7 FalseFlags

ruticker 04.03.2025 23:47:51

Recognized text from YouScriptor channel Denis Kazakov

Recognized from a YouTube video by YouScriptor.com, For more details, follow the link 7 FalseFlags

**Okay folks, welcome back! This is lesson seven of eight of the second month of the mentorship. We're gonna be specifically dealing with the market maker trap of false flags.** Now, a false flag is basically a pattern that classic chartists and pure chart pattern traders will fall victim to. A lot earlier in my career, I fell victim to this particular pattern as well. As a new trader being introduced to the markets, the commodity market was the asset class I started with. My way of introduction came by way of Kent Roberts, and one of the patterns that he taught in his manual, *World's Most Powerful Money Manual*, I wouldn't go so far as to say that, but it did introduce me to technical analysis. One of the patterns studied in classic chart patterns is a continuation pattern, and one of the simplest to see in price action is a bull flag. Unfortunately, not all sudden price rallies that move into a short-term consolidation are bull flags. 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. For now, for the points of concern, we have to understand that in a mature bull trend or in higher time frame distribution levels, price will post or create, or print if you will, in our charts a false bull flag. Retail traders, and I'm referring to myself when I first started as a commodity trader, saw this as a classic continuation buy pattern, but it many times resulted in a reversal. As time went on and my understanding grew, I discerned that understanding higher time frame charts and what you know now as a premium market assisted me in 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. It's a measured move type phenomenon in price action. However, 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 an order block, mitigation block, breaker, or even classic chart patterns like a head and shoulders or, in this case, a bull flag. Now, obviously, the opposite side of the spectrum, when we're bearish in a continuation pattern in a nice strong trend, you'll see a quick sudden move lower, a small little consolidation, and then another equal leg lower prior to the small little consolidation. Again, I'll give you some examples when we get past this boring part. But not all sudden price declines that move into a short-term consolidation are bear flags. In mature bear trends or in higher time frame accumulation levels, price will post false bear flags. Retail traders will see this as a classic continuation sell pattern, but many times it will reverse. Again, the takeaway is understanding how time frame charts and understanding the discount markets will assist in identifying when these are potentially false bear flags or when not to expect another leg lower, but in fact a buy. **For those that are unaware of what a bear flag or bull flag is, this is basically a graphic depiction.** I just simply did a Google search on bull flags, and this is one that came up that I agree with in terms of what it explains on how the price action should be viewed. 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 could 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. The reason why they call these patterns bull flags is the first leg up in price that would be viewed as the flagpole, which is the reason why it got its name that way. The flag portion is that small little consolidation slanting lower, and then you would measure that flagpole on the first leg up and then add that to the move out of the consolidation, and that would give you your measured move. When I first started, I can admit to you that some of my grain trades and some of my live cattle and live hog trades when I was trading commodities came by way of trading this simple pattern right here. It happened to occur when I had one-hour stochastic divergence, and when it was in agreement, it was great. The problem is I never really considered the higher time frame charts or what I understand now as a premium or a discount market. **Obviously, the same thing can be said just in reverse for bear flags.** Generally, you'll see a market drop off, have a sudden decline, then consolidation sideways, or in this case, it can be a consolidation that 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 rather from the breakout high and the consolidation, that'll give your projected low. Again, when markets are in a nice strong trend and they're not mature and they still have more legs to go lower, this pattern is pretty consistent. The problem is when you're not aware when the trend is mature or where you're in areas of accumulation. In other words, the market's really coming under aggressive buying by smart money, these patterns will materialize near the low, and you'll see a lot of folks see this as a continuation pattern. You'll see it on Twitter, you'll see it on social media, that there will be a particular expectation to see a new leg lower in price, but many times it won't go down, or if it does, it'll just go down just a smaller bit and then reverse abruptly, going higher. **Now, looking at another Google example,** just to give you a little bit more framework, these are not my charts; I just simply grabbed them off of Google. You can actually do Google searches on your own and get a little bit more examples of what a bull flag and a bear flag look like in price action. I liked this one here just for a quick 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 that consolidation to give us a price target. 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 of that. **So here we have a classic setup where the market has moved up aggressively, suddenly moved up higher, and we have what we have a small little consolidation after that immediate rally up higher.