Original subtitles

Welcome back folks.

This is teaching number eight of a series of eight for the month of November, 2016.

ICT mentorship.

We're really talking about false tops and bottom patterns as it relates

to classical head and shoulders.

Now, Haddon shoulders pattern is typically seen with a price high that

trades a small little retracement, and then it creates a higher high,

and then it retraces back lower.

And then it creates another level.

Price peak or short-term high.

And then connecting those three successive peaks in price.

We classically referred to that as the neckline and classical support resistance

ideas are seen here, where is that?

Neckline is broken many times.

You'll see it retrace or pull back up to that neck line and then sell off again.

Um, in the form of selecting targets, you can measure the range

from the neck line up to the.

Or the highest peak and subtract that range from the neckline,

once price breaks below it.

And they'll give you a reasonable price objective.

Now, the problem with this pattern.

Okay.

It's because it's taught in all of our retail books and such every trader

out there when he first get into their charts, they're always looking for

these types of patterns, but generally price will form these genuinely at

intermediate or long-term highs only.

And due to the low understanding of most retail traders, they tend to seek

these classic topping patterns on lower timeframes and many times at a significant

low in price, but they marry the pattern.

The opposite is referred to as an inverted head and shoulders pattern.

And this is a false batter, false bottom pattern.

We're going to be teaching in here.

So we're not really teaching these classical.

Uh, they can be found on the internet.

I'm not gonna teach that, but what I'm actually gonna tell you is

how you can capitalize on these patterns when they appear in charts.

And our hard time-frame premise indicates the opposite direction is unfolding, but

an inverted head and shoulders pattern is typically seen with a, uh, short

term low that's met with a lower, low than it makes a higher short-term low.

And you connect the.

Hi, is that form around those three successive lower lows.

And we refer to that as the neckline eventually should price trade above that

neck line classically you would expect a pullback in price or retracement back

down to the neck line and then advance me up to a target and the range from

the neck line down to the lowest low of those three lows added to the neck line.

Once the price breaks through it, that would give you a

reasonable upside objective.

Now again much in the same way, generally price will form needs.

Genuinely at intermediate or long-term lows.

And again much, like we said, with the regular classical head and George's

pattern due to the low understanding of most retail traders, they go into the

lower timeframes and they start looking for this classic bottom pattern on lower

timeframe charts, and many times at a significant high end price, but much like

you probably done when you first started as a trader, you get these textbooks and

you get these ideas and you go in, you.

The understanding of what you learned out of the books into the charts.

So therefore you learned about a head and shoulders pattern should

therefore there must be a head and shoulders pattern right now.

So let's go in there and trade it.

And unfortunately it doesn't always equate to profitability.

Uh, when I first started as a futures trader, this was one of the patterns that

were really promoted hard, uh, because it's the idea that you want to catch

a high and you want to catch a bottom.

Picking tops and bottoms.

It's one of the worst games to play accesses a nutrient cause

number one, even seasoned pros.

Don't do it.

Okay.

We don't, we don't pick tops and bottoms.

Uh, we can trade with rather impressing you the accuracy and, and catching

significant intermediate term willows and short-term lows and highs.

But as it relates to long-term tops and bottoms, I try to avoid that.

And I actually promote the idea of doing the same thing in your own trading.

Tried not to do that, but one of the coolest things I've learned

by going through institutional order flow studies and watching

how interbank pricing is done.

It allows me to go in and actually see these patterns

when they form in price charts.

Um, if I have a, uh, indication that the price is actually going to go

higher and I see a head and shoulders pattern, which would be a false.

In my opinion, but in the charts, the retail will see that as a top point,

conversely, looking at it, inverted head and shoulders, which would be classically

viewed as a bullish pattern and price.

Um, if I see that happening when the market is actually bearish, um, I would

be looking to go short and where we see the neck line, let's go back to the

standard head and shoulders pattern.

When you look at the neck line, um, what I see there is an opportunity to be long.

Once the neck line is broken on the downside, especially

if we are in a institutionally primed bullish environment.

