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23-ICT Mentorship Core Content - Month 3 - Market Maker Trap Trendline Phantoms

Last modified by Drunk Monkey on 2022-09-09 12:49
1 00:00:33,120 --> 00:00:41,790 ICT: Welcome back, folks, this is teaching number seven of eight for the month of November 2016. In the ICT mentorship, we're gonna be teaching trendline,
2 00:00:41,790 --> 00:00:54,210 phantoms or false trend lines. And the first is going to be diagonal trendline support. The priming is done by way of seeing the market begin to make higher
3 00:00:54,210 --> 00:01:07,290 highs and higher lows. The market appears to have an imaginary diagonal line it seems to repel price higher from retail traders will extend these imaginary
4 00:01:07,290 --> 00:01:18,180 lines into the future and attribute support theories to it. When price hits the extended imaginary diagonal line connecting higher lows, retail traders buy it
5 00:01:18,210 --> 00:01:30,570 then. Conversely, diagonal trendline resistance This is primed in the thought processes of retail traders. By seeing the market begin to make
6 00:01:36,450 --> 00:01:48,930 the market beginning to make lower highs and lower lows the market appears to have an imaginary diagonal line it seems to propel price lower from retail
7 00:01:48,930 --> 00:01:57,930 traders will extend these imaginary lines into the future and attribute resistance theories to them. When price hits the extended imaginary diagonal
8 00:01:57,930 --> 00:02:14,850 line connecting lower highs, retail traders short at that moment. Okay, trendline theory, now it's my press. It's it's my perspective that there's no
9 00:02:14,850 --> 00:02:26,670 basis on trendline theory in the form of diagonal support or diagonal resistance. And I believe it's it's basically an opinion, there's no statistical
10 00:02:26,670 --> 00:02:38,730 edge that I've been able to build with use of diagonal support or resistance in the form of trend lines. Now, I've been doing this for 24 years, coming up in
11 00:02:38,850 --> 00:02:47,340 just about the end of the month, we're actually producing this video and I will have been a trader for 24 years. And in 24 years, I've done a lot of things and
12 00:02:47,340 --> 00:02:56,070 analysis. And I was indoctrinated with trend lines when I first started. And to me it made perfect sense because I could see it in the past and knew all the
13 00:02:56,070 --> 00:03:04,320 books give us perfect examples where all works. But when we try to use the trendline idea, which loads the draw connections to which highs Do you draw
14 00:03:04,320 --> 00:03:13,590 connections to? And quickly all of a sudden, and it's like, oh, well, maybe this isn't as easy as I thought it was. But does price have an awareness of the point
15 00:03:13,620 --> 00:03:24,240 of trendline support? Or does price have an awareness of the point of trendline resistance, I'll submit to you that it does not price has no awareness of your
16 00:03:24,270 --> 00:03:33,870 trendline price doesn't respect what you have on your charts. Price only respects where the actual liquidity is in the marketplace. And because they
17 00:03:33,870 --> 00:03:43,920 can't see you because you're too small. The Marketplace sees where the large pools of liquidity are. That means in buying interest in selling interest, it's
18 00:03:43,950 --> 00:03:53,430 already in the marketplace in the form of protective sell stops protective buy stops or new buy stocks for long entries or new sell stops for selling entries.
19 00:03:54,090 --> 00:04:05,670 That's the only thing that makes price move. And it's going to be hinged and framed on the context of who is in play right now. What what smart money entity
20 00:04:05,670 --> 00:04:15,330 has the control of the marketplace at the moment, is it going higher based on their book in bullish? Or is it going lower based on their book being bearish.
