Smart Money Concepts - Flip Patterns and Flip Zones

Jul 14, 2024

Smart Money Concepts - Flip Patterns and Flip Zones

Introduction

  • Episode topic: Advanced tutorial on Smart Money Concepts
  • Focus: Identification of flip patterns/zones for high probability trades
  • Importance of flip entry models in smart money strategies

Understanding Flip Patterns

  • Flip: Market flipping direction, shift in market sentiment
  • Flip Entries: Quick setups during market plummets or surges
  • Flip Pattern: Price pattern indicating potential market direction shift
    • Transition from one trend to a reversal/change in sentiment
    • Divided into reversal and continuation patterns

Identifying Reversal Flip Patterns

  • Criteria for identification:
    • Price rejected from a higher timeframe supply zone
    • Retest of last demand zone
    • No new higher high; breaks through previously tested demand zone
    • Creation of a supply zone (flip zone)
    • Monitor flip zone for retest
    • Place limit order within flip zone

Comparison with Change of Character (CHOCH)

  • Flip pattern distinct but shares similarities with CHOCH
  • Flip pattern: Specific type of CHOCH with new structure creation

Trading the Flip Pattern

  • Aggressive Entry

    • Identify valid flip pattern
    • Highlight flip zone
    • Place sell limit order at lowest point of flip zone
    • Set stop loss above flip zone
    • Aim for next unmitigated demand zone as take profit target
  • Conservative Entry

    • Identify flip pattern on higher timeframe
    • Highlight flip zone from the wave that flipped demand zone
    • Zoom into lower timeframe for price return to flip zone
    • Confirm change of character in lower timeframe
    • Identify order block from CHOCH wave
    • Place sell limit order at lowest point of zone
    • Target unmitigated demand zone or current timeframe swing low

Continuation Flip Patterns

  • Supply to Demand Flip
    • Price transitions from a supply zone to a demand zone
    • Suggests sellers losing control, buyers taking over
    • Look for long positions after flip zone mitigation
  • Demand to Supply Flip
    • Price transitions from a demand zone to a supply zone
    • Suggests buyers losing control, sellers taking over
    • Look for short positions after flip zone mitigation

Rules for Valid Flip Patterns and Zones

  1. Reversal from Supply/Demand Zone: Price mitigates and reverses from higher timeframe supply/demand zone
  2. Inefficiency: Flip pattern should leave a significant inefficiency behind
  3. Pullback Reaction: Price must react and pull back before breaking supply/demand zone
  4. Unmitigated Zones: Flip zones are one-time use; not significant after initial mitigation

Example Analysis

  • Example for aggressive entry setup with euro-dollar pair
  • Identification of bullish and bearish scenarios
  • Use of higher and lower timeframes for precise entries

Emphasis on Backtesting

  • Importance of backtesting strategy 100 times before real use
  • Recommended tool: Trader Edge platform for backtesting

Conclusion

  • Summary of reversal and continuation flip patterns
  • Encouragement to stay updated and provide feedback for future topics