That means if we're in a long-term or even term low, and it forms a.

Successive three peaks and price moving higher, which would be classically

viewed as a head and shoulders pattern.

Um, chartist, pure charters would see that as a, uh, barest

indication, especially new newbie traders or less informed traders.

I like seeing when price does that, because to me, it's a retailer.

And marketing is actually, uh, designing classical chart patterns in price where

you can actually get tripped up thinking just because you saw he had George's

formation and the neck lines broken.

Um, when that neck line is broken, um, I don't see that pullback as right.

Resuming lower or a new selling scenario.

I see that as a turtle soup long, that took out two previous lows

where the clean lows were there.

I look at that as a buying opportunity.

So I'll buy the sell stops below those equal lows or where the neckline is.

And then I'll look for the head or the highest peak to be violated.

And I'll try to pair up my long exits with the biceps above the highest.

In this pattern, and that would be my first objective, the

inverted head and shoulders.

I would do the opposite.

If I'm looking for price action to be bearish, as a higher

timeframe would indicate.

And I see a low with a lower, low, and a higher low, which would be deemed

as a inverted head and shoulders.

I don't see that as a bullish breakout above the neckline.

I'm actually looking at that as a run-on by stops.

And I'm going to look to go short there.

And not expect to see price go higher, but in fact, below out those equal highs and

then make a run for the sell starts below.

What would be deemed as the head on this panel would be the lowest,

low, and most recent price action.

Um, you can actually take your first profit at the right shoulder on both

these patterns, uh, respectively, but, uh, let's take a look at a couple

of chart examples, and you can see what this parent looks like in price.

Okay.

Thanks.

We're looking at a daily chart and the British pound USD or.

Um, what you take a look at this down candle rate before the up

move with consolidated for awhile, uh, price came down and hit that

same order block right here.

Okay.

Closed in the fair value gap between the high to midway point of the candle and

look at this candle right next to it.

Price came down and respected that range.

Okay, right in here.

Didn't go any farther than that.

And then on this day here, it's August 10th.

We traded through to down candle making this a bull shorter

block, right in here, seven, this candle's high down to its opening.

It becomes sensitive to be about.

Right there in the high comes in at 1 55, 46.

So on this day, here we trade down into it on the 12th of August, 2015, shade

right down into the body of that down candor, which is a bullshitter block.

Now that's bullish on a dealing.

So let's take a look at a hourly chart that same time.

August 12th here, we have to market aching, a high, a higher high, and a lower

high, and we have two equal lows in here.

So we have what we have a head and shoulders pattern.

Retail traders are going to see that as a selling scenario.

So they're going to look for a break of this neck line and then take the

range from the high down to that neck line and subtract that and that'll give

them their objective for going short.

Okay.

So we have that range.

And we can duplicate that and give ourselves our downside objective

for the retail minded crowd.

So retail is going to think this breakdown here is going to lead them down to 1

55 or thereabouts in this range here.

So retail is going to expect a range expansion down to a low of 1 54 95.

We did not expect that because on the daily chart, we're expecting the

bullshitter bot to send prices higher.

So while we see a, in a regular head and shoulders pattern, which

would be classical bearishness in a part of price action study, as

it relates to institutional order flow, we're looking at the run below

these loads in here as a run-on.

So we're looking at the market to go below here to pair up orders, to

go long for those individuals that want to have a sell stop down here.

That's already long they're trailing stop loss is going to be in a form

of cell stop because the market moved most recently has been high.

We see this move below these equal lows as an opportunity to buy those cell stops.

Those willing cell stops or flood the market when the market trades below here.

So now we have a lot of liquidity.

Remember that market efficiency paradigm.

We see liquidity here in the form of gone long, and we're going to be looking

for objective up here to take profits.

So we could be a buyer at 1 55 50 and look for 56 20.

I move above this high 56, 20 as our objective or 70 pips, the

market runs 1, 2, 3, 4 more times below that low gathering up the

cell stops and then expansion two pairs up the buy stops above 56, 20.

