Introduction to Forex Market
You need to understand that the market is not free; it’s manipulated like a
puppet. The three major manipulators are Liquidity providers, Top currency
traders (Banks & Hedge funds) and Brokers.
I will not go into details as to how they manipulate the market but you are
reading these PDF because whatever you are doing is not working for you,
so trust me when I say the market is manipulated.
Simply understand that market makers are in business and every business
needs to make money; unfortunately retail traders are “customers” to this
business. Market makers are constantly hunting your stop loss using
algorithms that scans your entry point, stop loss, and take profit.
This algorithm then fluctuates according to the mass amount of orders it is
receiving and where the retail traders have placed their stop losses, with
the intent to hit as many stop losses as possible while at the same time
avoiding to hit take profit level areas of retail traders.
Lesson one #1: HERD MENTALITY
Herd, mob and pack mentality, also lesser known as gang mentality,
describes how people can be influenced by their peers to adopt certain
behaviours on a largely emotional, rather than rational, basis.
After all human being are animals, we feel safe in numbers and the people
who control the market know these. The people putting this into effect want
a certain outcome, outcome based framework. Ultimately, this is not about
the market, but about mind control and how to control the actions of a herd
based society.
The herd is being taught to trade in a particular way; to trade Breakouts,
trade support /resistance, follow the trend; these are the main ways the
herd is taught to trade. This is completely designed this way, there is an
underlying structural framework used to take out anyone and everyone that
uses this method of trading. If the masses are already losing, why would
you consume the information that the masses use and expect NOT to lose?
Lesson two #2 Accumulation/Trap (First Leg)
The dealer uses “Trap Zones” to trap a certain amount of liquidity in a
specific price range then swings the market in one direction leaving the
liquidity in that zone trapped. A trap occurs in the first leg and is spotted by
accumulation of many candles in the area.
You can see the accumulation of candles on the high of the previous day,
there were many sellers on that area and eventually there will be many
stop losses and buy stops behind that zone. The dealers are focused on
that level because many retail traders will lose money there.
As soon as price enters that trap zone it will move out quickly because the
dealer does not want you to catch that move.
Lesson two #3: STOP HUNT (Second Leg)
A “Stop Hunt” is a sharp move to the high or low. This can be the high or
low of the previous day, high or low of the previous week / month or year.
The larger the timeframe the larger the stop hunt. Most of the examples we
go over will be 15 min timeframe and USD related pairs. Not because these
patterns only happen on this timeframe and these pairs, but because it is
easier to understand in my opinion (and also because I am an intra-day
trader).
The “Stop Hunt” can be recognized when price Spikes or RailRoad sharply
to the high or low in one large candle.
Stop-hunts occur at the highs and lows, as retail traders we are taught from
the beginning to place our stop losses at the highs or lows. This means at
the highs and lows there will be more liquidity and the market will tend to be
more volatile in these areas.
Lesson Four #4:Entry/Exit
The most important aspect when trading m and w formations is your entry.
You can and will start to get trades with zero drawdown if you keep
practicing patience. Let the price come to you, there is no absolutely need
to get emotional when you are trading m and w formations!!!!
Unless you are over leveraging your account, you should never feel like
your emotions will get the best of you when trading. These m and w setups
are designed to be executed with precision and accuracy to help achieve
the best possible risk reward ratio. Your goal is to enter sells as close to the
high as possible and enter buys at the lowest point possible so you can
have a very small stop loss and more potential for reward!
Conclusion
This trade is only valid if price enters our trap zone in a certain way, please
keep in mind that not all moves are market maker trap moves, we must be
able to identify our confirming entry to validate the trade.
What is our confirming entry?
Once price enters our zone, we wait the next 3 candles to show the general
direction of the price. How to determine if a trap move has been validated?
- Look for a large "wick candlestick" inside our trap zone (see examples
below) - Look for a set of "railroad tracks" that close outside the zone and rapidly
reject - Only enter if the above candlestick pattern extend beyond the first leg a
little
Your goal from now on will be to limit your trades to only second "leg" m
and w formations, throw everything else away that you have learned in
your retail reality as it has done you no good, and this is why you are now
here, reading this. You want to find something that works! Now this is
obviously not a perfect strategy, and by no means am i saying it is. But it is
a strategy that can be perfected.
Good Luck...