** When you see that, obviously, the first thing that comes to mind if you knew a bull flag pattern is, "Well, this is obviously a bull flag." Then you would measure the flagpole or the impulse price swing up and then add that to the consolidation area, and it would give you a projected high. So we would expect recently, if we were just pre-pattern trading or looking for continuation classic patterns, we would be looking for higher prices. The problem is if we're just looking at one time frame and just only focusing there, that's a problem. You have to have a certain measure of top-down analysis and use higher time frame charts—monthly, weekly, daily, and at least a four-hour, but preferably a daily chart—that will give us the indications that there's going to be a little bit more information that needs to be considered. When we see that, clearly it's viewed as a classic bull flag. If we were going back in time in a time machine, if someone would have given me this chart my first six to eight months of trading, I clearly would have expected this market to go higher based on just this simple pattern alone. Unfortunately, like I said in the past, when I first started trading, everything was in a bull market, and I could only understand buying low and selling high. I never understood the concept of selling short. My first year, I just couldn't grasp it, so I would only be a buyer. But I can tell you, as a new trader, my first year, I would have looked at this and considered this as a bull flag. The problem is, that's what would generally end up happening. So clearly, we see that this bull flag was the opposite; it gave us no advancement higher. The only thing it did was just breach above a previous area of consolidation. **Okay folks, let's take a closer look at this particular false flag.** We have price showing a clear classic bull pattern in here, a bullish flag, but what would cause this market to break down like that? Why did it not continue and make its equal leg up here added to the move up? Why didn't we get a measured move higher? And again, why did the bullseye fail? Let's take a look at things a little bit closer and focus primarily on the bodies of the candles and the price action first. Forget this wick for a second. I'm gonna look primarily at the body of the candle right in here. As price dropped 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. If we were going to use this area right in here, we're going to note that and shade it with an area to highlight it, and we're going to go out to a daily chart. So we 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. As price was running up into that blue shaded area we had on a 15-minute time frame, we were inside of this big up candle, which is a bearish order block. 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. What that means is we are in an area of premium. So all through here, the market is in a premium market relative to the range. We have this old high, its old low. Now, what we know about the market, we're going to drop down into a four-hour chart, so we're focusing primarily here. When we look at this down move in here, we have a rally up creating a liquidity void, and then we have another liquidity void going down midway through. That is going to be the equivalent of what would be viewed as a bearish order block. 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 and then running down. This entire range is going to be viewed in the scope of a bearish order block, so we'll be looking at like a mean threshold. If we drop down into a one-hour chart, we have price coming down, and right in here, we're going to look a little bit more detail by dropping down into a 15-minute time frame. We have the gap between the opening of this candle and the close of this candle right in here. So we're going to focus primarily on that. We're going to zoom in on a five-minute chart to refine, and you can see there's one up candle 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 and this low here. The low in this candle comes in at 77.14, and the high comes in at 77.14. So it closed in the liquidity void in here relative to what was offered. The market was posting bullish prices or offering higher for the buy side. When it gapped down through it, they offered it one more time up here to be sold, filling in that range. So from this low over here, cut through this candle, and you'll see that actually filled in that range. We have one, two candles. If you take those two candles and you measure that range from the body low 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 time frame. So that's why that level's here. By having that level and also framing this swing high here, 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 is it really doing? It's only clearing out the bodies of the candles over here, and this big wick that we saw on a 15-minute time frame 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 up candles. 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 a quick rally up in a consolidation or slight dropping lower, which would look like a bull flag, we don't see that as a bullish scenario. What we're doing is looking for it to create a false move and break lower. Now, one or two scenarios can happen. One, you can get a turtle soup scenario where it'll start to come up 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, then it rolls over. Once that happens, you want to sell the first return back to a bearish order block that comes in way of the opening, which comes in at 76.97, and the high comes in at 76.97. That's where your short would be. Once you get that, you put your stop above what would be considered the bull flag's high, that wick. That would be your risk. So in terms of 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. The first objective would be to close the quarterly void that the bull flag creates, or the false flag that it creates rather. If we go out to a 15-minute time frame, you can see even on this time frame we have the last up candle right before it starts trading lower. The opening on that candle is 76.97 against the low as well, and obviously, we've already shown that the high is 76.97 here on this candle. So price breaks down, closes in its void, goes right to the bearish order block, and then we can see that as a sell-off. **So what am I showing you here?** I'm showing you that there are 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, and understanding the higher time frame, as we've shown with the daily chart here and walking our way down to a lower time frame that we can execute on. We can use the premise that other traders are going to see this as a bullish scenario, so it's really a sentiment play in addition to institutional order flow in a higher time frame. 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 it break down, we know we can get right back in there and sell it short right at that moment. Then quickly, price moves away aggressively and then closes in its void right here and then ultimately trades up one more time, closing in this small little liquidity void here and ultimately moving lower. **Let's take a look at an example of a bear flag that would be a false flag and how that would translate into higher prices.