All language subtitles for Lesson 7 - Market Maker Trap- Momentum Divergence Phantoms

Welcome back folks.

This is teaching seven of
eight of the December, 2016.

Content for the ICT mentorship.

This teaching is going to be
dealing specifically with momentum

divergence, Phantoms market maker trap.

And I don't teach a lot about indicators
because they're mathematically

derived in the measure of the past.

As a new trader.

I used them a lot and had a lot of false.

Placed on them.

I'd like looking at them at certain
points in price, actually, because I

can see where I used to think price
would go relative to a indicator.

And I can tell you now it's a completely
different paradigm shift that when we see

price action, indicating data wants to
go higher, not looking at the indicator.

Many times the indication will
tell you it's probably stopping

now or it's petering out.

It's it's making it's a reversal
or it's running out of momentum.

The, the idea is the indicators are
going to drive price as a retail trade.

That's what we think.

And it's not the case.

Um, the indicators don't have
any reflection whatsoever about

what the market's going to do.

Next price has no awareness of
our indicators, but we can reverse

engineer that thought process and
use that market efficiency paradigm.

I've been teaching since the beginning.

Mentorship where we look at how liquidity
can be either engineered or neutralized

and whether they're willing or unwilling
participants, the market makers can

draw traders into the marketplace
or take them out of the marketplace.

And by unseating them, they
can assume their position for

put them in on the wrong side.

By engineering liquidity runs.

And then take to market
the opposite direction.

In this case, what we're looking at here,
this is the U S CAD is the one-hour chart.

And I have the chart trained in
on the November 10th and 11th.

And we're looking at how the market
made a slightly higher high here.

Okay.

While momentum was already posting
a potential bearish divergence.

Now, when we talk about divergence,
there's two types of divergence

there's type one divergence, which
is your classic higher high, but not

seeing a higher high in the momentum.

Okay.

That's type one.

Bearish divergence, a bullish diversions
would be the opposite where we see

a lower, low in price, but a failure
to go lower in the stochastic or

whatever momentum indicator you use.

That would be a type one
bullish, divergence, uh, Trend

trading or momentum trading.

There's called a type two trend
following and it's commonly

referred to as hidden divergence.

And it's been never really
associated to who discovered it.

Nick.

They're nice.

He was the guy that released it
to the trading community at large.

Uh, George Lane gets a lot of
credit and falsely, I might add he

was not the creators to Catholic.

He's not the, uh, you know, the, the
inventor, if you will, of a divergence.

But nonetheless, I it's one
of those pet peeves of Maya.

When I talk about this, like,
I always gotta bring it up.

Cause it's just like a stick in my crawl.

I can't stand it.

So I have to keep reminding
that folks that are in trading.

Um, if they talk about divergence, uh,
they probably should be thinking a guy

that they'll probably never even meet.

Uh, but his name is Nick van.

Nice.

And it's a trend following divergence,
where if you have a highly.

Hello, but the stochastic cycles down
makes a lower, low that's trend-following

in nature, and it usually gives us
a really good momentum entry for.

Bullish markets.

Now I'm not teaching entries with
stochastics or any momentum indicator

here, but I'm going to teach you
how to use a means of sentiment

or how retail minded traders
are going to think about price.

I like these ideas because.

When we read the books.

When we get into trading, we get all
these indicator based books and textbooks

and courses and CDs and mentors and
everybody else and their disciplines.

Okay.

And believe me, I went through all
of this myself, so it's not like I

completely, you know, Walk on water.

I never had those issues before in
the past, I came up through all that

stuff, but the indicators teach us and
they tried to promote this idea that

indicator based treating is the way to go.

So therefore there shouldn't
be no thought process involved

at all about studying price.

Just study if the indicators over bald, if
it's over sold, if it's diverging better.

So you're bullishly and that's it.

So you have four conditions there.

Are we overbought or are we oversold?

And if we are overbought,
it's a diverging.

Bearishly.

Oversold are we diverging bullishly and
if it were that easy, then everybody we

making money and problem is, is there some
things you have to look at to determine

if the market is in fact bullish, no worth
it's bearish, and here's one for you.

