Original subtitles

Okay books.

Welcome back.

This is lesson seven of eight of the second month of the mentorship.

We're going to be specifically dealing with the market-maker trap of false flags.

Now a false flag.

Okay.

Is basically.

A pattern that classic chartists and pure chart pattern traders, uh, will

fall victim to a lot, uh, early on in my career, I fell victim to this a particular

pattern a lot as well, because as a new trader being introduced to the markets

and the commodity market or asset class I started with was the commodities market.

Uh, my way of introduction came by way of Kent Robertson and one

of the patterns that he taught.

And his, uh, manual, uh, world, most powerful money manual.

I wouldn't go so far as to say that, but, uh, uh, it did

introduce me to technical analysis.

And one of the patterns that studying classic chart patterns

is a continuation pattern.

And one of the simplest to see in price action is a bull flag, but unfortunate.

Not all sudden price rallies that move into a short term

consolidation are bull flags.

And if you don't know what a bull flag is, don't worry.

I'm going to give you an example of what they are, but for now, for the points

of, uh, of concern, we have to understand that in a mature bull trend or in higher

timeframe, distribution levels, price will post or create or print if you will.

In our, in our charts, a false bull flag.

Now retail traders.

And I'm referring to myself when I first started and it

was like a commodity trader.

Um, I saw this as a classic continuation by pattern, but it many

times resulted in a reversal as time went on in my understanding grew,

uh, I, I discerned that understanding hard timeframe charts and what you

know, now as a premium market, uh, they assist me in understanding and

identifying potentially bearish.

Bull flags.

In other words, a typical bull flag would indicate a pause or midway

point and another leg higher, or basically a traditional ABCD pattern.

And.

It's a measured move type buff, and I'm not in price action, but I found

that I would fall victim to this simply because I was only looking for

patterns for the sake of patterns.

Price does not move based on any kind of pattern, whether it be a word block

or mitigation block or breaker, or, um, even classic chart patterns like a head

and shoulders, or in this case, a boom.

Now, obviously the opposite side of the spectrum and when we're bearish, um, in

a continuation pattern in a nice strong trend, um, you'll see a quick sudden

move, lower, a small little consolidation, and then another equal leg lower, uh,

prior to the small little consolidation.

And again, I'll give you some examples when we, uh, get past this boring part,

but, uh, not all sudden price decline.

That move into a short-term consolidation are bear flags.

And obviously in mature bear trends or in higher timeframe, accumulation

levels, price will post false bear flags.

And obviously retail traders will see this as a classic continuation cell

pattern, but many times it will reverse.

And again, to take away is understanding how our timeframe.

And understanding to discount markets will assist in identifying when these

are potentially false bear flags or when not to expect another leg lower.

But in fact,

Okay.

So for those that are unaware of what a bear flag or both, I guess this

is basically a graphic depiction.

I just simply did a Google on a bull flag.

And this is one that came up, um, that I agree with in terms of what it explains

on how the price action should be viewed.

Uh, generally you'll see a price leg up and then there'll be a

small little consolidation that consolidation can go sideways.

Or in this case it can be slightly slanted lower.

And then all of a sudden there'll be another impulse swing higher that would be

equal to the first impulse swing higher.

So you have a measured move.

Uh, the reason why they call these patterns bull flags is the first leg up.

That would be viewed as, uh, the flagpole.

Okay.

Which is the reason why it got its name that way.

And then the, uh, the flag portion is that small little

consolidations slanting lower.

And then you would measure that flag.

On the first leg up and then add that to the, the move out of the consolidation.

And that would give you your measured move.

And while when I first started, I can admit to you that some of my

grain trades and some might live cattle and, uh, live hog trades.

When I was trading, come on.

Um, they came by way of trading this simple pattern right here.

Um, it, it happened to occur when I had, uh, one hours to Castic

divergence and, uh, when it was in agreement, it was great.

The problem is, is I never really considered the hard timeframe charts

or what I understand now as a premium or a discount market, obviously

the same thing can be said just in reverse for, for bear flags.

