okay folks welcome back this is the eighth and final teaching for the second month of the ict mentorship this is month october we're dealing specifically with market maker traps of false breakouts and we'll talk about specifically uh in this teaching uh one side of the marketplace just for the sake of saving time everything that we show you will be just a reverse everything that's been shown so false breakout above price consolidation this condition generally manifests in primary bearish markets in other words if the market's in a downtrend or for presently trading lower or expected to trade lower a false breakout above the consolidations is reasonably expected and generally what you see manifest itself at some measure of equilibrium in price the market will move into a trading range neophyte traders or breakout traders will bracket the trading range in price with orders that means they're going to have buy stops to break out on a buy above the old highs or sell stops below the old lows to sell short a break below the old lows in other words they're trying to capture a trend and they're going to put a buy order above the marketplace and a seller below the marketplace because they absolutely have no idea what's going on or breakout traders they just want to bracket the marketplace like long-term trend followers they don't mind taking a lot of losses with the hopes of eventually catching a large trade but market makers will typically send price above the range to neutralize buy stops so they're going to focus primarily on one side of the marketplace and again assuming that the market is primarily bearish that's what the market makers mo is going to be okay their playbook is to run the buy stops above the marketplace now false breakout below price consolidations is obviously the opposite this condition generally manifests itself primarily in bullish markets and at some measure of equilibrium and price the market will move into a trading range neo fight traders and or breakout traders again we'll bracket the trading range in price with orders again looking to focus on buying on a breakout or selling short on the breakout that you're not privy or astute enough to know what direction they just simply want to react to whatever the market gives them in terms of breaking out above or below but the market makers will typically send price below the range to neutralize the cell stops so graphically what i'll show you here is a breakout trader or a neophyte trader's perspective on a market that goes into a trading range above the old high or recent high they will have buy stops for long breakout traders and anyone that would be short obviously their buy stop would be resting above that high and below the lows there would be sell stops for long traders and sell stops for short breakout traders in other words they want to capture a move that would hopefully continue going for a long period of time lower uh they would like to get short on weakness and obviously bulls would like to be when their breakout traders they want to be buying on strength they think by breaking out above an old high their buy stop would trip them into a long position and their belief is that they're going to hopefully capture a long-term trend up now from a market maker's perspective we look below the marketplace when we have lows in the form of sell stops now i'm going to focus primarily on a buying environment okay focusing on you in the market is underlyingly bullish everything that i show you here would just be reversed for when the market's bearish okay just to save save time when the market breaks below the consolidation those sell stops are used to pair long orders now who's buying those sell stops it's smart money but what types of orders rest above here if we know below the marketplace itself stops what's resting above the highs buy stops so naturally as the market moves away from those cell stops being ran out below the consolidation they're going to expand price think of ipta now they're going to expand the price up to the liquidity above the old high so those buy stops are going to be used to pair long selling in other words they're going to scale out their long positions or take some profits eventually the market will go into another area of consolidation or another trading range the market drops below that trading range to take out the cell stops below consolidation now as soon as this happens the thought process should internally be going on inside your mind with okay they've already shown a willingness to take the sell stops below 108. 55 now they've rallied price above the 109 big figure we've retraced a little bit okay so if they are taking the market below this short-term consolidation they're probably going to run the price higher so where would those uh objectives be what's resting above that old high buy stops so after taking the market below a consolidation and our understanding our expectations is the market is bullish they're taking the market below the consolidations the run cell stops out the only reason why they're going to want to do that is to absorb those cell stops to be counterparties for their longs when they are long when smart money is long how do they look to exit their positions and book a profit or hedge they have to get out in a place where there's willing participants to buy buyers are always above the highs either in the form of a buying breakout or buy stops on shore positions that's where the liquidity is remember that market paradigm shift that's been spoke about in this mentorship well we're talking about it here again just using in terms where you can see how it's applicable in price price runs above that old high and now we have two areas at which the market makers have booked long positions so now they're pricing in a buy model so as the market moves higher okay they're going to liquidate some of their positions to hedge and they're also going to liquidate positions that those traders on the bank level are actually speculating for profit so this is how they actually take their their trades and put them on and how they scale them off where they're placing their entries and where they're placing their limit orders to get out with a profit but what's over here what rests above that remember i showed you in the first month of this mentorship in september specific things to look for clean highs and clean lows well there's an area right over here that clean highs above from where we're showing right now after that 109 15 levels been hit there really isn't much in way of liquidity voids or pools that would be much of interest except for those stops right above those equal highs as you can see price expands i think now in the interbank price delivery algorithm it's going to expand up and it's going to seek liquidity that's what we see here then what happens price invariably will go will go back into a consolidation now what's the underlying condition of the marketplace it's bullish why because they keep taking price below and then rejecting that absorbing the sell stops and expanding price higher is there any reason to suspect that price could go higher look at the price action you see here you see anything that jumps off at you if it doesn't we'll come to it as we move forward in this example but we have a consolidation in here our reasonable expectation would be to see price seek the cell stops below the consolidation price does in fact go below the consolidation what's above this old high liquidity now do we always look at the old high or would we look for do we consider the wicks we can but primarily all the volume is seen in what the wicks or the bodies the bodies of the candles so the body of the candles has the most volume so the liquidity is going to rest above it so if they took the stops out below the 108. 95 they're going to look to run price higher in the form of 40 or or higher but initially we had that short term consolidation the buy stops resting above that they could scale off a position right there and the next objective would be 109 40.
