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Market Mechanics Ep 14: Flip Zones — Transcript

by Brad Goh (The Trading Geek) · 5,848 words · 933 segments · language en · Watch on YouTube

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0:00The market is always telling a story.
0:02And one of the most important clues is
0:04not just when a zone works, but when it
0:08fails.
0:09Because when a supply and demand zone
0:11fails in the right way, that failure can
0:13reveal a shift in order flow. It can
0:16tell you that demand has overpowered
0:17supply or supply has overpowered demand.
0:20And that is what flip zones help us
0:23understand.
0:24So, we've already talked about supply
0:26and demand zones and how they help us
0:28identify where price is most likely
0:30going to react. But in this lesson, I
0:32want to show you something just as
0:34important, which is what happens when
0:37one of those supply and demand zone
0:38fails.
0:40Because a failed zone is not always
0:42meaningless. Something that fails tells
0:45us that the opposing side has
0:46overpowered it.
0:48Demand has exceeded supply, the buyers
0:51has took back control of price from the
0:53sellers or vice versa. And that is once
0:56again where flip zones come in. So, what
0:59are flip zones? What are these magical
1:01zones that you're talking about, Brent?
1:04Flip zones are pretty much the supply
1:06and demand zones that caused the
1:08opposing zone to fail.
1:11They signal a shift in order flow and
1:14tell us whether demand and supply has
1:16overpowered the other side.
1:18And they are usually caused by changes
1:20in the market sentiment, changes in
1:23order flow, and changes in the
1:25psychology of market participants.
1:29So, a flip zone is not just a zone that
1:31has failed. It's a failed zone that
1:33reveals a change in control, the buyers
1:36and the sellers, whoever took back
1:37control of price.
1:40So, that's what flip zones allow us to
1:42do.
1:43Okay, so there is two types of flip
1:45zones. There's your supply flip zone and
1:47then there's your demand flip zone.
1:51So, supply zone is like what we have
1:53went through in the first first few
1:55lessons, right? It's pretty much the
1:57point of interest that led to an
1:59aggressive move to the downside. And
2:01then a demand zone is pretty much a
2:03point of interest that led to an
2:05aggressive move to the upside, right?
2:06Really gotten that out of the way. If
2:08you don't understand so what are supply
2:09and demand zones and how to identify and
2:12trade them, please go and rewatch that
2:14lesson before you come on to this lesson
2:16itself.
2:17Flip zones are pretty much the zone that
2:20caused that particular supply or demand
2:22zone to fail.
2:24And the reason why they matter is
2:26because they help us understand when the
2:28previous trend is weakening. You know,
2:30when the sellers are getting weaker and
2:33when the buyers are stepping into the
2:34market.
2:35They help us understand when a zone has
2:38lost control.
2:40They help us understand when the
2:41opposing side has stepped into the
2:43market with a lot of strength, a lot of
2:46momentum, a lot of intent.
2:48And they help us understand where a new
2:50point of interest may form after it has
2:53failed.
2:54Okay? So, it pretty much tells you that
2:56the market is no longer respecting the
2:58old narrative. So, if the market has
3:00been bullish for quite some time and you
3:02start to see the demand zone fail, this
3:04tell us that sellers might be stepping
3:06into the market to take back control of
3:08price. Similarly, if the market has been
3:10bullish for quite some time and then you
3:12start to to see uh no, similarly, if the
3:15market has been quite bearish for quite
3:16some time and then you start to see the
3:19sellers start to fade away, they are
3:21start to weaken because the supply zone
3:23start to fail, this is where we know for
3:25a fact that the buyers are taking back
3:27control of price.
3:30So, supply flip zone
3:33is formed when a demand zone fails to do
3:36its job and create a higher high in an
3:38uptrend.
3:40So, what I basically mean by that is
3:41that if you look at this example right
3:43here, price goes up, pulls back, goes up
3:45creating a higher low, right? This is a
3:47bullish break of structure which tells
3:49us that price is actually in an uptrend.
3:51So, right now we are expecting price to
3:53create a new higher low
3:55and then go up there and create a new
3:57higher high.
