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So now let's discuss the sell side of
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the market maker cell model. So on the right side of the curve we have the sell side delivery.
Again, we look for the market maker sell model when the higher time frame is bearish.
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In our last example on the daily time frame, we had this buy side delivery for the buy program rebalancing this sellside imbalance. We seen that on the lower 1 hour time frame fractal with the buy side delivery
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on the left side of the curve of a market maker sell model reaching up into our higher time frame level in this example was the premium high of this sellside imbalance. After price had reached premium end and
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completely closed in the sellside imbalance. The market then sold off reaching for the sellside liquidity below these lows.
So again on the 1 hour time frame the smaller fractal is the sell side delivery of the market maker sell model.
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So once price had left the initial consolidation and our buy program was underway offering buyside delivery to our higher time frame level we then have a reversal known as a smart money reversal or an SMR.
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So what is a smart money reversal? It is a change in state of delivery.
So the algorithm goes from a buy program to a sell program or a sell program to a buy program. In the case of the market maker sell model, we are going from a buy program to a sell program to a sellside
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delivery. In a previous lesson, we have spoken about the types of reversals.
We have our type one reversal where we run above an old high and tap into a higher time frame level. We then reverse breaking below an old swing low.
This is
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known as a break in market structure. The type two reversal is we have reached a higher time frame level.
We have this high which failed to go above its previous high giving us a lower high and then running back below swing low giving
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us our breaking market structure. The ideal reversal pattern we are looking for is a type one reversal where we make a higher high and then break below an old swing low.
For extra confirmation, we want to look at a correlated asset
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class and we want to see an SMT divergence between the two. When asset one makes a higher high, we look for a correlated asset class to make a lower high.
If they are inversely correlated, then we would look for one to make a higher high and its correlated pair to
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make a higher low. I would only refer to this type of reversal pattern if it's correlated asset was showing an SMT divergence by posting a higher high.
So, let's look at type one in a little bit more detail. When we see a break in
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market structure after we have run a short-term high and rejected from a higher time frame level, we are looking inside of the expansion leg that broke market structure to see if we can see a fair value gap. Now, this is what it
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would look like on the chart where we have an old swing high which we ran through sweeping the buy stops above this high rejecting from the higher time frame level and then running back below this swing low causing a break in market
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structure. Now, this breaking market structure is confirmed with this fair value gap.
If this fair value gap is not present, we don't class this as a valid break in market structure. We don't have to close below this swing low in order
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for it to be classed as a valid break in market structure if we still have the fair value gap present. However, it is higher in probability if we do see a close below the swing low.
When price runs through the opening price of this
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last upclo that ran the buy side liquidity, this becomes an order block. And when it's open is violated, we have a change in state of delivery.
This order block and the change in state of delivery is confirmed with the
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presence of the fair value gap inside of the expansion leg that traveled through the opening price of this order block. The algorithm will then repric lower to attack sellside liquidity or to rebalance an inefficiency below the market.
So now that price has reached
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its higher time frame level and we have taken out buy side liquidity in the form of an old high to the left. We can now start looking for targets on the left side of the curve.
We know that our initial consolidation is going to be our likely draw since the higher time frame
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is bearish. The sellside liquidity will rest below the initial consolidation lows.
This would be our initial terminus as a target. from the point of origin to the terminus will be our SDR or our expected range for sellside delivery.
We
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are anticipating price to go lower after the smart money reversal and we are targeting the sellside liquidity below the initial consolidation. So just like on the left side of the curve where we could grade our range, we can now do the same for the sell side of
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a market maker cell model. Again, this would be our SDR levels on our fib tool.
We would anchor our fib from point of origin which would be the high of the market maker cell model to the initial terminus below the initial consolidation and we would get a graded range of 25%
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increments. So how far below the initial consolidation can price go?
Well, the initial consolidation would be our first target. But we can use calibration techniques to assess how far low we can go.
Now, calibration techniques are
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going to involve a number of things. Number one, we look for pip range below the initial consolidation.
And what do I mean by that? Well, if we have our consolidation range or we have our consolidation high and our consolidation low, we want to look for pip range below
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the initial consolidation in increments of 5, 10, 15, and 20 pips. The second thing we want to look for is if a higher time frame level will be in close proximity to one of the pip range
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levels. Now between 5 and 20 pips is generally a good target.
Or if a big figure level, so a 000 or a 500 level sits between a higher time frame level and a consolidation low, we can get
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anywhere between 30, 40 and 50 pips below. Once the buy program is complete, we can start taking measurements to assess how far the sell program can potentially deliver price.
If we take the swing low, which is the last swing low before the
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reversal, and we take the swing high, this is our manipulation swing that ran the buy side liquidity above this high and into our higher time frame level. Now, this occurs after the final stage of reaccumulation, and it tricks buyers
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into longs. Like I said in the previous lesson, the market moves explosively in this direction.
This is known as the manipulation leg of the smart money reversal. This will form an intermediate term swing with a short-term high to the left and a short-term high to the right.
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If we take the swing low to the swing high and we project standard deviations of this swing lower, we can look for potential targets that the algorithm will reach for a to complete it sell program. If one of these deviations
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align with between five and 20 pips below the initial consolidation and it also overlaps with a higher time frame level, this is a very strong confluence of where the market may want to repric to. Two to three standard deviations of
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the manipulation swing is common. When these standard deviations also align with other arrays, this is a high probability of a distribution area.
one to two standard deviations of the manipulation swing is also another good area to look for redistribution.
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If we also take the first swing low after the smart money reversal and anchor a fib from its low to the short-term high and if we project deviations lower, this can give us extra confluence again especially if it lines up with a higher time frame level and
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another standard deviation. We can also take the breaker swing and we project deviations lower.
Again, this is another strong measurement to look for confluences and overlapping levels. I personally use this one quite often in my trading.
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So now we have our calibrated terminus which aligns with a higher time frame level 5 to 20 pip range below the initial consolidation and we've used a different swing measurements. We now have our calibrated terminus.
If we now
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grade this from our point of origin to our new calibrated terminus and we divide that range in our 25% increments, we now have a calibrated grading range. The first stage of distribution is
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likely to occur around the first 25% of the graded range. Around this area, we are also likely to see a breakaway gap, which is an unfilled fair value gap.
We will get into a lot more detail in future lessons about gaps.
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Again, at the 50% grade, we are likely to see our measuring gap, which will be an unfilled fair value gap at the midpoint of the range. Again, this measuring gap will give us extra confluence that our calibrated terminus was correct.
We will normally see our second stage of
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distribution around 75% of our graded range. This is known as the silver bullet.
In the next lessons, we'll go into detail about how and why the silver bullet entry forms and how we can utilize this to take an entry. Reverse
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all of this for the buy side of the market maker buy model. So, that's your homework is to try to find a market maker buy model and apply these concepts to your chart.
So, I hope you have found this one insightful and I will catch you again in the next lesson.