Fakeout and Quasimodo Trading (229)

Think like an institutional trader 1

About Us

Chart-Master FX

CMF is a forex trading company based in South Africa.
Kudakwashe Mazibisa (Chart Master) is the author of this
book and the co-founder of CMF. The goal of CMF is to help
traders understand price movement with precision. CMF
believes in teamwork, research, and hard work. The CMF
trading style is rooted in RTM.

[email protected] Available on YouTube, Facebook and 2
Telegram. Search Name (Chart-Master FX)
CMF Research
Think like an institutional trader

COPYRIGHT RIGHTS

© CMF copyright 2021

All rights reserved. The anatomies and flashcards in this
book are exclusively owned by Chart-Master FX. All the
material in this book cannot be distributed, transmitted, or
broadcasted without the permission of the author.

CMF Research Think like an institutional trader 3

ACKNOWLEGEMENTS

My sincere gratitude goes to IF Myante of Read The Market
(RTM). The content of RTM helped me predict price
movement with high accuracy. Secondly, I would like to
acknowledge the work of Mansor Sapari on Quasimodos and
Fakeouts.

CMF Research Think like an institutional trader 4

DISCLAIMER

No liability will be assumed to Chart-Master FX for any losses
incurred, as a result of using the strategies in this book.
Trading foreign exchange on margin carries a high level of
risk, and may not be suitable for everyone.

CMF Research Think like an institutional trader 5

FOREWORD

The book presents high probabilistic decision points namely
the Inside-QML (QMM), Cho-Cho-Cho-QML (CCC-QML),
Flag Limit-QML (FL-QML), Bearish/Bullish Engulfing-QML
(BE-QML), Doji-Flag Limit-QML (DJ-FL-QML), Hidden Base
– Flag Limit - QML (HB-FL-QML), MW-QML (MW-QML),
Mera-Mera QML (MM-QML), and Wick-Body Separator-
QML (WBS-QML).
The book focuses on six types of Fakeouts namely the Break
out and Stop Zones Fakeout, Equilibrium Fakeout, Golden
Fakeout, Squared Fakeout, Imbalance Fakeout, and Multiple
Fakeout.

CMF Research Think like an institutional trader 6

LIST OF ABBREVIATIONS

Code Description Code Description

BE Bearish/Bullish Engulfing QML Quasimodo Level
CCC
CO Cho-Cho-Cho R Resistance
DJ
FL Consumed S Support
FO
FTB Doji SL Stop Loss
HB
MM Flag Limit SSR Significant Support Resistance
OTM
Fakeout SR Support and Resistance

First Time Back SOP Standard Operating Procedure

Hidden Base TG Target Profit

Mera Mera WBS Wick-Body Separator

Origin of the move

CMF Research Think like an institutional trader 7

Contents Page Chapter 1: Breakout and Stop Zones Fakeout (BSZ FO)

28

55 Chapter 2: Equilibrium Fakeout (EQ FO)

127 Chapter 3: Golden Fakeout (GD FO)

181 Chapter 4: Squared Fakeout (SQ FO)

195 Chapter 5: Imbalance Fakeout (IB FO)

216 Chapter 6: Multiple Fakeout (MT FO)

8

Classification of Fakeouts

BSZ EQ GD

Breakout and Stop Equilibrium Golden
Zones
1by1 1by2
2T, 2B, 3T, 3B, 4T, 4B. 1by3

SQ IB MT

Squared Imbalance Multiple

2by2 2by1 1by4, 1by5, 2by3, 2by4,
3by1 2by5, 3by2, 5by1,
3by3, 3by4, 3by5.

CMF Research Think like an institutional trader 9

FO Distance

Standard
The FO is categorised as standard if it is

within the 0.5 to 1 range. This is
considered as the ideal scenario.

Average

The FO is categorised as average if it is
within the 0 to 0.5 range.

Below Average
The FO is categorised as below average

if it is within the -0.5 to 0 range.