3:58So, we are expecting this demand zone to
4:00hold, right? So, if that demand zone
4:02hold, this tell us that the market is
4:03still bullish and
4:06price is just going to continue going
4:07up.
4:08But, observe what happened next, right?
4:10So, in this case, price went down,
4:12mitigated the demand zone, right? So, it
4:15it did its job, right? It did fill up
4:16the remaining buy orders that was
4:18pending at this demand zone, but there
4:21was insufficient demand.
4:23As a result, price created a new lower
4:25high right here,
4:26and then later on price went out there
4:28and take out the last low, giving us a
4:30market shift.
4:32So, in this case, this is what we call a
4:34failed reaction,
4:35which is when price
4:37actually wanted to go up, but there was
4:39insufficient liquidity, insufficient
4:41fuel, insufficient demand. As a result,
4:44not enough fuel, it came down and caused
4:46the entire trend direction to shift.
4:50Okay?
4:51So, basically, like I said, if this
4:53demand zone were to do its job, it would
4:55have come up here, create a new higher
4:56low, and create a new higher high. But,
4:58in this case, it failed to actually
5:00create a new higher high. It failed to
5:02take out this high right here, which
5:04tell us that this demand zone has
5:06failed.
5:08So, leaving us a failed reaction. And
5:12when there's a failed reaction just like
5:14this, this is where we can draw the flip
5:17zone, right? Which is from the bottom to
5:19the top of the failed reaction, and this
5:22is our supply flip zone.
5:26Okay, literally as simple as that. You
5:28just identify the range
5:31that was created after
5:34the zone has failed, and that is your
5:36flip zone itself.
5:39And then you can see later on price came
5:40down here, taking out this low, telling
5:42us that supply has overpowered demand,
5:45the sellers has overwhelmed the buyers,
5:48and right now the sellers are in control
5:49of price.
5:53So, yeah.
5:55Price must break and close below the
5:56reaction point. Must break structure in
5:59order for the supply flip zone to
6:00actually be formed, right? So, these are
6:02like the two criteria, which means that
6:03the there must be a nice candlestick
6:05closure below the previous low right
6:07here, and it must also lead to some form
6:10of market shift or some form of break of
6:11structure for us to deem that as a valid
6:14supply flip zone.
6:16So, a demand flip zone is pretty much
6:19the opposite of that, right? Demand flip
6:21zone is formed when a supply zone fails
6:23to do its job and create a lower low in
6:25a downtrend.
6:27So, once again, in a downtrend just like
6:29this, we are expecting price to create a
6:31lower highs and lower lows. So, we
6:33naturally expect price to mitigate the
6:35supply zone, and then for sellers to
6:37step into the market and cause price to
6:39come down there and take out this low
6:40right here.
6:42But, in this case, once again, that did
6:44not happen because there's not enough
6:45sell orders within that supply zone. As
6:48a result, it creates a failed reaction
6:50just like this. When we have a failed
6:52reaction, which tells that price didn't
6:55have enough sell orders to cause price
6:56to continue going down to take out this
6:58low right here, instead it actually
7:00reversed to the upside. This tells us
7:02that we have a flip zone. Okay? This
7:04tells us that the supply zone did not do
7:06its job. It failed to do its job, giving
7:08us a failed reaction, which allows us to
7:11draw a flip zone.
7:13Which is once again from the top of the
7:14failed reaction to the bottom of the
7:16failed reaction.
7:17And right now we can expect price to
7:19pull back to the flip zone after the
7:21market shift to fill up the remaining
7:24buy orders before continue to the
7:26upside.
7:28Okay? So, you can actually look for
7:29shorts at this supply flip zone and look
7:31for longs at this demand flip zone
7:33itself.
7:34As simple as that. Once again, this just
7:36tell us that, you know, the opposing
7:38side has actually took back control of
7:40price.
7:42Now, I want to emphasize on this point
7:44right here, okay?
7:46If you look at this move over here,
7:49you must understand that a zone reacting
7:51is not enough to call it a flip zone.
7:54Okay, so if price comes up here,
7:56mitigate this supply zone, and goes
7:58down, this is not a flip zone.