as you can see 10940 is swept moving just above the bodies of the candles note the way that the orders are stacking higher each time when they buy they're buying a little bit higher each time and they're working their orders in and still offering opportunities to scale off and profit so the hedgers can work this model the speculators at the bank level can work this model and they're also providing liquidity for those individuals that want sell stops to be activated if the market goes down to those positions and those individuals that want buy stops above the old highs they're happy because their liquidity is being provided as well so think remember that market efficiency paradigm you have to think like a market maker now we have a larger trading range now i've kept that area which old buying was done at 109. 95 i'm sorry 108. 95 but now we've moved into a larger range nothing's changed here the model is still bullish so we see market action trade below that consolidation it trades down into 108.
85 so with that movement down into that level where is the liquidity at above the old high at 109 45 or so that's what you have up here so what is it specifically buy stops so we have willing buyers that are waiting up there for price once it gets there they're buying smart money's buying at 108. 90 or 108 85 in that area and they know that there's going to be willing participants to be buying it from them when they want to sell it for a profit at 109. 45 to 109.
50 so 109. 45 to 109. 50 is hit so the buy stops are used to pair long exits so now we look what we have here we have a wonderful example of how using consolidations with the expectation of viewing the market with that market efficiency paradigm i spoke about where we think like a liquidity provider we can still speculate we can still hedge we can still make a profit using the same model it answers all of the the problems as it relates to trading but specifically it offers the answer to liquidity providing buy stops are activated and they're actually uh um given the ability to to be effective and sell stops are the same way so what the market makers do we can vilify them we can say all those rascals they did this to me they did that to me okay but what they're doing is their job they're providing liquidity the absence or lack of understanding that traders have they attribute that as these those guys they they did it to me they usually misappropriate that to their broker but what it is is the market maker is providing liquidity and if you understand how the market seeks liquidity that's the number one driver in price action the market will always seek liquidity and where is the most recent area of liquidity that's been untapped with the least of resistance getting to it and that will give you the directional bias when you're a trader but when you see markets go into consolidation and you have an underlying directional premise or you arrive at one based on studying the market like this you can quickly ascertain trade setups and signals will jump off the chart at you by way of looking at like this again we have to look at price with that market efficiency paradigm we do not look at it as give me a buy and a sell okay think like the market maker if you had complete control of price where would you drive price at to allow other traders to get in and at least facilitate their trades at least whether they're right or wrong that's not the the problem here where's the buyers and where's the sellers at and if we look at the market in this scope in in this perspective we'll know that we'll always have buyers above old highs and we'll always have sellers below old lows so if we know that that's where liquidity rests all we have to do is discern whether or not does the market want to seek the buyers or does it want to seek the sellers and the way you get that indication is by studying when they go into consolidation what side of the market they reaching for and then where is the market going after it happens and here you can clearly see every time there's a consolidation the market seeks the liquidity below the marketplace and once it absorbs it it quickly runs the other direction why is that happening because the market makers are facilitating their long positions and building a buy model in the price or in this asset so we can expect to see every time the market goes below these consolidations these movements below it are always going to be viewed in our eyes as a false breakout so the false breakout that would trip up traders otherwise or knock them out of profitable positions if they would have been remaining long we can view the marketplace with the market efficiency paradigm seeing it as a provider of liquidity see it in just in the same scope or perspective as a market maker does and then we're suddenly in line with the market maker we're not beating the market maker we're not trying to outsmart the market maker all we're trying to do is get in line with what their motive would be what's their mo how how are they going to book the market for this particular day or for this month or this week okay how are they going to do that and by looking at the models that were shown here with looking at ranges and when they break below the ranges and we see willingness to rally after that it gives you your first telltale clue every time the market goes into consolidation expect every drop down below an old area of consolidation expect that to be a false breakout and then anticipate accumulation of long positions and in the market once they can accumulate their long positions then they will reprice the market higher running for the buy stops above old highs but what else do you see here i mean if you're looking at this what else if you were to study this for a moment and i'm going to ask you to pause the video study this for a few minutes and see if there's anything else that jumps off the chart at you and don't be discouraged if once i show you what it is if it wasn't apparent this first price swing from the first initial false breakout below the old lows and consolidation once that rallied up and we gave another area where we can buy again at that 108.
75 level that that red area if you will i guess it's red it's a measured move from that same buy and it gives you an approximation over here where the algorithm will reach for to offer price and we see it reach up into that 109 25 level from 108. 75 which is the measured move from the initial low that it ran up and created that first red box and then first that impulse price swing uh the second leg in price higher is equal to that first one also the larger price swing from that first initial buy all the up to the intermediate term high or the midpoint of the overall price swing once we had that larger consolidation and it went down and traded into 108 85 when that happened that same measured move from 108. 50 up to 109 45 or thereabouts that same measured move from the the stop run at 108.
85 that gives us a projected run up to that 109 80 level and you can see that was handsomely hit and ultimately that 109. 90 as we spoke in real time at the time of this recording in the mentorship which we spoke about that 109.