Undefined
The FO is categorised as undefined if it

is within the -1 to -0.5 range.

CMF Research Think like an institutional trader 10

FO Location

Uniformly Distributed

A Fakeout is considered uniformly
distributed if the support and resistance

touches are distributed evenly.

Beginning

A Fakeout is classified as FO Location
(Beginning) if the Fakeout is clustered

at the beginning of the FO.

Middle

A Fakeout is classified as FO Location
(Middle) if the Fakeout is clustered at

the middle of the FO.

End
A Fakeout is classified as FO Location
(End) if the Fakeout is clustered at the

end of the FO.

CMF Research Think like an institutional trader 11

Risk Assessment

Low Risk (1) Low Risk (2) High Risk (3) High Risk (4)

The decision point The decision point General QML General QML
should be any of the should be any of without any without any
nine DPs outlined in this confluence. confluence.
the nine DPs
book. outlined in this FO Distance: FO Distance:
Average. Below Average.
The FO Distance should book.
be standard.
The FO Distance
Target not yet hit before should be average
the price goes to the DP.
or standard.

Target hit before
the price goes to

the DP.

CMF Research Think like an institutional trader 12

Risk Management

Stop Loss

Flag Limit Apex of the Head

In the event that the QML is The SL can be placed above the Head
associated with a flag limit. It is depending on the proximity between the
advisable to put the SL above the QML and the apex of the Head. If the
FL. This action can minimise risk distance between the QML and the apex of
especially when the QML/ Head the Head is small then it is advised to put
Apex distance is wide. the SL above the Head.

DJ/MM/BE/HB
The SL can be placed above the
four candlestick patterns to
minimize risk.

The risk should be pre-defined before
trade execution (Mark Douglas).

CMF Research Think like an institutional trader 13

CMF Research Introduction 14
Decision Points

Think like an institutional trader

General types of Quasimodos

First Quadrant
The first quadrant shows a general
typical structure of a Quasimodo.

Second Quadrant

This type of QML might not be easy to
spot to the untrained eye. This is the

most prevalent QM in the market.

Third Quadrant

This type of QML cuts across two or
more highs instead of one high.

Fifth Quadrant
This QML has two QMLs aligned
together. The QML is abbreviated as

D-QML.

CMF Research Think like an institutional trader 15

Types of Fakeouts

1byn

The anatomy shows various types of
Fakeouts. The first row shows 1byn
Fakeouts. The 1by1 Fakeout is the most

prevalent FO in the market.

2byn

The second row shows various types of
2byn Fakeouts. The 2by2 Fakeout is
also known as the squared Fakeout.

There are also 3byn Fakeouts. These
Fakeouts are valid as well.

CMF Research Think like an institutional trader 16

BSZ Fakeout

Buy Setup

There are generally two types of BSZ
FOs namely the Double Bottom (2B)
and Triple Bottom (3B). In some cases,
the BSZ might be in the form of a 4B

and so on.

Sell Setup

There are generally two types of BSZ
FOs namely the Double Top (2T) and

Triple Top (3T). In some cases, the
BSZ might be in the form of a 4T and

so on.

CMF Research Think like an institutional trader 17

QML Decision Points

FL-QML BE-QML DJ-FL-QML
MM-QML WBS-QML

CCC-QML MW-QML 18

QMM HB-FL-QML

Inside-QML
(QMM)

QMM General
This setup consists of two This type of QML does not
QMLs, the Main QML and happen often. But when it
the Small QML. Both QMLs happens, it is a powerful
should be perfectly aligned decision point to consider.

together. Stop Loss
The SL should be placed
Validation above the head of the small
The Small QML should be
formulated within the large QML.
QML (QML inside a QML).

CMF Research Think like an institutional trader 19

SSR Cho-Cho-Cho-QML Extra Confluence
(CCC-QML) This setup can also be
The CCC-QML has multiple associated with a BE, HB,
support and resistance Think like an institutional trader
touches. MM, FL, or WBS.