8:00For it to be a valid flip zone, it needs
8:02to have the opposing zone failed to do
8:05its job, right? So, in this case, the
8:07only reason why we can call this a flip
8:08zone and not just an ordinary demand
8:10zone is because it causes this supply
8:13zone to fail.
8:14Right? This supply zone failed to do its
8:16job, which means we got a failed
8:18reaction right here. So, this is our
8:20flip zone.
8:21And And to be very specific, it's our
8:23demand flip zone.
8:26And it also caused price to break
8:29this relevant structural point. So,
8:31that's another important thing, right?
8:33It needs to cause price to break
8:34structure.
8:36So, if this flip zone did not break
8:37structure, it is not counted as a flip
8:39zone.
8:40And another thing is that it needs to
8:42break
8:43and close beyond the reaction point,
8:45right? So, this is the last high right
8:48here. It needs to have a nice
8:49candlestick closure above that last high
8:52right here.
8:53Okay, so once again, just a quick recap.
8:55A flip zone is only confirmed when there
8:58is a failed reaction,
9:01when price breaks structure,
9:03and price actually close above the or
9:05below the reaction point.
9:08So, those are the three criteria of a
9:10flip zone.
9:11Now, let's take a quick look at some
9:13examples on what this looks like on the
9:15chart, right? So, in the In this case,
9:17you can see on the left-hand side, we
9:18got a supply flip zone, and then on the
9:20right-hand side, we got a demand flip
9:21zone.
9:22So, what happened is that price went up,
9:25pulls back, goes up. Guess what? You got
9:27a demand zone being formed right here.
9:29So,
9:30assuming that the market is to remain
9:32bullish, what must happen is that price
9:34must come down here, respect the new
9:35higher low,
9:37and respect this demand zone, buy orders
9:39must step into the market, and there
9:40must be so much buy orders that cause
9:42price to later on go up there, break
9:44structure, and create a higher high.
9:47If that does not happen, if price failed
9:49to take out this high high right here,
9:51and instead cause a failed reaction, we
9:53know that supply has overpowered demand.
9:57Sellers has overwhelmed the buyers, and
9:59right now the trend is about to shift
10:00from bullish to bearish.
10:04And then later on we got price coming
10:06down there, take out the last structural
10:08low right here, giving us a market
10:09shift, confirming to us that
10:12price is indeed shifting bearish.
10:16Now, notice that when price actually
10:18have a failed reaction right here, okay?
10:20Over here. This does not necessarily
10:23mean that the market is about to
10:25reverse. Because as long as price is
10:27still respecting this last higher low,
10:30we are technically still bullish. Which
10:32means that price can pull back to this
10:33demand zone right here, you know? But
10:36does not take out that demand zone,
10:38and instead just start reversing up just
10:40like this, the market is still bullish.
10:42Which means this right here is not a
10:43valid flip zone.
10:45Because it did not lead to a break of
10:47structure. It did not lead to a market
10:49shift.
10:52But later on, in this case, we got a
10:53market shift right here, and this give
10:56us our supply flip zone, which we can
10:58identify by drawing the high to the low
11:00of that failed reaction, drawing a box
11:02just like this, and this is where you
11:05got a flip zone. All right? So, you just
11:07wait for price to mitigate that flip
11:08zone, and then this way you can look
11:09look for shorts. Same thing as the
11:11demand right here, right? Supply zone
11:13failed, creating a failed reaction right
11:15here, and then later on we wait for
11:16price to pull back to the flip zone, and
11:18we look for our long position, and buy
11:20it all the way up.
11:23As simple as that.
11:26Okay, so
11:27like I said, I don't always like to have
11:29you guys memorize that you don't
11:31understand. So, once again, I just want
11:32to explain the logic, the psychology
11:35behind the flip zones.
11:37Flip zones are caused by a change in
11:40market sentiment and participant
11:42psychology.
11:44For example, in this case,
11:47the traders right here, you know, when
11:49price is actually in the uptrend just
11:50like this, they're obviously expecting
11:52this demand to hold.
11:55But, when it didn't hold,
11:58and instead it failed,
12:00this invalidation
12:02fuel was the move in the opposite
12:04direction.
