Peak formation high
#2 #3
#1
#4
#5 #6
Peak formation low
KEY
Blue Box – Asian Session
Green Box – London Session
Red Box – New York Session
Black Boxes – Peak Formations
Yellow Circles – Trap Moves
Trap Moves
#1
During the Asian session, the market maker would be in the accumulation phase, whereby he would be accumulating traders’ positions. In this
case, he induces the traders to take long positions by driving the price up. This is a false move to induce the traders to take long positions.
#2
After having driven the price high during the Asian session, the market maker is running out of liquidity, so he needs to regain some money from
the traders. He does so by throwing a spike high, creating the initial high of the day. This move induces more traders to take long positions as they
see price going up. However, there are some traders who would have taken short positions in anticipation of the price to go down. These short
position traders are taken out by the spike high. After throwing the spike high and taking out the stops of the short position holders, the market
maker then drives price down using three vector candles. This is a false move and in this move, he traps all the long position holders from the
Asian session. He does not break the initial low of the day and this gives the long position holders confidence that price is surely going to continue
going up. He takes some of their money and hits the stop losses of some of the long position holders. In this move he also induces some of the
traders to take short positions. As soon as he has accumulated enough short position holders, he pulls the price back up, trapping them and hitting
the stops of some of them and taking their money. This pull back driving price high, induces more traders to take long positions.
#3
After pulling back up, the market maker does not break the initial high of the day, and he pulls back and drives price down, hence ensuring that
the long position traders continue trapped and they do not realise any profit. At the same time as he pulls price down, he induces some traders to
take short positions. He fails to break the previous low, ensuring that the previously trapped short positioned traders do not realise any profit.
This moves also encourages more traders to take long positions, as they interpret it as support for the price to go up. After dropping price down,
he drives price up again, further encouraging more traders to take long positions, as all the evidence would be pointing towards the upward
movement of price.
#4
At this stage, the market maker breaks the initial high of the day, creating the new high of the day. At this stage, we have the peak formation high
of the day. This move further strengthens the retail traders’ sentiment that price is going to continue rallying up. More traders are induced to take
long positions. The peak formation high of the day is created using a spike, and this spike hits the stops of any short position holders. However,
this would be a false trend. In addition to that, price has been rising for 3 levels and at this point, the market maker is almost out of cash and needs
to create liquidity. Therefore, after breaking the initial high of the day and forming the peak formation high of the day, the market maker reverses
price, during the New York reversal and drives price down aggressively, hitting all the stops of the long position holders and taking their money
ensuring that they do not realise any profit. This becomes the true trend of the day.
#5
After having driven price down aggressively, traders will begin to take up short positions. Before the peak formation low of the day, the market
maker throws a spike to hit the stops of some of the short position holders who would have entered the trade late. He then breaks all the previous
lows of the day to create the peak formation low. After the peak formation low, traders would have been convinced that price is surely on a
downtrend. He then pulls back, and drives price up, trapping any short position holders.
#6
After having trapped the short position holders, he goes into consolidation and ends the day in consolidation with the short position holders
trapped.