Uh, generally you'll see a market drop off, have a sudden decline.

And consolidation sideways or in this case, it can be a consolidation.

It slopes up diagonally and then another leg equal to the first price

swing or impulse swing, lower that measurement on that first leg lower.

If you add it to I'm sorry, if you subtract it to rather,

uh, the breakout, um, huh.

And the consolidation that will give you your projected low.

And again, when markets are in a nice, strong trend and they're not mature and

they still have more legs to go lower.

Okay.

Uh, this pattern is pretty, pretty consistent.

The problem is when you're not aware when the trend is mature or where you're

in areas of accumulation, uh, nowhere it's the market's probably coming under,

uh, aggressive buying by smart money.

Uh, these patterns will materialize near the line.

And you'll see a lot of folks see this as a continuation pattern.

You'll, you'll see it on Twitter.

You'll see it on social media.

That there'll be a particular expectation to see new leg, uh, lower in price.

But many times it won't go down or if it does, it'll just go down and

just a small little bit and then reverse abruptly and go higher.

Now looking at another Google example.

Okay.

Just give you a little bit more framework.

These are not my charts.

I just simply grabbed them off of Google and you can actually do Google searches

on your own and get a little bit more, um, examples of what, uh, a bull flag

and a bear flag look like in practice.

But I, I liked this one here just for a quick, uh, an idea

of what we would be looking for.

In other words, what the flagpole measurement would be and adding it

to, or subtracting it from, uh, that consolidation that give us a price target.

And that's great.

Well, I'm not trying to teach you the continuation pattern here because it's

obviously pretty general knowledge.

I want to teach on how the markets can actually give us these false

patterns and we can take advantage.

So here we have a classic set up where the market has moved up aggressively,

suddenly moved up higher and we have what we have a small load consolidation

after that immediate rally up higher.

Well, when you see that, obviously in the first thing comes to mind, if

you knew a bull flag pattern is a, well, this is obviously a bull flag,

and then you would measure the, the flag pole or the impulse price swing.

And then you would add that to the consolidation area and it

would give you a projected high.

So we would like recently, if we were just pre uh, pattern trading

or looking for continuation class.

Yeah.

The patterns, if you will, uh, we would be looking for higher prices.

The problem is, is if we're just looking at one timeframe and just

only focusing there that's a problem.

You have to have a certain measure of top-down analysis and using

higher timeframe charts, monthly, weekly, daily, and at least a

four hour, but preferably a daily.

Uh, that will give us, um, the, the indications that there's going to

be a little bit more information that needs to be considered.

So when we see that clearly it's viewed as a classic bull flag.

Okay.

And if we were going back in time in a time machine, if someone would

have given me this chart in my first six to eight months of trading,

I clearly would have expected.

Uh, market to go higher based on just this simple pattern alone.

And unfortunately, like I said, in the past, um, when I first started

trading, everything was in a bull market and I can only understand

buying low and selling high.

I've never understood rather the, uh, the concept of selling short, my, you know,

my first year, I just couldn't grasp it.

So I would only be a buyer, but I could tell you as a nutrient in my

first year, I would have looked at this and consider this as a boy.

Problem is, is that's what would generally end up happening?

So clearly we see that this bull flag was the opposite.

It gave us no, uh, advancement higher.

The only thing it did was just breached above a previous area of consolidation.

So let's take a look about this specific area and what was behind the

scenes that led to this overall price.

Okay folks, let's take a closer look at this particular false flag.

Okay.

We have a price showing a clear classic bull pattern in here and Bush flag.

And what would cause this market to break down like that?

Why did it not continue and make it equal leg up here added to the new move up?

Why would, why didn't we get a measured move higher?

Uh, again, why did the bull side fail?

Well, let's take a look at things a little bit closer and let's

focus primarily on the bodies of the candles and the price action.

First, forget this wick for a second.

Okay.

And we'll look primarily at the body to the camera.