12:05So, this was like
12:08a sign that tell us that the confidence
12:10have shift from the buyers to the
12:12sellers.
12:15And then now this failed zone becomes a
12:18clue that tell us that the control has
12:20changed.
12:21The buyers
12:23are no longer in control of price, the
12:25sellers are now in control of price.
12:27So, this failure of a particular zone of
12:30this demand zone tells us that
12:33the sentiment of the market has changed.
12:36The belief has changed.
12:38And since the belief and the sentiment
12:40has changed, the order flow has changed.
12:45So, that's the psychology behind flip
12:47zones.
12:48With that being said, let's go on to the
12:49charts and try to identify some flip
12:51zones.
12:53All right. So, I'm once again, I'm going
12:54to give you like a very systematic
12:55framework that you can use to identify
12:57these flip zones because I want to make
12:59it as mechanical as humanly possible so
13:02that there's no room for guesswork or a
13:05doubt whatsoever.
13:07>> [snorts]
13:08>> And that usually comes down to just a
13:09few steps, right, which I'm going to
13:11show you in a minute.
13:12So, let's Okay, so these are already
13:15some flip zones I've marked up for you.
13:16Let me just remove everything and let's
13:18just go step by step. Okay, step by
13:20step.
13:22So, let's look at this price action that
13:23we have going on right here.
13:25First step, do your mapping out of your
13:27structure, right? So, this is the
13:29bullish break of structure. This is the
13:31swing high or this is the swing low and
13:33this is the swing high. Okay, so we can
13:36clearly
13:37identify this bullish break of
13:38structure. So, this is the range that we
13:40are focusing on.
13:41So, this is where we can map out our
13:42demand zone, which is this entire range
13:45right here. If you're using the range
13:46method, if you're using the pivot
13:47method, it would just be the pivot
13:48candle right here. But, for simplicity's
13:50sake, let's map out this entire range
13:52right here.
13:54So, this right here is our
13:57demand zone.
13:59Okay?
14:00So, right now price is bullish, creating
14:03higher highs, higher lows. We are
14:04expecting this demand zone to hold and
14:06we are expecting price to come down here
14:07to create a new higher low for price to
14:08go up even further.
14:10That should be clear by now. If that's
14:12still not clear, please go and revisit
14:14the past few lessons.
14:16Right? So, in this case, we do nothing.
14:18Okay, we wait, we observe what price is
14:19doing. Price mitigate this demand zone
14:22right here. Bam!
14:24And then creates a fair reaction. Okay,
14:26let's let's go back a little bit. Okay,
14:28so that's the first step, right? The
14:29first step is to identify the structure
14:31and also just map out any original
14:33supply and demand zone that you can
14:34spot.
14:35And then
14:37ideally
14:38we want to assume that this zone is just
14:40going to work. And then if it doesn't
14:41work, then it gives us a fair reaction,
14:43then now we know that the sellers has
14:45overpowered the demand, the the buyers.
14:48So, in this case, price mitigate this
14:49demand zone right here. Now, our
14:51expectation is that price is going to go
14:53up here. Okay? So, that's what we're
14:54expecting right now. Price is going to
14:56go up. Okay? And then price did go up.
14:59But then it came up here, mitigating
15:01this supply right here, and then started
15:02coming down a little bit. No worries,
15:04right? That might just just be a little
15:06pullback for price to continue going up
15:08even further.
15:09So, in this case, we just wait, wait.
15:10Boom! And then the price came down and
15:13what do we have?
15:15We got a fair reaction.
15:17Now, this just tell us that smart money
15:20institutions, they have used the buy
15:21orders within this area, but there was
15:23insufficient buy orders for price to
15:25continue going up to take out this high
15:28right here. So, as a result, it might
15:32be failing to do its job.
15:34It might. We cannot assume yet, right?
15:35Because there is no market shift
15:37whatsoever. Price has not take out this
15:38low. So, this could just be, you know,
15:40price pulling back, maybe coming deeper
15:42into this demand zone, and then goes up.
15:44Okay, so this is just a first sign that
15:46tell us that it might fail.