And ultimately you could see a nice little, little pullback here.

Okay.

So that's an objective of using the head and shoulders pattern again.

What retail would expect and using higher timeframe, institutional

order flow on a daily chart, reading it as the banks would, let's go

back out to that daily chart.

You can see what it did as a result, and here's that expansion.

And it's not much of a move, but that you don't need much of a move.

We understand what you're looking for.

Okay.

We have another example here.

This is the daily or the British pound USDS the down candle

right before this big move.

Equal highs in here.

There would have been by stops above these highs.

This rally up takes out those by stops and it comes all up and

closes in its range all up here.

So this is liquidity voyage closed in less up candle closes it in, but

more importantly, these stats were targeted with this down candle.

That means that this down Canada was able to order block, which is used to break the

buy stops that were in the marketplace.

So when price trades below it here, when price comes back up to it

here, we're inside of a breaker.

That's a bearish environment, 1 50, 3 45 to 1 50, 3 50.

In that area.

We're looking for a reason to expect some kind of, uh, uh bearishness but

there's going to be on a lower timeframe.

Retail we'll see patterns like this.

We have a low.

A lower, low, higher, low.

This is an inverted head and shoulders pattern.

If you draw your neck line on the chart.

Okay.

That's the high up here and we're going to draw what would be considered the

inverted head and shoulders, neck line

connecting these two levels here.

And the difference would be from the low up to this neck line.

And once we break above it,

price trades above it here,

necklines broken stackable or heres would be, would be tired.

So selling up here on a break above the neck line, not looking at that

as bullishness and return for a higher prices, but looking for it

to sell off, getting above there.

So we would look for that run to sell into the buy stops above this

high here and above this high here.

That's why I would expect to see some bears in this year.

And then we would wait for a run below these lows here.

It does give a lot more than that.

Nonetheless, it's not a bad little trade.

Uh, 10, 20, 30, 40, 50, 60, 70, 80 pips, or more running them low over here.

Let's go back out to the daily.

Okay.

And we're going to look up at this high up here.

Price trades up into it here.

We're going to use the low or the last option.

Right here and the body of the candle.

You could see the trades up into that as well.

And we're gonna look up at the 18th on October.

Okay.

So we have here's the, uh, 15th creating a head and shoulders inverted.

So that would be viewed as bullishness.

So if we get above.

That high, we can be a seller because we would expect those buys stops

to be viewed as breakout artists on, in inverted head and shoulders.

They're going to see that as a bullish pattern, we're going to

look at it as a Bayer's pattern.

We're going to be completely opposite of that.

Now you can do two things.

You can use this here, or you can use the bodies of the candles.

Like I teach, uh, where the most volume is.

So this is the highest body of the candle.

So a 55 0 2 would be.

If we get above it, price trades to it here.

So you can be a seller above 55 0 2.

So 55 0 2 is your area of being a bearish.

We do not look at that as a breakout and then wait for a pullback for new

higher prices looking to see it so off.

And there's your entry on the buy staffs at 55 0 2 and the neck line.

I'm sorry, the head down here.

Your objective would be to cover below that low right here.

And that happens right there.

And then again, all through here gives you an opportunity to cover and

ultimately, uh, runs one more time above that 55 0 2 level for by stops.

And then again, below what would be the head playing opportunity

to get, make a handsome profit.

So again, it's you look for the pattern because retail will look

for the pattern, but you're going to fade that pattern based on what

you see on a higher timeframe.

So we look for institutional order for, to justify why this

should be bearish up in here.

We should be looking for a reason to be selling, not buying.

And if we see inverted head and shoulders patterns on the lower timeframes,

retail is going to be all over that.

Looking for bullish upside move.

And that's not what you see here at all.

So hopefully you found this one insightful as well.

Uh, we're going to be attacking a lot of the retail minded classical chart

patterns throughout this ICT mentorship.

So this is just the beginning of two that will fall victim to

institutional order flow until next time we should good luck into you.