21 00:04:15,870 --> 00:04:24,630 And that's what this mentorship teaches. It gives you those ideas that go into seeing where price is most likely going to go. And we don't subscribe to down
22 00:04:24,630 --> 00:04:35,820 sloping trend lines or up sloping trend lines to formulate ideas in which we find support or resistance based on an idea. Do banks associate value or
23 00:04:35,820 --> 00:04:44,580 prognostication on the basis of trendline theory? I'll submit to you No, they do not. Now for some that are in the financial industry. Maybe you're working at a
24 00:04:44,580 --> 00:04:53,400 bank. Maybe you have used them in the past and you've had success. I'm telling you since the banks don't have any association or prognostication placed on
25 00:04:53,610 --> 00:05:07,740 valuing a trendline level on a diagonal basis. And the reason why is because it's so subjective, you are associating future price movement to a level that
26 00:05:07,860 --> 00:05:17,970 hasn't been traded to yet. You're doing it on the basis of connecting two reference points in the past that don't have any bearing on what the future
27 00:05:18,060 --> 00:05:28,020 price is going to do has nothing that high that you connect it to to a lower high, when you're looking for resistance or downtrending, trendline resistance,
28 00:05:28,740 --> 00:05:37,050 that third time it supposedly comes up to that line, what makes you so confident that it's going to go down at that point, just because you drew the line on on
29 00:05:37,050 --> 00:05:47,760 your chart? The the banks don't care what your scribbling all of your charts, they don't care about that. They're not aware of it. Okay. But what they are
30 00:05:47,760 --> 00:05:55,890 aware of is sentiment that shifts and builds around those levels, because it's going to be many times being replicated on the fund level.
31 00:05:57,330 --> 00:06:08,820 Funds will get beat up. That's the basis of trading. Large traders are the prey. That's where the markets go. They go for their orders, not for our little
32 00:06:08,820 --> 00:06:23,670 orders, not for our little liquidity, okay, but because we learned to trade in herd, like the fund traders, we owe many maintains our casualties of that war
33 00:06:23,700 --> 00:06:34,320 between smart money and large funds. That's the business model that goes on. Large funds are cannibalized at reversals, but they're permitted to facilitate
34 00:06:34,320 --> 00:06:46,260 long term trends when the markets are in that environment. But trend lines are not the key to it. Is the very nature of trend lines flawed at its core, I will
35 00:06:46,260 --> 00:06:54,780 submit to you that yes it is because it gives too many dangling carrots in front of the traders eyes thinking that okay, this is going to be an easy setup. So
36 00:06:54,780 --> 00:07:04,140 therefore, let me go in here and sell at this resistance trendline or let me buy it this diagonal support trendline it's not that easy, folks, but many times our
37 00:07:04,140 --> 00:07:15,870 charts will paint these beautifully disguised opportunities that are impossibilities. Knowing this, how can market makers capitalize on this fallacy
38 00:07:15,870 --> 00:07:16,620 and price action.
39 00:07:24,600 --> 00:07:35,190 Retail bullish trend lines support. In periods when prices making higher lows and higher highs, the use of trendline support will be adopted by retail
40 00:07:35,190 --> 00:07:47,520 traders. The influx of weak handed or less informed money at an area or price level provides liquidity for the market maker. The chart may appear bullish, but
41 00:07:47,520 --> 00:07:56,340 the underpinnings are in fact the opposite. The retail crowd will buy at a moment when price will be devoid of support price will collapse and leave the
42 00:07:56,340 --> 00:08:09,450 retail trader long withdrawal down in the trade. When that third touch of that uptrend line is seen in price action many times I get dialed in expecting the
43 00:08:09,450 --> 00:08:19,740 high that forms between the low at the second time it hits the trendline and the third time it hits the trendline that high in between. I am in that high for a
44 00:08:19,740 --> 00:08:28,950 bearish order block or I will be allowing price to just briefly poke its head above that high for a turtle soup, especially if the higher timeframe charts
45 00:08:28,950 --> 00:08:37,710 that I use for my analysis indicate that we are not in a bullish environment, but the lower timeframes will many times paint these beautifully illustrated.