15:48And then in this case, let's just
15:50continue to observe what price does
15:51because I never ever want to assume
15:52things.
15:53Boom. Price came down and take out that
15:56low right there.
15:58Okay, the minute it take out that low
15:59right there,
16:00this is where we know for a fact that we
16:02got a market shift. Okay, so the minute
16:04a candlestick close below this previous
16:07swing low right here, we already got a
16:09market shift.
16:11Now, this is where we can start to
16:13identify our flip zone.
16:16Your flip zone is basically
16:19in this case, the supply zone that
16:22caused this demand zone to fail.
16:25All right? So, there's actually quite a
16:27few
16:28flip zones right here if you were to
16:30look at it closely.
16:32So, first of all, let's see the
16:33pullback. Price goes down, pulls back,
16:35and then goes up. So, let's look at this
16:37supply zone right here. Is this a flip
16:39zone?
16:40Well,
16:41it's not a flip zone. The reason why
16:42it's not a flip zone is because it did
16:44not cause any demand zone to fail.
16:46Right? If you look at the left-hand side
16:47right here, look, was there any demand
16:48zone that price reacted from? No, there
16:50wasn't. So, if that's the case, this is
16:52not a flip zone.
16:53Now, then later on price continue going
16:55down, and then pulls back, and then goes
16:56down even further. Now, this is where we
16:58can map out another supply zone right
16:59here.
17:00Now, is this a flip zone? Well,
17:03let's go through the three criteria that
17:05we have laid out earlier.
17:08Okay, so for this to be deemed as a flip
17:11zone, what must happen is that
17:14it must cause a demand zone to fail.
17:16Okay, so in this case, this supply zone,
17:18did it cause this demand zone to fail?
17:19Yes, it did. Right, because when price
17:22came down to this demand zone, price
17:23reversed, did not take out this high,
17:25did not do its job, and instead just
17:27continued going down.
17:29Cool.
17:30Did
17:31it close below the reaction point?
17:34Right, so this is the reaction point.
17:36Did the candlestick close below this low
17:37right here? Well, yes, it did. It did
17:39close below this low right here.
17:41Second criteria check.
17:43Third criteria is did it lead to a break
17:46of structure or a market shift?
17:49Later on price came down here,
17:51broke structure below these lows, and
17:52also led to a market shift.
17:54Yes, it did. Making this a supply flip
17:58zone.
17:59All right, so that's my supply flip zone
18:01right there.
18:03If this zone did not cause this zone to
18:05fail, then it would just be a supply
18:06zone. But in this case, this zone caused
18:08this zone to fail, and it also met the
18:10other two criteria that we just talked
18:11about, making this not just ordinary
18:14supply zone, but a supply flip zone.
18:17Now, let's look at look at these other
18:19examples right here. Price continued
18:20going down, pulls back, comes down.
18:24So, in this case, we can map this up as
18:26a supply zone, right? And ask ourselves,
18:28is this a supply flip zone? Well, did it
18:31get a reaction from the left-hand side?
18:32Yes, it did. Right, it reacted from this
18:34demand zone that we have right here.
18:38And then also it met the other two
18:39criteria when it actually went down and
18:42create a
18:43failed reaction where the candlestick
18:45actually took out the reaction point,
18:47and also led to a market shift. Okay, so
18:50doing that alone, these two are our flip
18:52zone, right? Both of these are our flip
18:53zone right here. Supply flip zone one,
18:55supply flip zone two.
18:57Let's just continue to observe what
18:58price does next, okay?
19:00So, later on price actually
19:03went up, mitigate that flip zone, and
19:06then started coming down. Okay, so two
19:08things happened right here.
19:10When price came up to this supply flip
19:11zone, it reacted from this supply flip
19:13zone.
19:14But there was not enough liquidity,
19:16right? So as a result, it just continued
19:17blasting right through it. And it went
19:19up there, swept the liquidity above this
19:21fair reaction, and then pushed to the
19:24downside. Right? So in this case, not
19:26enough liquidity at the flip zone, guess
19:29where it needed to sweep liquidity.