There's a fifth condition.

Is there a really a time to be trading?

Because there's some time there isn't
Marcus sustain consolidation and you

don't want to be doing much of anything.

So if we're looking at an example, Okay.

We're price makes a higher high like this.

Okay.

Forgetting what's over here.

Like a retail trader, like I did.

I just looked at, okay, well now
we're making a higher high here.

So naturally I'm just looking at
any time when the indicator was

failing to make a higher high.

That's how I started in the business folks
in 1992, I'm looking at charts and this is

what I'm looking at a bear's divergence.

Okay.

So I would be looking to go short.

In 1992 and 1993.

But understanding what I know now,
there's liquidity above this high.

They're not going to
keep price this close.

Okay.

And not run that high.

So there's buy stops above there.

So if I see bears divergence
in here and it's qualified

with this move here, we have a cross over.

It starts to drop down.

Okay.

But look what we have.

We have a down candle here.

We have equal lows in here.

So the market drops down, clears out the
equal lows dips into this bullish order.

Block this also in here, we
have a range from the high down

to the open on this candle.

This range in price, price trades
down into it, the midway point of it.

Okay.

Just like a mean threshold.

Okay.

This portion price comes down, delivers
price below these lows in here.

Momentum indicator.

Folks are going to say, okay, well,
this is a solid bear's divergent.

So we're going to be
expecting lower prices.

Price action-based traders are
saying this is actually a box.

And there's an equal high up in here and
we have liquidity above this high here.

We're too close to these
levels up here, not to run them

market consolidates a little
bit in here and then boom.

It rallies up.

It makes one more tap
against this high here.

Is price going to reject here?

No, look what's happened.

We have a low.

Which is directly related to this
cycle through wants to cast it.

And then we have this higher, low
with a lower, low on sarcastic.

This is that hidden divergence
for trend following divergents.

Okay.

This actually is a very powerful scenario.

If you know what you're looking
for in price, and you see

this qualified in a momentum.

Not that you're basing your trade on
the indicator, but I like seeing this

because what this is doing is, is it's
arm wrestling with the guys that are

looking at this bearish divergence
document, capture a high, because think

about what it is when you're looking
at indicators, the mythology is you can

pick tops and bottoms with indicators.

And while we can go back and look
at the charts and see many examples,

how that may have been profitable.

There's many times where
it isn't profitable either.

So if we're going to be looking for
price action to give us clues as to where

price is going to be reaching for, we
can't get that information by looking

at an indicator because all that's doing
is, is looking at the past and it's

compressing all that data mathematically
and spitting out an output that output

has absolutely zero bearing on where
the actual orders are in the model.

UBS credit Swiss city.

They're not in, they're not in
the business of looking at what's.

The gas is telling him that's not what
they're doing, but they are interested

in where buy stocks and sell stocks are.

Okay.

And they're attacking that
liquidity on the fund.

So when I talk about making a run on
stops, it's not that they're aiming

for retail stocks because you're not
even in the same arena with them, but

if they can push price to an area above
an old, higher, below an old low, they

know that there's going to be a poor
liquidity and base of fund trading.

So let's recall that market
efficiency, paradigm retail use.

And they see what they want to see
in the context of an indicator buy

or sell overbought or oversold.

Market-makers look at the participants,
thought processes about price and they

manipulate their decisions based on
what they should be seeing in price.

The indicators way of engineering,
a thought process behind a trader.

And it's almost like.

Remote control in many instances
and funds, they trade with

a trend following nature.

They're long-term momentum trend
followers, but those long-term trend

following systems that they use.

Targeted.

And usually it's in consolidations
or sometimes if it's at a high where

they're making a top in the marketplace,
those funds that are aggressive and

they try to sell short, they make
one more pass up there and knock

out those individuals to smarter
fund traders will go back in again.

But you notice like sometimes when
you get knocked out of a trade, the

wind is taken out of your sales.

You don't want to do it again.

You're afraid.

But when we look at divergence.

Okay.

There's two camps.

Those that see that higher high.

