Welcome back folks. This is teaching number eight of eight in December 2016 ICT Mentorships content. We're dealing with specifically double tops and bottoms. Okay, before we get into it, I want to talk about measured moves and clean highs and clean lows. If you look at this price action in here, we have a Drop down in price with relatively equal highs in here.
Okay in the marketplace, there is a pretty reoccurring phenomenon that takes place about measured moves and You can see This price swing here projected up gives us pretty close to that level up there. And when I was going through my coming up as a trader, I took a lot of the things I learned from institutional trading and retail trading and blended the two together. And I knew that there would be runs on stops above the highs and runs on stops below the lows. I noticed that there was measured move ideas throughout all of price action.
And I also noticed that by blending some of the things like price delivery and double tops, like we see here, these two highs here in close proximity to one another, price is already showing a willingness to want to go lower. And inside this consolidation, let's take a look at the liquidity pools and ranges above and below. Well, above here, we have this range here. Okay, and what I'm noting here is this candle's opening, 7742, and this candle's high. coming in at 77 even big figure.
So there's our range in here. Now what I've delineated on the chart is the open at which price was an up candle beginning and another up candle here. And then everything below this candle here is all sell side delivery. So there is a gap or liquidity void in this range here.
Down here, we have a fair value gap right in here. These candles here, this candle here. So we have that, and we have the body of the candle of this down candle, which is the bullish order block, which is right before this big move up, the last down candle. We're going to focus primarily on...
the open on that candle. So we have mapped out both sides of markets liquidity and we can now build ideas about what we would reasonably expect to see price do. Now the retail universe is going to see this as Double top, so therefore there's resistance. Let's get short and put a protective buy stop above these highs.
And they're going to be looking for the market to trade down into this low because support resistance says this is where support bounced. So therefore, price should reach all the way down to that level. Institutionally, what we would be thinking is price definitely has buy stops above here. So, traders that are already short back here, we want them to drop their protective buy stops down here. So, we're going to wait for price to drop lower, close in this fair value gap, and potentially hit this order block level down here.
If price drops down to that level, we could reasonably expect price to go back up and clear out these buy stops. Or, the market could come up. trade into this void close it in and then trade lower to close this fair value gap or hit this bullet shorter block to close the trade here are the two scenarios as it is the market starts to break down so we know they're going to be looking for this side of the liquidity first so that means they're going to drop into this area here in this fair value gap or bullet shorter block And then we'll expect to see the equal highs or double top to be blown out and to reach up into this area here.
But at this point here, we also notice that we have a range in here. And we also have the liquidity void up here and a fair value gap below. So we're looking for the market to trade down, hits the bullish order block, shows willingness to want to rally. Double top is now gone. Those buy stops are gone.
We're looking for the void to close in up here. So now we're going to take our level, put it right on that candle's opening right there. Price trades up, hits it to the pip.
The high comes in at 77.42 to open on this candle. comes in at 77.42 double top buy stop liquidity run up into a liquidity void to a bearish order block which is the last two up candles it goes right to the liquidity void being closed in buy stops ran out above a double top then the market makes a run for the liquidity below that low and there you go Let's take another example on double tops and bottoms. Okay, here we have a double top.
Price has traded down into a bullish order block, which is the last down candle right before the up move. This would be a nice buying opportunity here. So what would you be reaching for?
What liquidity? Well, retail is going to see this as resistance. So in the mind of the retail universe, They see this as resistance here, because price hit this here, and it traded lower. Buy stops are above that.
Now, short traders have their protected buy stop above this equal high, or double top. And you know there's going to be buy stops above this high, but nonetheless, we're focusing on double tops and buy ones for this teaching. We have a bullish order block here.
We could be a buyer here. Price we'll be reaching for. and through this.
Now the question is, is how much beyond that? We have our double top again, and you're going to measure the high down to the low between the two peaks. Okay, so we have the high down to the low. We can project that. Up here.
And now while retail thinks this is where it's going to go, the algorithm is going to reach this far up because it's going to remember the range back here. So we're looking for $74.45. Market rallies, trades through here.
Right in here, there's probably some kind of a momentum divergence. And just for... completeness sake in this month's teaching let's put a momentum indicator up and there's some diversions right there at a level of old resistance at a double top retail is going to think this is a sell and they're going to look for price to come back down to this support level that's what retail is thinking we're thinking it's going up to 74.45 the double top is here buy stops are above that and we're going to take you the measurement that the algorithm is going to use and project that above to get its objective. The high comes in at $74.46 off by one pip and there you go.
You have a market move right to a specific price level running the double top out and then there's your move because it's subsequent. down move running out the liquidity below these lows and now we're going to look at the double bottom traders going to see this as support price rallying away sell stops will build up below here use the high down into the low there's our range and we're going to project that down right there. And what that'll do is that'll give us our algorithm objective where price will look to expand and seek downside liquidity. And there you go. And the subsequent price reaction after that, right back up to the double top reference point.
So it's exactly on both price points here. in here. The tip off is when you're looking for double bottoms and double tops the algorithm is going to know those reference points even if time has passed it knows how to find these reference points by consolidation.
Then it takes those projections and moves it above and below and expands down and above that far. And that's why you get these spike reversals on both sides of the marketplace and why you get the reactions as a consequence. So when you're looking at double tops and bottoms, while they may take time to eventually get through and trade through them, we never trust double bottoms and double tops because we understand that the market makers and the interbank algorithm will go through these old highs and old lows seeking liquidity below them in the form of sell stops, above them in the form of buy stops. Extreme ends of the range is where high probability trading is.
In the middle of the range is where there is low probability. When we use double tops and double bottoms, we're framing the extremes of the current trading range. Every time you look at your charts going forward, you want to be highlighting these double tops and bottom areas because they're going to give you specific laser guided precision levels at which price will drive through above for the buy stops and below for the sell stops.
You can see on an hourly chart it gives us a lot more framework instead of using like a 15 minute time frame for intraday trading where usually it's a 10 and 20 pip run on stop. Usually we expect a 20 pip, 10 to 20 pip range run above an old high or 10 to 20 pip run below an old low for stop runs. When we're using higher time frame charts like the hourly chart, you can't use a 10 and 20 pip grade. you have to use other ideas and the algorithm will reach for these reference points based on the double tops and double bottoms.
And you can see that the ranges, in this case, it's 48 pips. So, it's moving that far based on the movement inside of the double bottom or inside the consolidation. And in here, it's moving based on this move here. inside the consolidation before the double top is ran out. Notice the double top formed here and we had a reference point of this level based on these double top highs and the range projection inside of it.
Price traded all this time until eventually over here it worked it out. So that's why I taught in September what you should be focusing on. Look for levels that are clean like this. You may not have a trade today with that information, but it will give you insights at a later time when we start to run through it.
Or once we have run through that level, then we can understand where it's going to reach for in a contrary view. If it's taken the buy stops already, what side of the marketplace is it going to reach for now? The sell stops. You can see that happening here.
Go through your charts, and I'm sure you'll be amazed at how many times you see this phenomenon take place. And it's on all time frames, so don't think just in a 15-minute or a 5-minute basis or an hour. Look across all the time frames, and you'll see it's there. Until next time, I wish you good luck and good trading.