19:30Where it needed to sweep the next buy
19:31side liquidity. Well, it's going to be
19:33above this swing high. And that's what
19:35we talked about in the last lesson,
19:36right? That's why I say you got to watch
19:38the lessons in chronological order. And
19:41you're not allowed to skip from one
19:42lesson to the next lesson. Because the
19:44minute you skip one lesson, the next
19:45lesson is just not going to make any
19:46sense anymore. Because every single
19:48lesson is built on top of the last
19:49lesson. Right? So please, if you guys
19:52haven't went through the liquidity
19:53concepts and inducements lesson, go and
19:55rewatch the lesson because it's so
19:57important.
19:58You need to understand that before you
19:59can even
20:01fathom what happened right here. Why did
20:04price freaking flip the flip zone? Well,
20:06it's because there was not enough fuel
20:08within this flip zone. So as a result,
20:10it needed to grab more fuel above this
20:11swing low, swing high right here.
20:14And then let's take a look at what
20:15happens next. Later on, price came up
20:17here.
20:18Mitigate this flip zone, come to the 50%
20:21of the flip zone, and then consolidate a
20:23little bit before it started dumping
20:25very aggressively. Right? So you can see
20:27this flip zone
20:29clears day. Judging by this huge move to
20:32the downside, clearly tells that this
20:34flip zone has done its job. This flip
20:36zone really worked, right? There was
20:38just so much sell orders within this
20:39area. It's actually diabolical.
20:44So yeah, that's uh example of a supply
20:47flip zone. Let me just try to show you
20:48guys some more examples.
20:52Let me show you like a much more subtle
20:54example. Right? So let's zoom in at
20:57price action that we have going on right
20:59here. Okay? So you can see price came
21:01down, pulls back, goes down, and then
21:03there's a flip zone being formed right
21:04here. You might not be able to see it
21:06right now because you haven't got used
21:08to seeing it. Right? But because I've
21:10gotten used to seeing the flip zone so
21:11often by now, I can just see that
21:13there's a flip zone going on right here
21:15without actually jumping down to the
21:16lower time frame.
21:18So, let's jump down to the lower time
21:19frame. Let's go down to the 15-minute
21:20time frame. And look at what happened
21:22right here.
21:24Okay, so I've shown you an example of a
21:25supply flip zone. Now, let me show you
21:27an example of a demand flip zone.
21:30So, in this case, price broke structure
21:33right here, later on broke structure
21:35again over here. Okay, lower highs,
21:38lower lows, our good old bearish break
21:40of structure right here,
21:42which tells that this is the swing high,
21:46and then this is the swing low. Okay,
21:48let's just go back in time a little bit
21:50right here.
21:51Swing high, swing low. Cool.
21:54And then this is where you can map this
21:56up as your supply zone. All right. So,
21:58once again, our expectation is that
22:00price is just going to come up here,
22:02respect this last lower high, respect
22:04this supply zone, and price is just
22:07going to continue bearish. That's our
22:09expectation right now.
22:11But whether that actually plays out or
22:12not, it depends on what the market does,
22:14right?
22:15Later on, price went up there.
22:17And what do we have over here? Okay,
22:18what do we have here, ladies and
22:20gentlemen?
22:21So, in this case, we got price going up
22:24there and take out the last lower high.
22:27You can see, clear as day, the
22:28candlestick closed above the last lower
22:30high, which means that we got a market
22:32shift. All right, we got a market shift
22:34right here.
22:35But was there a flip zone right here?
22:38No, there was no flip zone over here.
22:40Right? There was this demand zone right
22:41here, right? But it didn't really cause
22:43any zones to fail, right? It's neutral,
22:46right? So, that's all it is. There's no
22:48failed reaction, no flip zone, as simple
22:50as that. Let's continue to observe what
22:52price does. Later on, price
22:54pulled back to this extreme demand zone
22:56that we have marked up, got a reaction
22:58from there, and then as a result, pushed
23:00to the upside.
23:01Now, this is where things start to get
23:03interesting
23:04because we got a failed reaction right
23:06here.
23:07Are you able to see the failed reaction?
23:09It's a little bit subtle, but are you
23:10able to see it?