Validation Stop Loss
A QML is considered valid if The SL should be placed
it has at least one opposite
above the Head.
touch. The QML in this
example is considered valid 20
if it is aligned with at least
one support touch. On the

other hand, a QML for a
Buy Setup is considered
valid if it is aligned with at
least one resistance touch.

CMF Research

Flag Limit-QML
(FL-QML)

FL General
The flag limit concept is
A flag limit can be in the very broad. In this book, we
form of an HB, BE, or DJ. are not going to discuss the
However, even if the FL
concept in a detailed
does not have these manner.
candlestick characteristics,
it is still classified as a valid Stop Loss
The SL should be placed
FL. above the flag limit or above
the Head depending on the
Validation
situation.
A FL is considered valid if it
engulfs the QML and makes 21

a retracement before
continuing its movement in

the engulfed direction.

CMF Research Think like an institutional trader

Bearish/Bullish Engulfing-QML
(BE-QML)

Alignment FL-BE
The QML should be
perfectly aligned with the The BE can be in the form
opening price of the bullish of a flag limit which is also
candle. This is the ideal
price action to look for. considered valid.

Other BE versions Stop Loss
Sometimes the BE might
not be perfectly aligned with The SL should be placed
the QML. In this case, it is above the BE.

still considered valid.

CMF Research Think like an institutional trader 22

Doji-Flag Limit-QML
(DJ-FL-QML)

DJ General
The Doji should be
formulated along with the In a sell setup scenario, we
Quasimodo level. As a expect a bullish Doji
result, it automatically
becomes a flag limit. whereas if it is a buy setup,
we expect a bearish Doji.

Other Variations Stop Loss

In some cases, the Doji will The SL should be placed
be present but not perfectly above the flag limit or above
aligned with the QML. This
implies that the Doji might the Head.

be present but not in the
form of a flag limit.

CMF Research Think like an institutional trader 23

HB Hidden Base-Flag Limit-QML General
The HB should be (HB-FL-QML) If you zoom in to lower time
formulated along with the frames you begin to see the
Quasimodo level. Owing to Think like an institutional trader flag limit of the hidden base
this, the hidden base
automatically becomes a clearly. The wicks should
not overlap the high or low
flag limit.
of the candlestick.
Other Variations
The HB might not be Stop Loss
perfectly aligned with the The SL should be placed
opening and closing price of above the HB flag limit or
the candles. In that case, above the Head depending
the HB is still considered
valid as long as it manifest on the situation.
itself in the form of a flag
24
limit.

CMF Research

MW-QML
(MW-QML)

MW General
The MW-QML is classified If it is a buy setup, the M is
as significant support and
inverted to become a W.
resistance. The price Additionally, the QML might
creates a QML then makes
a flip reaction to the right also have an extra
confluence such as a flag
side of the QML.
limit.
Validation
The M pattern may vary. Stop Loss
The tops of the M are not
always equal. The other The SL placement varies in
side might be higher or this setup since it depends

lower than the other. on the situation.

CMF Research Think like an institutional trader 25

MM Mera-Mera -QML General
The QML should be (MM-QML) An MM is a combination of
perfectly aligned with the candles of the same family.
open price of the first Think like an institutional trader
The wick of the second
bearish candle. candle should engulf the
body and the wick of the
Other Variations
In some cases, the QML preceding candle.

might not be perfectly Stop Loss
aligned with the open price The SL should be above the

of the first bearish MM.
candlestick. In that case, it
is still considered valid as 26
long as the QML is cutting

across the MM.

CMF Research

Wick-Body- Separator -QML
(WBS-QML)

WBS General
The QML must be perfectly
The colour of the candles
aligned with the opening does not matter. As long as
and closing of candlesticks the WBS condition is met.
as shown on the anatomy.
Stop Loss
Validation
The QML should separate The SL should be above the
the wicks and the body of WBS.

the candlesticks.