** We have one more example here. Price has a sudden decline or an existing downtrend here. Price goes into a small consolidation, and look, we're having that same consolidation sloping higher. By all intents and purposes, this would be deemed as a classic bear pattern or bear flag continuations. So one would reasonably expect to see a move from this high down to this low, from this high projected lower. We could potentially see a move to about 73.55 if we were looking at pure chart patterns in the form of classic patterns. The problem is the market traded down into 74.42. So what's significant about that? Well, I'm going to show you by having our higher time frame perspective. We're going to highlight this little area. That's where our bear flag is, or our pseudo bear flag, and I want you to see what's actually happening here. When the market trades into that level, we're going to get a high time frame, but I want you to see what happens right from the price at this point here. Suddenly, that bear flag doesn't look so bearish. So by having this, let's go in here and take a look at the daily chart. Here's that area where that bear flag would appear like we were just showing on a one-hour chart. Look at the bodies of the candles over here. All these wicks trading down here, again, all the heaviest volumes inside of the wicks. So if we take our area we just highlighted and keep it where it's anchored at for the one-hour setup we were identifying as a false bear flag, I'm actually identifying all the price action below these lows. Now, I'm not using the wicks; I'm using the bodies of the candles. 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 or 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. We ignore all these wicks; we know that the bulk of the volume is seen in the bodies. So this run down below here was really just making a run one more time for the 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 buy it as the market starts to rally. We want to wait for a swing high to be created and violated on the upside. We get that here. We have a swing high; the market trades up through it, and 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 stop below the flag's low. So we could be doing this: stop moving below there, you're getting long at 74.70, we'll call it 74.70, and the expectation would be we would be looking for a range fill-in of all these down candles. So we'd look for upside objective here, the last up candle's body, and then we'll be looking for the stops above these equal highs that clean level here. Plus, we have another... **Another bearish order block here, and then one more right in here. Then we have equal highs again, so we could be looking for that for a liquidity pool. We can look up here for another objective if we want to look for a really long-term type scenario. Okay, so going forward, price responds off that level rather handsomely. It comes back a little bit for a retracement just to populate more buying in here. Price comes up, sweeps out these equal highs right here.** So these highs in here were cleared out. The high on this candle comes in at 75.68, and the high on this candle here comes in at 75.73. So we cleared those stops out here; that's why we saw a little bit of rejection here. Ultimately, we see price rally up into closing this range here and then blowing through its high. The next area of liquidity would be this liquidity pool here. It trades through that, has a small little consolidation again, and then ultimately sees that run up into that rejection here. So there's that bearish order block we finally looked at, and it swept through that as well, ultimately just for good measure, clearing out the old highs over here. Okay, so it's not the fact that we're looking for chart patterns, okay? Especially if the idea of looking for a continuation... actually, if I just scrolled over, I didn't even realize, but we had one more here. **Okay, price trades down, creates a small little consolidation slightly higher. That would be viewed as what? A bear flag.** What we're actually going to do is wait for a swing high to be violated. 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 it, it goes higher, and then we have a swing high violated there. So we go down to the last down candle right here, draw that out in time. There it is; there's your buy, and there's your run up higher prior to the down move we just identified. Verified that was 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 traders will view the opposite side of the marketplace. 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 view things in the form of classic chart patterns and in the form of indicators. We'll talk a lot about that later on in this mentorship, but for now, I want you to take away the study of going back through old data. Go through your charts and find areas where bear 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. Look for opportunities where the market showed a clear example of what would be viewed as a bull flag, but it creates a high. **What happens is, actually, the market goes into a period of... after it rallies up or it moves down for a period of time.** If we have the market create a run-up, say it just creates a quick rally up, then after that rally, the market will go into another consolidation. Think about it: 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. Now, the period is 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 want to reach for a specific level of liquidity above the marketplace or below the marketplace. So if we get that big run-up and it starts consolidating, it can consolidate going slightly lower in a diagonal pattern like a classic bull flag would be. What's actually happening is they rallied price up to get traders thinking it's going to keep going higher, then they pause it. What many times you'll see is the market will just do this: make a 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 here, price rallies up, and then it falls through. The scenario is seen here: price drops down, consolidates, and then drops lower. So this would be like this: the pattern would be a decline, consolidation, then an initial leg lower just by a little bit. This short-term low violates these lows 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 measure to move lower. But in fact, all it's doing is taking out these short-term lows here and then reversing and running the other way, which is again the basis of turtle soup. You see that taking place right here.

Назад

Залогинтесь, что бы оставить свой комментарий