23:12Okay, so in this case, price reacted
23:14from this supply zone on
23:16right here,
23:18causing a pullback, and then later on
23:20price went up,
23:22giving us a failed reaction. Because if
23:24this supply zone were to do its job,
23:26price would have continued going down
23:27and take out this low right here and
23:29continue bearish. But instead,
23:32it created a
23:34U-shaped reaction, V-shaped reaction,
23:36creating a failed reaction. Right, so
23:38this is the failed reaction, and then
23:40this becomes the reaction point, and I
23:41can see the candlestick close above the
23:43reaction point.
23:45I can even map this up as the reaction
23:46point to make it more obvious for you
23:48guys to see.
23:49And this is where we can map this entire
23:52thing right here as our flip zone.
23:53Right, so you map the high to the low of
23:57the failed reaction, and this right
23:59here, ladies and gentlemen, becomes our
24:02flip zone.
24:03Okay, this is our flip zone.
24:06Now,
24:08candlestick closed above the reaction
24:09point, check.
24:11This
24:12demand zone caused this supply zone to
24:13fail, check.
24:15Did it lead to a break of structure?
24:17Yes, it did. Broke structure by taking
24:19out this previous high right here.
24:21Right, price created higher high, higher
24:23low, and a new higher high right here.
24:25So, that's a valid flip zone. That's a
24:27valid demand flip zone, and look at what
24:29price did.
24:31Price pulled back to the flip zone and
24:33then pushed to the upside. Right, you
24:35can see.
24:36Observe where price pulled back to.
24:40After price made its move to the upside,
24:43came down, touches the flip zone right
24:45here, and then goes to the upside.
24:49Okay?
24:50And interestingly enough, there's
24:52actually another flip zone which is not
24:54really obvious, but it's there.
24:56So, when you're asking yourself whether
24:57there's a flip zone, you just want to
24:59look towards the left to see whether you
25:00actually cause any opposing zones to
25:02fail.
25:03So, if I'm asking myself, is there a
25:05demand flip zone?
25:07Then I need to look towards the left to
25:08see whether it
25:10has any supply zone that failed in the
25:12past.
25:13So, this is where you look to the to the
25:14left. Okay, price goes up,
25:17comes down. Okay, this entire range
25:19right here will be our supply zone.
25:22Right, so there we have our supply zone,
25:24and then we drag it all the way to the
25:26right-hand side right here. Maybe this
25:28entire range is a supply zone, just like
25:30this.
25:31Okay. So, in this case, price actually
25:34mitigate this supply zone that we have
25:36on the left-hand side right here.
25:38And if this supply zone were to do its
25:40job, price would just go down and take
25:41out this low.
25:43Continuing this lower high, lower lows
25:44dynamic, but it failed to do its job,
25:47giving us a failed reaction, where price
25:49actually reversed and hit back up.
25:51Now, don't get me wrong, right? It did
25:54did its job to a certain extent. Right,
25:56price did mitigate its sell orders. Uh
25:58this What What was that? Price did
26:00mitigate this supply zone right here,
26:03and it did get a reaction. Right, like
26:05price did went down, but there was not
26:07enough fuel. There was not enough
26:09supply. There was not enough sell orders
26:11for price to just continue going down.
26:14Instead, it just reversed and hit back
26:16up. So, in this case, we got a failed
26:19reaction right here. And since we got
26:21this failed reaction here, this is where
26:23we can identify the reaction point, drag
26:26it from the high to the low, and this,
26:29ladies and gentlemen, is our flip zone.
26:34And now you can see where price reacted
26:37from before it continued going up.
26:39Right, before price actually went up, it
26:41came down, mitigate this flip zone right
26:45here that we have identified 50% of it,
26:47and then continue pushing to the upside.
26:52Okay. So,
26:54just apply this mechanical rule and you
26:56will start seeing flip zones everywhere,
26:57right? Because
26:58every time there's going to be some form
27:00of supply and demand zone failing,
27:01because there's just
27:03a change
27:05in terms of order flow, right? There's
27:06just the buyers and the sellers changing
27:08hands and it happens all the time.
27:12So, just to show you another very subtle
27:13example right here.