Right in here as price dropped the lower, we rallied up, tried to get a

little bit 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.

Okay.

If we were going to use this area right in here, we're going to

note that and shade it within.

In the area of the highlight it, and we're gonna go out to a daily chart.

Okay.

So we'll have the daily chart here.

And what I want you to look at is we have a price swing from this high down,

and then we have a retracement up.

So as price was running up into that blue shaded area, we had on a 15 minute

timeframe, you're inside of this big up candle, which is bearish or block.

And we also have.

If we take our fib and we draw it from the high down to the low right here, which

is right before this price went up, we can clearly see that we are in an area of

distribution.

And what that means is that we are in an area of premium.

All through here.

The market is

in a premium market.

The relatives is a range.

We have this old high it's old, low.

So now what we know about the market now we're going to drop down into okay.

For our chart.

So we're focusing primarily here.

And when we look at this down, move in here, we have a rally up

creating a liquidity void, and then we have another liquidity we're

going down midway through that.

It's going to be the equivalent of what would be viewed as a bear shorter book.

So since we're in a premium market where we should be seeing distribution,

we have two areas at which the market created liquidity voids running up

then running down this entire range.

Okay.

It's going to be viewed in, in the scope of a bearish order block.

So we'd be looking at like a mean threshold if we drop

down into a one hour chart.

Okay.

So we have.

Price coming down and right in here, we're gonna look at it a

little bit more detail by dropping down into a 15 minute timeframe.

Okay.

We have the gap between the opening of this candle and the close

of this candle right in here.

Okay.

So we're going to focus primarily on that.

We're gonna zoom in on a five minute chart to refine and

you can see this one upcoming.

Prior to the down move here.

Now there's two candles going up right before the move lower and this up move

here with these up candles one and two, that only trades right back up

into the institutional order flow of this low here in this low here, the

low in this candle comes in at 77 14.

The high comes in at 77, 14.

So it closed in, uh, liquidity void in here relative to what was offered.

The market was posting bullish prices are offering higher for the

buy-side when it got down through it, they offered it one more time here

to be sold, filling in that range.

So from this low over here, cut through this candle and you'll see to the

actually, uh, IPTA filled in that range.

So.

We have one, two candles.

If you take those two candles and you measure that range from the body,

blow to the body high between the two candles, you get equilibrium right here,

which is that level I have highlighted, which is also the bottom of that last

up candle on a five minute timeframe.

So that's why that levels here.

Okay.

So by having that level and also I'm framing.

This swing high here.

So we have a little bit of a fair value gap right there.

You can see price creating this potential bull flag here, and it starts to come

up, but what does it really dealing?

It's only clearing out the bodies of the candles over here and this big wick

that we saw on a 15 minute timeframe is not being considered at all.

But when price starts to break down, all we have to do is go back

in and look at price action here.

Look at the upcoming.

Okay.

The up candles start with their bodies and their wicks on the low end.

That's where all the sensitivity on selling short will be.

So when we get into areas of heavy distribution like this, and we see,

oh, quick rally up in a consolidation or slight dropping lower, which

would look like a bull flag.

We don't see that as a Bush scenario.

What we're doing is, is we're looking for it to create a false.

Move in break lower.

Now one of two scenarios can happen.

One, you can get a turtle soup scenario where it'll start to come up.

Okay.

And then start to break down.

That's the easiest one to trade because you'll actually see it.

Go up, get people tripped up thinking it's going to go higher.

And then it rolls over once that happens.

You want to sell the first return back to a bare shoulder

block that comes in way of.

The opening comes in 76 97.

The high comes in at 76 97.

That's where your short would be.

Okay.

Once you get that, you'll put your stop above what would be considered a bull

flags high, that WIC that's what would be, that would be your, uh, your risk.

So in terms of.

Uh, risking a lot of pips.

It's not much at all.

And you would just simply wait for it to come back down to trade.

And closing first objective would be to close with the Coolie void

that the bowl flag creates or the false flag that it creates.