CMF Research Think like an institutional trader 27

Chapter 1
Breakout and Stop Zones Fakeout

CMF Research Think like an institutional trader 28

The chart shows a Breakout and Every time you see a 2B or 2T you
Stop Zones (BSZ) example. The should look beyond it for clean orders.
BSZ Fakeout is prevalent in the
market. It can be found all over Usually, the cleanest orders will be
aligned with a Quasimodo Level.
the place.

The institutional traders know that Although the majority of the BSZs are
there are tons of orders above in the form of a 2B or 2T. Fakeouts
the BSZ. In this context, the with three or four resistance/support
touches are also considered valid
institutional traders usually create Breakout and Stop Zones Fakeouts.
a 2T or 2B and break it

immediately or later with the
intention to take stop losses of

retail traders.

CMF Research Think like an institutional trader 29

DP
There is no decision point in this
example to which the BSZ was

more likely to react to.

FO
In this example, the price made a
2B. Thereafter, the price went to hit
the OTM zone. Usually when the
price hits the OTM before returning
to DP. The trade becomes risky
since the target will already have

been hit.

CMF Research Think like an institutional trader OTM
The origin of the move (OTM) will
be used entirely in this book. It is
used as a target profit since price

usually fills the range after
making an FO.

30

DP
The price failed to come back
immediately to make a Fakeout to
the demand zone below. In the
event that the price takes a long
time before coming back to the DP.
The FO might be considered no

longer valid.

CMF Research Think like an institutional trader FO
The chart shows an
example of a 4B BSZ.

General
The price should not take a
significant amount of time
before coming back to the

decision point.

31

DP FO Distance
In this chart example, there was
no DP to the left side of the FO. Assuming that the FO
reacted to something
When trading FOs, it is significant in the past. We
important to check where the consider the FO distance as
the ideal scenario. In other
FO is reacting to. words, the FO distance
should not be too close or
FO too far from the entry-level.
The price created a 2B.
Thereafter, it made a FO to an
unknown territory before going

northwards.

CMF Research Think like an institutional trader 32

DP

The price made an FO to an
unknown territory. The FO
should occur on a DP to be

considered tradeable.

CMF Research Think like an institutional trader FO

2T BSZ.

N
During the creation of R2,
an N pattern was created.
The OTM zone has not yet
been hit, which is what is

expected.

33

FO
The chart shows an
example of a 3T BSZ.

CMF Research Think like an institutional trader General
When drawing a BSZ line.
The support or resistance
touches should be perfectly
aligned. Even if this is the

ideal scenario, in some
cases the touches might not
be perfectly aligned. Hence,

a small insignificant
variation gap should be

allowed.

34

DP
The DP is in the form of a supply with a
Bullish Engulfing candlestick pattern. In
this book, we are going to focus on QML
as the main decision point. A supply DP
is only considered valid if it is aligned

with a QML.

FO
There is a 2T BSZ in this example. The

price made an FO to the DP and
dropped thereafter.

CMF Research Think like an institutional trader There is an ‘N’ pattern that was
formed during the creation of R2 which
left the target not yet hit. The example

shows a standard FO gape which is
the ideal FO scenario.

35

DP FO
The example shows a QML that 4T BSZ.
FO Location: Uniformly
cuts across two vertical lines. Distributed.
The QML is not aligned with FO Distance: Standard.
any special candlestick pattern.
General
The price reacted nicely on
the QML and dropped until

reaching the OTM zone.

CMF Research Think like an institutional trader 36

DP General
QML/BE During the formation of R3,
The QML has a confluence of a
an ‘N’ shape was
BE. formulated. The bottom side

FO of the N failed to hit the
3T BSZ. OTM zone before going to
FO Location: Uniformly the DP. This means that the
Distributed. target has not yet been hit
FO Distance: Standard. which is what we expect.

CMF Research Think like an institutional trader SL
The SL can be put above
the BE candlestick since the
apex of the Head is too far

from the entry-level.

37

DP
QML/BE.
The QML is aligned with a BE.