27:15Maybe one last example.
27:17Over here, price goes up, pulls back,
27:19goes up, we got
27:21demand zone right here. Okay, we got a
27:23good old demand zone over here.
27:25And then later on, price came down,
27:27mitigated this demand zone. Over here,
27:28you can see this long lower wick right
27:30here, which tells that price did
27:32mitigate the demand zone.
27:34And if this demand zone were to do its
27:35job, price would just continue going up
27:36there, take out this high and just
27:38continue bullish.
27:39But instead, price actually reversed and
27:41head back down, creating a failed
27:43reaction. And when there's a failed
27:44reaction just like this,
27:46guess what? We can map this up as our
27:49flip zone.
27:51Okay, so that's becomes another supply
27:53flip zone.
27:55And look at what price does.
27:57Okay.
27:58Price came up, gravitated towards this
28:01flip zone right here,
28:02but this is one of those instances where
28:04the flip zone actually failed.
28:07Right, the where the flip zone actually
28:08just, you know,
28:10actually just start to
28:12I mean, it did not really fail, right?
28:14Like you can see price did mitigate this
28:15supply flip zone. We did got a small
28:17reaction right here, but there was just
28:18not enough sell orders at this flip
28:19zone. As a result, price just blast
28:21right through it.
28:22And you might be wondering, why is that
28:24the case?
28:25It's because price has literally just
28:28reacted from this 15-minute flip zone.
28:31And remember in the multi-timeframe
28:33concepts lesson, we talked about how the
28:35higher the time frame,
28:37the stronger the price action is.
28:40So, if I see a flip zone on the
28:4115-minute time frame just like this,
28:44this price action is going to outweigh
28:47any flip zone that was formed on the
28:495-minute time frame.
28:51Okay, so in this case, this 15-minute
28:53flip zone will outweigh this 5-minute
28:56flip zone.
28:57So, price is most likely going to
28:59respect this flip zone, this demand flip
29:01zone, than this supply flip zone right
29:04here.
29:05So, you can see, you literally apply the
29:07same principles, but just because the
29:09context is different, the time frame is
29:12different, you get two different move.
29:14One in which price actually respected
29:17and just caused price to move up very
29:18aggressively, and the other, price did
29:21respect it a little bit,
29:23but it was quite insignificant.
29:26All because this was like 5-minute flip
29:27zone, and then this was like a 15-minute
29:29flip zone.
29:32So, just to sum up everything that you
29:33guys have learned in this lesson, flip
29:35zones are essentially the supply and
29:37demand zones that caused the opposing
29:39zone to fail.
29:41They pretty much show us that one side
29:42has overpowered the other, and that
29:44order flow has shifted.
29:47So, a supply flip zone forms when a
29:49demand zone has failed to create a
29:52higher high,
29:55and then price breaks below the reaction
29:57point and the last lower high.
30:01No, and the last higher low. Yeah, and
30:03the last higher low, which is in
30:04somewhere around here.
30:06And a demand flip zone is formed when a
30:08supply zone fails to create a lower low,
30:11and then price breaks above the reaction
30:14point and the last lower high,
30:17causing the trend direction to shift
30:18from bearish to bullish.
30:22Okay? So, flip zones are they are not
30:25just failed reactions, they are about
30:27failed zones that led to a structural
30:29shift. They tell us that demand has
30:31overpowered supply or overpower or
30:33supply has overpowered demand, sellers
30:36has kicked out the buyers, and vice
30:37versa.
30:39So, once again, this is just another
30:40tool in your arsenal to help you
30:41understand who is in control of price,
30:44whether the buyers or the sellers
30:47itself.
30:50Okay? So, yeah. Please make sure you
30:52combine this with all the other concepts
30:53that we are teaching here, right? This
30:55is just another confluence that you can
30:57add into your trading plan. And yeah,
31:00this is one of those things where it
31:02really just helped me read the market
31:03and just make everything a lot more
31:05clearer.
31:07So, with that being said, I hope you
31:08guys have enjoyed this lesson. And I'm
31:10looking forward to see you guys in the
31:11next lesson. As always, remember you're
31:13just one trade away.

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