Rather, if we go out to a 15 minute timeframe,

you can see, even on this timeframe, we have the last up candle right before

us district starts trading lower.

The opening on that.

Is 76 97 against the low as well.

And obviously we've already shown that the high is 76 97 here on this candle here.

Two price breaks down, closes in it's boy goes right to the bear shorter block,

and then we can see that as a sell-off.

Okay.

So what am I showing you here?

I'm showing you that there's going to be times when we break our market

down from a top-down perspective.

By defining the market in terms of discount or premium.

Okay.

And understand the hard timeframe as we shown with the daily chart here

and walking our way down to a lower timeframe that we can execute on.

We can use the premise that others traders are going to

see this as a bullish scenario.

So it's really nice.

Yeah.

Sentiment play in addition to institutional order

flow and a hard timeframe.

So we're able to see what everyone else with a retail minded.

Perspective would see here in terms of continuation on the upside.

But when we start to see the breakdown, we know we can get right back in

here and sell it short rate at that moment there, and then quickly price

moves away aggressively and then closes in it's Boyd right here.

And then ultimately trades up one more time, closing in this

small little liquidity void here and ultimately moving lower.

So let's take a look at an example of a bear.

That would be a false wag and how that would translate into higher prices.

Okay.

We have one more example here.

Price has a sudden decline.

We're an existing downtrend here.

Okay.

Price goes into a small consolidation and look, we're having that saw

consolidation sloping higher.

Okay.

By all intents and purposes, this would be deemed as a classic bear pattern.

Okay.

Or bear flat.

Uh, continuations.

So one would reasonably expect to see a move from this high, down to this

low, from this high projected lower.

So we could potentially see a move.

To about 73, 55.

If we were looking at, uh, pure, uh, chart patterns in the form of

classic patterns, and problem is the market traded down into 74 42.

So what's significant about that.

Okay.

Well, I'm going to show you by having our hard timeframe perspective, we're

going to highlight this little area.

Okay.

That's where a bear flag is or our pseudo bear flag.

Okay.

I want you to see what's actually happening here when the market trades

into that level, we're going to get into high timeframe, but I want you to

see what happens right from the price.

At this point here, suddenly the bear flag doesn't look so bearish.

Okay.

So by having this, let's go in here and take a look at the daily.

Okay.

Here's that area where that verified will appear.

Like we were just showing on a one hour chart, look at the

bodies of the candles over here.

Okay.

All these wicks trading down here, again, all the heaviest

volumes inside of the Wix.

So if we take our area, we just highlighted keep it where

it's anchored at for the one.

Set up, you were identifying as a false bear flag and actually identifying

all the price action below these lows.

Okay.

Now I'm not using the Wix.

I'm using the bodies of the candles.

Okay.

And the expectation is this movement here, because we're now coming

back down into this area for the first time in a couple of months.

Well a month and a half here on the Aussie.

So we're going one more time back into this area below the

lows, in terms of their bodies of the candles, not the wicks.

Okay.

So we ignore all these wicks.

We know that the bulk of the volume is seen in the bodies.

So this rundown below here was really just making a run one more time

for this stops below these candles.

So if we're seeing that on a daily chart, We have to consider that when

we go back into the hourly chart.

So when the market starts creating that pseudo bear flag in here, we

don't see that as a bear flag, we actually start going in and looking

for reasons to expect higher prices.

Now we don't just simply go by it.

As the market starts to rally.

We want to wait for a swing high to be created and violated on the upside.

Okay, we get to here.

We have a swing high market trades up through it.

Here comes back down to the last bearish candle right here.

So we can take that idea and not look at it as a bear flag, but

look at it as a buying opportunity.

So we could be a buyer right here with a stock below the flags low.

So we could be doing this.

You stop moving below there.

You're getting long at seventy four seventy.

We'll call it seventy four seventy and the expectation would be, we

would be looking for a range fill in of all these down candles.

So it looked for upside objective here.

Last up candles, body.

And then we were looking for the stops above these equal

highs, that clean level here.