FO
The FO is in the form of a

3T BSZ.
FO Location: End.
FO Distance: Average.

CMF Research Think like an institutional trader The QML was respected by price on
FTB. The price dropped and

managed to hit OTM1 and struggled
to come to OTM2.

38

DP FO
QML/BE. 2T BSZ.
There is a QML aligned with a FO Location: Uniformly
BE. Nevertheless, there is no Distributed.
perfect alignment with the FO Distance: Average.
open/close of price.
General
The price dropped
massively soon after
reaching the decision point
on FTB. The price managed

to hit OTM.

CMF Research Think like an institutional trader 39

DP FO
2T BSZ.
QML/WBS. FO Location: Uniformly
The QML has an additional Distributed.
confirmation of a WBS. The FO Distance: Standard.
QML is perfectly aligned with
General
WBS. The price respected the
decision point to the pip and
dropped towards the OTM

zone.

CMF Research Think like an institutional trader 40

DP FO
3T BSZ.
There is a general QML in this The FO distance is standard.
setup.
General
The price managed to react

at the QML and dropped
until it has reached OTM.

CMF Research Think like an institutional trader 41

DP FO
3T BSZ.
The QML has an additional This FO is known as a uniform
confirmation of a DJ candlestick distributed Fakeout.
FO Distance: Standard.
pattern.
General
The price reacted at the
decision point and dropped
until arriving at the OTM

zone.

CMF Research Think like an institutional trader 42

DP
The decision point is in the form of a

QML associated with a BE.

FO
2B BSZ.
The FO distance is standard.
FO Location: Uniformly Distributed.

CMF Research Think like an institutional trader The decision point was respected by
price to the pip and dropped until
hitting the OTM.

43

DP FO
2B BSZ.
MW-QML. The FO distance is standard.
There is a QML aligned with a FO Location: Uniformly
Distributed.
W shape. The QML was
respected by price to the pip. General
The price managed to hit
and run as it reached the
QML. The price went on to

hit the OTM zone.

CMF Research Think like an institutional trader 44

DP

The QML is not associated with any
additional confirmation.

FO

The FO is in the form of a
2T BSZ.

The FO Distance is
standard.

CMF Research Think like an institutional trader As the price reacted to the decision
point of interest it dropped until
hitting the OTM zone.

45

DP
QML/DJ.
The QML is associated with a Doji
candlestick pattern.

FO
2T BSZ.
FO Location: End.
FO Distance: Average.

As the price reached the QML on
FTB it dropped towards the OTM

zone.

CMF Research Think like an institutional trader 46

DP FO
2T BSZ.
The QML DP is not aligned with FO Location: Uniformly
any additional confirmation. Distributed.
FO Distance: Standard.
CMF Research Think like an institutional trader
General
The distance between the
apex of the Head and QML
is huge. Hence, putting the
SL above the Head would
lead to high risk exposure.

Nonetheless, the price
respected the QML and
dropped until hitting the

OTM zone.

47

DP FO
2T BSZ.
QML/DJ. The FO distance is standard.
The QML has an extra FO Location: End.

confluence of a DJ. General
The price managed to
respect the QML and
dropped until hitting TG1

and TG2.

CMF Research Think like an institutional trader 48

CMF Research Think like an institutional trader DP
QML/WBS.
There is a QML separating the wicks
and body of the Head candles.

FO
The FO is in the form of a

3B BSZ. The distance
between the FO line and
the anticipated entry line is

standard.

The price managed to
respect the DP and went
upwards until reaching the
OTM zone. Thereafter, the

price managed to go
beyond the OTM zone since

it had a CO status.

49

DP

The QML cuts through three vertical
lines. This might be a sign of

weakness. Additionally, the QML
does not have a second confirmation.

FO
The FO is in the form of a
2B BSZ. The FO distance is

standard.

CMF Research Think like an institutional trader The price managed to make an FO
to the QML and respected it. The
price went on to hit the OTM. It was
easy for the price to go past this
OTM zone since it had a CO status.

50