46 00:08:37,950 --> 00:08:50,070 uptrend diagonal support lines. So what I'm trying to do is I'm focusing in on when the market maker sets their traps for sale scenario. Many times that tie in
47 00:08:50,070 --> 00:09:00,360 between the loaded forms at the second retouch of that trendline. In the third touch of that trendline the high in between there is going to be a sell scenario
48 00:09:00,360 --> 00:09:08,070 that I'm aiming for in that I'm looking for a bearish order block, or I'm looking for maybe sometimes on a lower timeframe. I'm looking for a breaker a
49 00:09:08,070 --> 00:09:17,460 bearish breaker, where the market has shown a willingness to rally up to take out an old high it's on a lower timeframe that may not be seen as clear with
50 00:09:17,460 --> 00:09:26,400 that high in between point number two and point number three. All I'm looking for is a reason to be contrarian because if the trend line looks so obvious to
51 00:09:26,400 --> 00:09:42,810 me, I'd look at that as a trap. Retail bearish trendline resistance in periods when prices making lower lows and lower highs, the use of trendline resistance
52 00:09:42,810 --> 00:09:53,430 will be adopted by retail traders. The influx of weak handed or less important money and an area where price level provides liquidity for the market maker. The
53 00:09:53,430 --> 00:10:01,980 chart may appear bearish but the underpinnings are in fact the opposite. The retail crowd will sell at a moment when the price will be devoid of resistance
54 00:10:02,700 --> 00:10:14,430 price will rally and leave the retail traders short withdrawal down in the trade between the high formed at point number two and point number three, the low in
55 00:10:14,430 --> 00:10:22,830 between those two points, I'm going to be aiming for a reason to be a buyer down there. Because I, I will submit to you that if the higher timeframes are
56 00:10:22,830 --> 00:10:30,180 indicating that higher prices are most likely going to be in the near term. And we're trading at higher timeframe support levels based on order blocks or
57 00:10:30,360 --> 00:10:39,450 institutional order flow. I'm looking for that low between high two and high three, I'm looking for a bullish order block at that low in between the two
58 00:10:39,450 --> 00:10:49,170 points. And while price may drop down into that low just by a little bit, but not getting down to the low altogether, I will be looking for a bullish order
59 00:10:49,170 --> 00:11:00,780 block to buy. Or I will accept a break just below that low for turtle soup long entry, or basically a run on the sell stops. Many times the market will break
60 00:11:00,780 --> 00:11:14,280 through. Now a point at which I want to draw a attention to is the second point at which you have that trendline. In other words that the first high You see,
61 00:11:14,700 --> 00:11:23,100 when it comes down and makes a lower high number two, and it trades lower. And you think it's going back up to make a number three point high, it's lower or
62 00:11:23,100 --> 00:11:31,140 three times touching on a downtrend, when the market rallies, I'm actually going to be looking for a move up into that second high, because that's where a lot of
63 00:11:31,140 --> 00:11:39,660 the pie stops are going to be residing. The same thing said just an opposite when we're looking for that sell scenario and bullish trend line support.
64 00:11:41,220 --> 00:11:50,730 Retails going to be looking for to go higher, I'm looking for it to go down below point number two. That's where everyone stop loss is going to be. Now,
65 00:11:50,760 --> 00:12:00,120 when you think about like this trendlines in the form of diagonal basis, support or resistance, it's really a toss up, do you have confidence that the trendline
66 00:12:00,150 --> 00:12:09,750 you're drawing is going to really provide support or resistance. Think about it, it's really associated closely to flipping a coin head, you're going to be a
67 00:12:09,750 --> 00:12:20,460 buyer. And guess what? Tails, you'd be a seller, you're back to the same equation of chance. And we do not trade with the perspective of chance.
68 00:12:25,410 --> 00:12:36,840 When we trade we look at the marketplace to provide clues. Clues in which the smart money is going to be utilizing the liquidity that's made available for
69 00:12:36,840 --> 00:12:47,220 willing or unwilling to liquidity in the form of the funds and uninformed money. You have to think like that liquidity prior prices delivered to engineer
70 00:12:47,220 --> 00:13:03,690 efficiency for the smart money entities only. Effects let's take a look at examples here. I want to take a look at this high right here. Okay, price has a
71 00:13:03,690 --> 00:13:16,710 nice run away from that. So very nice, intermediate term high. But the impulse price swing moving lower. And we have a gap in here fair value gap from the low
