forget about wicks for now.
  • As price dropped lower, we rallied up tried to go lower again and finally ran through everybody that trades bull flags would have been excited about this move here breaking out. The only thing it did was trade just above this old high.

Conclusion

  • False bull and bear flags can occur when a market is in an area of accumulation or when the trend is mature.
  • It's important to use top-down analysis and higher time frame charts to get a better understanding of the market.
  • False patterns can be taken advantage of by being aware of them and not relying solely on classic patterns.

Understanding the Market

In this section, the speaker explains that the market is in an area of distribution and premium. They also discuss how to identify a bearish order block.

Identifying a Bearish Order Block

  • A bearish order block is identified by drawing a Fibonacci retracement from the high down to the low before a price swing up.
  • The market is currently in an area of distribution.
  • The market is in a premium market relative to its range.
  • The entire range can be viewed as a bearish order block.

Analyzing Price Action

In this section, the speaker analyzes price action on a four-hour chart and identifies areas of liquidity voids. They then zoom in on a five-minute chart to refine their analysis.

Analyzing Liquidity Voids

  • On a four-hour chart, there are two areas where the market created liquidity voids running up and then running down.
  • These areas are equivalent to what would be viewed as a bearish order block.
  • On a 15-minute time frame, there is a gap between the opening and closing candles that needs further analysis.
  • Zooming in on a five-minute chart, there are two candles going up right before the move lower.

Sensitivity on Selling Short

  • When we get into areas of heavy distribution like this, we see quick rallies up followed by slight drops lower which would look like bull flags. However, these scenarios are not bullish but rather create false moves that break lower.
  • When price starts to break down, we look at the up candles and their bodies and wicks on the low end. This is where all the sensitivity on selling short will be.

Trading Strategy

In this section, the speaker discusses a trading strategy for a turtle soup scenario.

Turtle Soup Scenario

  • A turtle soup scenario occurs when price starts to come up, then starts to break down.
  • The first return back to a bearish order block that comes in way of the opening is where you want to sell.
  • Your stop should be above what would be considered the bull flag's high.
  • The first objective would be to close the liquidity void that the false flag creates.

Understanding Market Breakdown

In this section, the speaker explains how to break down the market from a top-down perspective by defining it in terms of discount or premium. They also discuss how to use sentiment and institutional order flow to execute trades on lower time frames.

Defining the Market

  • The market can be broken down from a top-down perspective by defining it in terms of discount or premium.
  • Other traders will see a bullish scenario when there is a consolidation pattern sloping higher.
  • When the market breaks down, traders can sell short at that moment.

Bear Flag Continuations

In this section, the speaker discusses bear flag continuations and how they can lead to higher prices. They also explain how to identify false bear flags and buying opportunities.

False Bear Flags

  • A sudden decline followed by small consolidation sloping higher would typically be deemed as a classic bear pattern.
  • However, when looking at the daily chart, all price action below these lows indicates that this movement was just making a run one more time for stops below these candles.
  • When the market starts creating that pseudo bear flag, we don't see it as a bear flag but look at it as a buying opportunity.

Buying Opportunities

  • We could be buyers with a stop below the flag's low and an expectation of looking for upside objectives.

Understanding Price Action

In this section, the speaker discusses how to understand price action and identify classic chart patterns.

Identifying Liquidity Pools

  • The speaker suggests looking for liquidity pools to identify long-term scenarios.

Price Movement Analysis

  • The speaker analyzes price movement and identifies equal highs that could indicate a liquidity pool.
  • After retracement, the price rallies up into closing the range and blows through its high.
  • The bearish order block is swept through as well as old highs over here.

Classic Chart Patterns

  • The speaker explains that they look for reasons why other traders will view the opposite side of the marketplace by analyzing classic chart patterns and indicators.
  • They suggest going back through old data to find areas where bear flags were viewed as if it would call for lower prices but reversed and went long.
  • Similarly, they suggest looking for opportunities where the market showed a clear example of what would be viewed as a bull flag but created a high instead of going higher.

Turtle Soup Pattern

In this section, the speaker discusses how to identify turtle soup pattern in price action analysis.

Identifying Turtle Soup Pattern

  • The speaker explains that after rapid delivery on one side of the marketplace, it goes into consolidation before reaching specific levels of liquidity above or below the marketplace.
  • They explain that turtle soup pattern is identified when there is a decline consolidation followed by an initial leg lower just by a little bit violating short term lows before reversing.
Playlists: 2016 ICT Private Mentorship Core Content Month 02
Video description

2016 Premium ICT Mentorship Core Content Video Lectures Audio and visuals are exactly as they were distributed in October 2016. CFTC RULE 4.41 – HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN Trading performance displayed herein is hypothetical. Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance trading results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results. U.S. Government Required Disclaimer – Commodity Futures Trading Commission Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don’t trade with money you can’t afford to lose. This is neither a solicitation nor an offer to Buy/Sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this web site. The past performance of any trading system or methodology is not necessarily indicative of future results. Trade at your own risk. The information provided here is of the nature of a general comment only and neither purports nor intends to be, specific trading advice. It has been prepared without regard to any particular person’s investment objectives, financial situation and particular needs. Information should not be considered as an offer or enticement to buy, sell or trade. You should seek appropriate advice from your broker, or licensed investment advisor, before taking any action. Past performance does not guarantee future results. Simulated performance results contain inherent limitations. Unlike actual performance records the results may under or over compensate for such factors such as lack of liquidity. No representation is being made that any account will or is likely to achieve profits or losses to those shown. The risk of loss in trading can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. If you purchase or sell Equities, Futures, Currencies or Options you may sustain a total loss of the initial margin funds and any additional funds that you deposit with your broker to establish or maintain your position. If the market moves against your position, you may be called upon by your broker to deposit a substantial amount of additional margin funds, on short notice in order to maintain your position. If you do not provide the required funds within the prescribed time, your position may be liquidated at a loss, and you may be liable for any resulting deficit in your account. Under certain market conditions, you may find it difficult or impossible to liquidate a position. This can occur, for example, when the market makes a “limit move.” The placement of contingent orders by you, such as a “stop-loss” or “stop-limit” order, will not necessarily limit your losses to the intended amounts, since market conditions may make it impossible to execute such orders.