Lecture 7: Trendline Phantoms in ICT Mentorship

Introduction

• Lecture on trendline phantoms or false trend lines
• Focus on diagonal trendline support and resistance

Diagonal Trendline Support

• Market appears to make higher highs and lows
• Imaginary diagonal lines are drawn by retail traders
• Retail traders buy when price hits these lines

Diagonal Trendline Resistance

• Market appears to make lower highs and lows
• Imaginary lines suggest resistance
• Retail traders sell at the intersection of price and these lines

Critique of Trendline Theory

• Lecture argues against the validity of trendline theory
• Price does not have an awareness of trend lines
• Price respects actual liquidity, not chart drawings
• Market movements are influenced by liquidity and smart money

Banks and Trendline Theory

• Banks do not base decisions on trendline theory
• Trendline theory offers no objective basis for future price movement
• Trendlines are considered subjective

Market Maker Strategies

• Retail traders often mislead by trendline support/resistance
• Trendlines often serve as traps set by market makers

Retail Bullish Trendline Support

• Retail buys at an apparent support level
• Trendline may signal an impending price collapse
• Strategy: Anticipate the high formed before trendline hit for bearish setups

Retail Bearish Trendline Resistance

• Retail sells at an apparent resistance level
• Trendline may signal an impending price rally
• Strategy: Look for buying opportunities at lows formed between trendline points

Examples and Analysis

• Examples demonstrating false trendline perceptions (e.g., 52.34 level)
• Trendlines should not be relied on for support/resistance predictions
• Real market movements hinge on liquidity, not trendline theory

Conclusion

• Trendlines are likened to coin flips in terms of prediction reliability
• Real trading should focus on liquidity and smart money strategies
• Retail traders are often misled by apparent trendline signals

Recommendations

• Study charts for trendline fallacies
• Focus on higher time frame institutional order flow for better prediction
• Understand the market maker's perspective and liquidity traps