72 00:13:16,710 --> 00:13:28,440 of this candle to the high of this candle has only been down movement with this candles body. I'm going to highlight this whole area in here. And we're going to
73 00:13:28,440 --> 00:13:42,510 reference to the low of that candle right here. Okay, so we're gonna watch price as it trades, that's a reactionary level that we're gonna be waiting for in the
74 00:13:42,510 --> 00:13:59,340 future. So this is how we stock setup, price starts to rally up trades right into that 5234 level right there. That day it occurs is December 11 2015. So
75 00:14:00,570 --> 00:14:12,090 carrying on the right hand side, we have the 15 minute timeframe for December 11 2015. And we're going to delineate that same high
76 00:14:20,280 --> 00:14:35,670 at 5234. See price hitting it right here. And I want you to look at how this low connected to this low here. projected out. That's he hasn't done a third time
77 00:14:35,670 --> 00:14:50,460 hitting it. Okay, so trendline followers, see that as a potential continuation co higher finding some support here 123. Maybe a run up higher. Problem is we
78 00:14:50,460 --> 00:15:01,170 have a daily institutional reference point over here. And we're in that area over here. In this whole shaded area. We've closed that in So we will be looking
79 00:15:01,170 --> 00:15:12,090 for the next area of liquidity now here so we can look at this range from this down candles high
80 00:15:17,730 --> 00:15:29,940 from this damn candles high up to this down candles low between this candles high in this candles low it's only been one pass on the upside so we're going to
81 00:15:29,940 --> 00:15:44,910 be looking for price and when it comes back down into this candles high in the form of 5060 case 150 60 level so, we know that a possibility to see price want
82 00:15:44,910 --> 00:15:56,490 to drop lower based on liquidity we have trend lines in here that will be reasonable in terms of what retail would be drawing expect expecting some
83 00:15:56,520 --> 00:16:07,560 bullish prices, let me show to you what it may look like at the time when it was forming. Okay, you have a low here there find support here, old high back here.
84 00:16:08,070 --> 00:16:18,840 So they could reasonably expect to see this to trade higher promise is only thing it's done is move back up into the last up candle here which is a bearish
85 00:16:18,840 --> 00:16:38,070 order block right there. So using the market efficiency paradigm we don't see this as trendline support, we see this as a return up into a reason to get short
86 00:16:38,400 --> 00:16:50,400 more in the market breaks lower. market trades down into a low right here, which we'll look at when you zoom out a couple minutes. We have a low here. We have
87 00:16:50,400 --> 00:17:00,960 another low here projecting that low out in time. Okay, we can see price coming down to that third time does it make a bullish scenario No, it's only going up
88 00:17:00,960 --> 00:17:16,650 to the last up candles midway point for me mean threshold so let's take a look at what that is. Okay, right in here equilibrium trading, right that reference
89 00:17:16,710 --> 00:17:25,620 reference point we're gonna be looking for price to come down and close in this void. This candles low here in this candle is high. So in here has a liquidity
90 00:17:25,710 --> 00:17:37,920 void. And we have sell stocks below this low here. Again, remembering that we're focusing on the idea on a daily chart like a bank would looking for 150 60
91 00:17:37,920 --> 00:17:49,110 level. So up here we're looking at this market move higher. Anything that we viewed as support one diagonal basis on a trendline we're going to look at that
92 00:17:49,110 --> 00:18:01,140 as suspect and buyers are going to come in here in a big influx we're going to have wonderful opportunities to be sellers to them. market trades up into
93 00:18:03,120 --> 00:18:14,130 equilibrium. One more time pierces the high turtle soup sells off and it trades rent one more time down into this level in here. So I'm gonna zoom out a little
94 00:18:14,130 --> 00:18:25,860 bit to a 30 minute chart you can see that other trendline so we have a low here stand out in time here's another low in price comes down hits it here is that a
95 00:18:25,860 --> 00:18:36,870 buy now it's only coming back up into this last up candle bearish order block sell here do not see this as a bullish scenario because the trend lines because
96 00:18:36,870 --> 00:18:49,200 we're expecting this area here to promote selling okay, it's in an area in which we're going to be looking for a sell off. Price does in fact sell off. And you
97 00:18:49,200 --> 00:19:00,990 see the bearishness here it runs back above old high turtle soup or bearish order block. Okay, because we're using a higher timeframe setup over here, your
98 00:19:00,990 --> 00:19:13,650 stop would provide you an opportunity to put a stop above an old high back here. Price accelerates goes through what would be considered trendline support and
