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