And the subsequent movement lower, which
would confirm in any retail traders mind

that they did catch her capture a top.

Cause that's what they're thinking.

Okay.

Verus diversions, they're looking
for tops, pull aside versions.

They're looking for bottoms.

You ask any trailer that sees that they're
not looking at qualified entries and

qualified exits and specific targets.

What they're looking for is get me in
at the low and I'll figure out where

I'm going to get out later on and
believe me, I've done that same thing.

When we look at price, now we
see that, yes, they're going to

see that as a bear's divergence,
they're going to want to sell short.

And we expect that same measure of
retracement lower as well, but we want to

see it come back down and hit this order
block and wipe out this stops over here.

Why would they want to come
down below these lows in here

to gather up all the cell stops?

Why?

Because they're willing sellers down here.

Why would they want to go down here?

Because they want to pick up
those orders that liquidity

is offering so they can buy.

So price quickly.

Reprices and now we will make
a run above this high here.

Why?

Because this is the real divergence.

Okay.

Or the new cycle low on the
stochastic notice it's not oversold.

It's not needed to be oversold.

What we're doing is this.

We're watching the momentum shift
back down just to get the cell stops.

Then they make a run for where
the market really wants to

be reaching for the orders.

Not with this little indicator.

Divergence is indicating here.

So we're seeing.

Retail view this as a higher high in
price with a lower high in stochastics,

which is what every textbook shows.

That's a type one bear stock
versions, or a sell signal.

Okay.

You might have saw 30 pips or
so in your favor, but you're

not going to hold for just that.

And you're going to hold forever.

You're going to look to see it
go lower and lower and lower.

You know what it's like to be, you know,
a new trader and looking at all this

stuff, it's the same stuff you did.

So this was, I did.

But if we wait for this to cast at
the cycle down below this low here,

we can anticipate that same thing
occurring when it runs out some cells.

And it closes in and arrange
for a bull shorter block.

Then we can expect price to snap back
higher and take out this whole assumption.

That is a barest divergence
in the marketplace.

Again, price has no awareness of
the divergence, but markets have an

uncanny ability to be aware of the
thought processes that are in all the

traders because of their orders because
of their trading, because of the.

They're leveraged because of what
they're doing in the marketplace, the

excitement around specific levels.

So when we see this, we anticipate price
moving higher, not on the basis of a

bullish divergence that you would see
classically with a lower, low, and a

higher, low, and the momentum indicator.

What we're actually seeing is a
higher, low relative to this low and

here, this being higher, low, but the
momentum actually is cycled lower.

Again, that's tight to hidden divergence.

Let's try and follow me in nature,
and we can expect to see price

drop above this high here and
price doesn't fact that you can see

price gave a nice opportunity here.

And those individuals looked
for this bear's divergence

were left holding the bag.

Okay.

Folks, we're looking at the dollar.

Swiss is an ally chart.

Okay.

We're looking at ACE, another
scenario where the price has

made a nice rally higher.

And we're looking at what
would potentially see as a

type one bear's divergence.

Now, again, retail traders are
going to see that as well, where

we're making a higher high in price.

So if price is making a higher
high here, we're not seeing

that same thing reflected here.

So it's, the Catholic has
crossed down and now we have a

signal confirming lower prices.

So what we do as price
action based traders, we

anticipate seeing some measure.

Consolidation to retracement.

And we watched this low back here on this
to Castic what's this relative to this

low here where we're not seeing in our
expectation is the move below that low.

We're not expecting that, but retail
is expecting that they expect this

to be a top and price trading all the
way down to what would be seen as what

classic support they're looking at.

At this low and maybe
even a low back here.

So in retail, Blindsight,
they're doing this.

This is what's all over their charts.

They're looking for a move down
into this low, and they're looking

for a move down into this low
because that's a classic support.

Resistance tells us when the textbooks,
this is what classic divergence tells us.

They're going to catch a top.

So the market's making higher
high in here from this high

to here, we made higher high.

It's not happening here
in the stochastics.

So if it's not happening,
it's the Catholics.

It has to be indicating
that I'm going to go lower.