99 00:19:13,650 --> 00:19:33,870 ultimately down into the 150 60 level right here and as you can see over here let's take a look at some downtrending or bearish trend lines that are actually
100 00:19:33,870 --> 00:19:39,120 by scenarios Okay folks, we have a nice run up here
101 00:19:44,760 --> 00:20:03,720 two down candles right the up move. Okay, so we have 143 85 or there abouts the opening price on the IRS 143 84 So we'll round it to 4385 Okay, moving down
102 00:20:03,720 --> 00:20:27,330 candle hits 4385. So we're going to add 4385 to our lower timeframe chart. 4385 we see price. Trading down to here hitting it one more time, we have a high, we
103 00:20:27,330 --> 00:20:38,700 have a lower high, and the third time price hits it here. We see this as a sell. No, we don't we see it as a potential turtle soup long here for a return back to
104 00:20:38,700 --> 00:20:50,790 bullish order block. So we could be a buyer at 4385 or 4391. A limit for if we can get a fill at 4380. or lower, you can be a buyer down here with the
105 00:20:50,790 --> 00:21:01,380 expectation that this is a false trendline. And we will be looking for this high here and it's the second one. So anyone would be short all their protective
106 00:21:01,380 --> 00:21:15,990 BizStats will be above this high in here. Price rallies away comes out real close to this high in here. retracement lower
107 00:21:21,180 --> 00:21:37,920 back down into the last two down candles here as a buying opportunity. Again, up here, where are we expecting to see the BizStats be tagged you can see that
108 00:21:37,920 --> 00:21:42,300 happening here and five stops right there, you
109 00:21:48,330 --> 00:22:00,090 can see that happening here. By stops hitting right here. Then you'd be permitted to see lower prices because we've seen the highest taken out here for
110 00:22:00,090 --> 00:22:15,000 the form of a buy stop read. And then now that liquidity below here would be allowed to be tested. You see that happening. Here's another example of a nice
111 00:22:15,000 --> 00:22:24,180 down candle here bullish order block. It's validated when this candle trades above this down candles high. The very next candle we trade up again, in the
112 00:22:24,180 --> 00:22:32,820 third candle, you see it opens here and trades down into the body of this down candle. That mean threshold is approximately 144. Big figure and the open comes
113 00:22:32,820 --> 00:22:52,230 in at 144 46 on this down candle. So we have 46 pip range in here. And the day on this candle is the 18th of May of 2016. We see the 18th of May here. Okay,
114 00:22:52,230 --> 00:23:01,350 and we see the high, a lower high can extend that out in time does price sell off here, the little bit, then it comes up pops through one more time. So
115 00:23:01,410 --> 00:23:09,750 traders that even see this as a downtrend that maybe have been broken, they may see this as a return back down into it to be a buyer. And they're wrong there as
116 00:23:09,750 --> 00:23:19,650 well. Also, you may see a classic chart pattern here that we haven't spoke about. But we're going to talk about in this mentorship as well. Classic chart
117 00:23:19,650 --> 00:23:29,460 pattern, triangle and false breakout here, they would have been wrong even trading with that, and exploding up into one that 146 big figure. Another reason
118 00:23:29,460 --> 00:23:37,830 why 146 big figures is the last up candle on the daily chart, and it closed in all these down candles. So institutional order flow, you're gonna see price come
119 00:23:37,830 --> 00:23:47,880 up and close all that ends, it's only been delivered. On the downside, all down candles, price has to be efficiently balanced by offering on the buy side after
120 00:23:47,880 --> 00:23:55,200 it's been sold off and been offered on the sell side. Price to be efficiently delivered has to be offered on the buy side. So we see that rally back up into
121 00:23:55,200 --> 00:24:08,640 that 146 big figure. And that's why it quickly ran up into that level here. But breaking this idea of these supposedly trend lines. That's not the key to
122 00:24:08,640 --> 00:24:16,380 advice. But we can see when the trades are seeing these retail fingerprints all over it. Probabilities really shift in our favor when we're doing the opposite
123 00:24:16,380 --> 00:24:23,010 of it. And we can also justify it with institutional order flow and institutional reference points on a daily chart just like a bank would. So
124 00:24:23,010 --> 00:24:28,950 hopefully you enjoyed this teaching. Go back through all your charts, look at some of the moves it's taking place and go down the lower timeframes and
125 00:24:28,950 --> 00:24:36,780 actually see how these trend lines are really there as phantoms and retail chases them and when they think they see them. They're really not there and the
126 00:24:36,780 --> 00:24:39,270 end up giving up the ghost and their profits.