Transcription
Most traders lose because they're trading without context. They're zoomed into the lower time frame with no idea what the higher time frame is actually doing.
But with the master pattern strategy, this becomes simple because there are only two steps. Step number one, identify the higher time frame bias. And step number two, enter on the lower time frame alignment. That's it. When you get step one right, step two becomes effortless.
Today I'm going to show you exactly how to determine bias using the master pattern on the daily and the 4hour and then how to execute precision entries on the 15minute or the five minute. This is the same blueprint Smart Money uses to stay on the right side of the market. And once you understand it, you'll stop fighting price and start trading with the flow. I'll show you the basic and most beginner friendly way to do this strategy. And if you want the full advanced training and all the other methods I teach, you can get them inside my program.
This is a trend trading strategy. So step number one is the higher time frame bias. Being able to understand what is the direction of the market. For this, we're going to use the 4hour chart or the daily chart. As you can see here, I've marked on the screen a master pattern. If you don't know how to mark up the master patterns yet, click this link above. Go watch that training first, then come back over here.
So once you identify this higher time frame master pattern, what we want to do is we want to look for the area where price is going to be breaking above the value line or below the value line. You can see over here if price breaks above the value line, this is what we call an expansion leg. And then we get the rotation back to value. Then we get an expansion leg and a rotation back to value. We want to look for entries exactly where price is going to break this higher time frame value line. And this is going to be our bias indicator.
Once we understand bias, step number two is our lower time frame entries. Then we go into the lower time frame and we start marking out lower time frame master patterns on the 5m minute or the 15minut chart. Now all depending on the bias on the higher time frame, that is where your entries are going to align on the lower time frame. If your bias is long on the higher time frame, we're going to look for long entries underneath the value line. If your bias was short on the higher time frame, we're going to look for short entries when price is above the lower time frame value lines.
Now that you understand the basics, let's jump into the charts so I can show you exactly how this works. Here we are on the charts and I'm looking at a Bitcoin chart, but this will work on any asset class. As you can see over here, I'm on the one day chart and I've marked out the one day master patterns. You can see I've got the contraction boxes, which are blue, and then the value lines, which are white. And over here I've got a gray box and a gray value line. And gray just means price has only moved to one side of the direction. It's a one-legged expansion breakout. Whereas blue just means price has moved above and below in more of a whips saw fashion.
If you look carefully, we mark an exact line where the value line is located. You can see this is the exact point where price broke above or below the value line. And you can see carefully if price broke below the value line, then we had this downtrend. and price broke above it and we had this uptrend. So, there's two ways to trade this. There's the reversal strategy where you're trading from underneath the value line back to value or above the value line back to value or there's the continuation strategy, the trend trading strategy where we look for entries when price is breaking above or below the higher time frame value lines.
So once you understand that we're using higher time frame value to determine bias direction. If price is breaking above this value line, we're going to determine longs. If it's breaking below the value line, we're going to determine shorts. Then we can also add in market structure as an additional element. So for instance over here, I'm going to focus on this region to show you how we could have got good trades. This is by combining the SMC strategies. I talk about this so much in all my videos.
So what we want to do is we want to mark out structural points. As you can see over here this is a structural point. Price is finding support support and then finally price breaks the support and then it becomes resistance. If you see over here it breaks becomes resistance. So what we can do in this scenario, we're also noticing that price has broken below a higher time frame value line over there and it's broken below this higher time frame value line and it's breaking a structural level. So by combining and bringing in structure with the master pattern, we can actually get a very strong confluence, help us make even better trading decisions. So this is very clear price has broken structure. It's below these higher time frame value lines. So we can be very confident that at this point with price is underneath this structural level we can only look for short positions because price has broken a very strong structural point. See so first step is you want to identify the bias of the market the direction of the market when price breaks structural points it's showing us especially to the downside the market is going into a bearish trend and specifically because it's broken below these higher time frame value lines. So, at this point now, we're only looking for short positions.
So, now I've dropped onto the 15minute chart to look for my entries. As you can see over here, I've still got the higher time frame master patterns on the screen. You can see right over here, this is a higher time frame value line, and this is a higher time frame value line. Price broke below both of these higher time frame value lines, and then it broke below the structural point, this gray line over here. This is showing us price is going into a bearish state. Now we had this retracement. You can see price has retraced back to retest and then from here it's completely dropped.