Plus we have another

bearish order block here and then one more right in here.

Then we have equal highs again, so we can be looking for that for a liquidity pool.

And we can, we can look up here for another objective if we want to look

for a really longterm type scenario.

Okay.

So going forward price responds off that level, rather handsomely.

Comes back a little bit retracement just to populate more buying in here.

Price comes up, sweeps out these equal highs we're here.

So these highs in here were cleared out.

The high on this candle comes in at 75 68.

The high on this candle here comes in at 75 73.

So we cleared those stops.

Here.

That's what we saw a little bit of a rejection here.

And ultimately we see price rally up into closing this range here

and then blowing through the tie.

And then the next area of liquidity would be this liquidity pool here.

It trades through that here.

Small little consolidation again, and ultimately seeing that run

up into that rejection here.

So is that bearish order block we finally looked at and it

swept through that as well.

And ultimately just for good measure, cleared out the old highs are here.

Okay.

So it's not the fact that we're looking for chart patterns.

Okay.

And especially if.

The idea of looking for a continuation, actually, if I just scrolled over, didn't

even realize, but we have one more here.

Okay.

Price trades down creates a small little consolidation, slightly higher.

That would be viewed as what?

A bear flag.

Okay.

Well, we're actually going to do is we're going to wait for

a swing high to be violated.

Okay.

And we have a swing high here, even though it creates a lower low, it

would have been looking like, oh, this is going to keep going lower.

All of a sudden they put the brakes on and go.

Can we have a swing high Wiley there till we get down to the

last down candle right here.

Draw that out in time.

There it is.

There's your buy in issue?

Run up higher prior to the down move.

We just identified barefoot.

That was a suspect.

Okay.

It's a false bear flag.

So when I look at price action, this is what I'm going to give you as a takeaway.

When I'm looking at price action, I'm looking for reasons why other trades.

Well view the opposite side of the marketplace.

So I'm not always just looking for what would make me take the trade.

I'm also looking for the marketplace to suggest to me how retail minded

traders are going to be things in the form of classic chart

patterns in the form of indicators.

Okay.

And we'll talk a lot about that later on in this mentorship, but for

now, I want you to take away the, the study of going back through.

Old data, go through your charts and find areas where Blair flags and bull

flags were basically looking as if it would call for lower prices for a bear

flag and it reversed and went long.

And look for opportunities where the market showed a clear example

of what would be viewed as a bull flag, but it creates a high.

And what happens is actually is this, the market goes into a period.

Of after it rallies up or it moves down for a period of time.

Um, if we have to market create a run-up okay.

Say it, this creates a quick rally up then in that, after that rally, the

market will go into another consolidation.

Okay.

And think about if the now price delivery has been rapid.

On one side of the marketplace.

So the market's going to go into consolidation.

It's going to pause for a couple of periods in that period.

It's going to be relative to what it needs to do, and you never know

exactly how long that time period is, which again, I've already proven.

We don't care.

We're just going to wait for the indications.

The market's going to reach for a specific level of liquidity above

the marketplace or below the market.

So if we get that big run-up and it starts consolidating and it can consolidate

going slightly lower in a diagonal pattern, like a classic bull flag would

be what's actually happening is, is they rally price up to get traders thinking

what it's going to keep going higher.

Then they pause it.

What many times you'll see is the market will just do that.

Just make us short, slightly short term, higher high, and then

collapse.

This is the basis of turtle soup.

And you see that here.

Okay.

We have a consolidation.

Price rallies up and then it falls through.

Okay.

The scenario is seen here.

Price drops down, consolidates, it drops lower.

So this would be like this.

Okay.

The pattern would be a decline consolidations.

Then an initial leg lower just by little bit, the short-term low

violate and these loads right here.

So when we see that it's going to look like it's been validated for

this bear flag to go lower and have a projected measured, move lower.

But in fact, all it's doing is taking out the short-term lows here and then

reversing and running the other way, which is again, the basis of the turtles.

Bye.

And you see that taking place right here.