So they're looking for price of trade
all the way down to this level here,

and that might be their first target.

And then here's the second target
because that's supporting assistance.

What we see is this is the last
down candle prior to this up move.

So inside this range in here
and this wick, we expect

price to trade down into that.

Now the question is going to be Michael.

Do I use the.

Well, I used the body.

You use the body.

Why?

Because of the condition that's here, we
have a wick in prices already trading.

Several times through here, but we've
only traded up from this point here.

So this down close, we only had an
up close and up close and up close.

So we're going to be looking for price to
trade down and deliver on the sell side

of the liquidity on this candle's range.

So what I'm saying is
we're going to look at

this candle here and capsulate that
whole little wick down into the.

Okay.

And we're expecting price to yes.

Cycle down and go lower, but
not to go below the middle

of that body of that candle.

So for a move down into 96, 45 to
96, 40 as a low end is, is expected.

It's reasonable, but we do not
expect that low to be violated.

That same reference point down
here in the stochastic is here.

We expect this to Castic to
trade lower than this low in the

indicator, but not show it in price.

We expect price to trade higher.

Why, why would I expect that on.

We have all this appear, all sell
side liquidity offered, say we

expecting price to be delivered on
a move higher to closing that range.

So we're looking for a difference
in direction, and we're

just gonna use this old low.

So we're gonna use support
resistance ideas, but we're going

to be diametrically opposed to
what retail mindset is going to be.

So we're looking up here,
accurate drops down.

So we're doing two things.

We're bringing prognostication we're
forecasting and we still have targeting.

So we know what we're
looking for for entry.

We're expecting anticipating
that Marvin event to take place.

We're going to go long around 96, 45
with an accent around 97 0 8 retails

thinking this is a top it's selling off.

It's going to break this low and
it's going to make the low attempt

to retest here and maybe even
run down the here based on just.

What we're looking for is yes, this
stochastic is going to drop down as price

should drop down, but the stochastic
is going to drop below this low in

the indicator, but it won't go below
this low here because the institution

or flow is supporting higher prices.

And they're going to want
to close this range in.

Okay.

Now watch what happens.

Great.

There, this candle slow is 96, 45.

I got the reaction there.

Boom.

Kodaly different from what retail
would be expecting higher, low.

Lower low and stochastic.

Okay.

This move here.

Not necessary.

Don't worry about that one here.

We're not talking about that.

Now I'm focusing primarily on
where the divergence gets traders

in a pickle and it messes them up.

In this case, we were looking
for liquidity on the upside.

Okay.

And I, all I did was use
a simple world back here.

And if we use order block theory,
That puts you up to here, and then

you have equal highs up here as well.

So 97 60 and then you have 97, 28 and
price blows through both of those.

Okay.

So that's an example of a.

Divergence Phantoms where folks
like I did when I was a new trader.

When you go in, you're looking for
scenarios to anticipate specific things

to unfold, and the opposite happens.

This move down here, gets
into this order block

right here, clearing another area,
cell stops and then rallying.

Another bearish divergence here with
a higher high is a bullish move.

I'm sorry.

Is there a bearish move?

Is that a bearish move expected in here?

Well, if you looked at the retail
mindset, you have bearish divergence.

We're going to be expecting this
low to not be violated, but the

low in the stochastics will be.

Here you go.

One more time, type to trend, following
lower, low, and the stochastic

with a higher, low and price.

Continuation on the upside and
the other bears divergence.

This is probably the top.

Now it's got, it's got
eventually happened.

Here's your bears divergence.

Okay.

What happens?

Price doesn't make a sell off as this
goes higher and it ultimately punches one

more time up and then it gives off a cell.

So please don't think that indicators
are going to be the answer.

If you're learning what I'm
teaching and you're getting.

Inspired to pull up.

Indicators only pull them up with
this basis in mind, only draw a

contrasting view, and it'll give you
what the retail mindset thinking.

And if you can do that and also
see reasons behind the scenes,

why institutional order flow is
going to suggest the opposite

occurring chances are you probably
got a good deal until next time.

I wish you good luck.