So what I've done now is I've marked up all my 15minute master patterns contraction boxes and value lines. Once again, if you don't know how to do this, I'll leave a little link above. Just click on that link to watch that training on how to mark it out. Then you can come back and watch this for our entries. Now we're looking at counter trend entries. So every time price is above the value line that is where we're going to look for our short entry. We've identified that the market is bearish based on our first step. So now every time price above the value line we can look for an entry. Look for an entry. You can see price is above this value line. Here's entries.
There are other tools we can use to get a closer look and I'll quickly show one of them to you. Now I like to use the TDIX. This is also a custom indicator. There is a free TDI that you can access in Trading View. But you can see over here when price is above the value line, we want to look at the TDIX and we're going to simply look for these shark fins. Shark fins are simply where we get this EMA breaking out of this Ballinger band or when we get a divergence. It can either be an RSI divergence if you've got an RSI. So whenever price is above the value line, we're either looking for shark fins or for price to come into overbought or oversold territory or we're looking for divergences. There are also other indicators we use to do this which is part of our strategy and our system. But the main concept is that whenever you come onto the lower time frame, your best entries are going to be when price is above the value lines. If we move over here, you can see price is above the value line. Another entry, price is above the value line. another entry and there you go.
So you can see the way the market maker moves price is that whenever we get value price is going to come above value and when price is above value that's when you look for your short entries to the downside. We already know that the higher time frame is confirmed bearish. So now we're just catching that current and that trend on the lower time frame. For our confirmation we just come and use the TDIX and we can look for confirmed entries. Like for instance over here you can see price was just above the value line and what do we get and then we get this small shark fin. Can you see this is where we get this EMA breaking out of the bology band. This is another one over here and this is another one over here. This is a volatility indicator. So it's letting us know when the highest probability of these reversals are taking place. We would have taken this one but we not would not have taken this one because price is not above the value line. We would have taken this one because it's above the value line. You can see this one over here. We would have focused on the divergence. You can see price is going up on the price on the oscillator. The oscillator is going down. So our divergence also shows us when price is going to rotate back to value.
If we keep going on to the next entry, this one over here, you can see price broke above and came into this 15minut expansion leg all the way up here and then we got a divergence on the oscillator. You can see oscillator is going down, price is going up. So this is a sign for us to start looking for our shorts. Otherwise, if we're not sure, we can just wait for a new master pattern to form. And whenever price is above the value lines with our confirmed entry, you can see over here if we come on to the TDIX, we get a shark fin over here. And the shark fin occurs right above here. So this would have been our precise place to look for an entry.
So it's simple. Once you understand bias, you just got to mark out these lower time frame master patterns. And then whenever price is above the master pattern, that is where you want to start looking for entries. And you can use a tool like the TDIX to get more precise entries. There is a TDI that is for free and you can use it on Trading View. But this is basically the gist of the strategy.
Then when you enter, when you enter, there's two things you can do. You can either trade back down to value. Value lines are magnetic levels and price loves to come back down to value. That can be one of the places or you can hold your trade and wait for price to suddenly break out into a stronger downtrend. You can see if you'd broken up into multiple positions, you entered one position here, one position here. So you enter smaller positions on all these entries. And then when price does officially break out into the third phase, which is the trend phase to the downside, you can see over here. Then you will capitalize on your profits from all your previous positions that you entered over here. And then when price does go into this trend phase, you catch the wave into that trend phase.
This is a super basic strategy. It's really easy to do. Get good at marking out contraction boxes and expansion lines on the higher time frame and the lower time frame. And also pay attention to market structure breaks to help confirm the bias in the direction. You can also use EMAs and other tools which I will be highlighting in the next videos.
If you want to dive deeper into this, we have multiple different indicators for this strategy to help you determine bias and help you determine value lines, expansion lines, and of course the TDIX. Click the link below if you want to check that out. We're currently running a discount and we have a trial if you just want to test it out. Otherwise, make sure to watch this next video now to learn more about this master pattern strategy because this is such an excellent strategy and I believe it can help you improve your trading.