Reading the Signal Flags

THE STRAT is a comprehensive, indicator-free price action methodology built on three simple candlestick numbers, eighteen core combinations, and a multi-timeframe confirmation framework called Full Time Frame Continuity (FTFC). It was developed by Rob Smith, a former floor trader with over twenty years of experience, and popularized by the Move With Market community.

The core philosophy is deceptively simple: no indicators needed, execute without second-guessing, play with the trend, and use comprehensive candlestick combinations for every scenario. It works on all timeframes and across all asset classes: stocks, options, futures, forex, and crypto.

"THE STRAT relies on price action and time frame analysis. Play with the trend, not against it."
— Rob Smith

The Three Signal Flags — 1, 2, and 3

At the heart of THE STRAT is a simple classification system. Every candle is assigned a number — 1, 2, or 3 — based solely on its relationship to the previous candle's high and low. Color does not matter. Only one question matters: did this candle break the previous candle's high? Did it break the previous candle's low?

Flag 1: The Inside Bar (Consolidation)

An Inside Bar fails to break either the high or the low of the previous candle. It sits entirely within the range of its predecessor.

Previous:   |-----|
Inside(1):    |--|

What it means: Consolidation. Indecision. Neither buyers nor sellers have seized control. The market is pausing, gathering energy for its next move.

Trading implication: Avoid new entries when the timeframe above shows an Inside Bar. Entering within consolidation is a recipe for chop. Wait for a breakout — a 2 or a 3 — before acting.

"Does not matter color of candle."

Flag 2: The Directional Bar (Trend)

A Directional Bar breaks one side of the previous candle — either the high or the low, but not both.

Previous:       |-----|
Bullish 2:  |------|     (breaks high only)
Bearish 2:      |--|     (breaks low only)

What it means: Directional movement. One side has taken control. A trend is developing.

Trading implication: Trade in the direction of the 2. A 2-2 continuation means stay in the trend. A 2-2 reversal means a possible trend change is underway.

Flag 3: The Outside Bar (Range Expansion)

An Outside Bar breaks both the high and the low of the previous candle. It engulfs the entire range.

Previous:       |-----|
Outside(3): |---------|   (breaks both high and low)

What it means: Range expansion. Volatility is increasing. Both buyers AND sellers are active, fighting for control.

Trading implication: A 3 can be either continuation or reversal setup. A 3-1-2 continuation means the trend is resuming after an expansion shakeout. A 3-2-2 reversal means expansion was a trap. Be cautious of chop within a 3's wide range.

Special Candle Types Within the Numbers

Candle	Description	Bias
Doji	Open approximately equals Close	Neutral — pure indecision
Hammer	Small body, long lower wick	Bullish — buyers rejected lower prices
Shooter	Small body, long upper wick	Bearish — sellers rejected higher prices

How to Identify a Number in Three Seconds

1. Look at the current candle.
2. Compare it to the previous candle's high and low.
3. Did it break the high? Did it break the low?
4. Neither = 1. One = 2. Both = 3.

The Eighteen Combinations — The Complete Signal Library

When three simple numbers are sequenced, they form eighteen core combinations — six continuation patterns, eight reversal patterns, and four special reversal STRATs.

CONTINUATION PATTERNS — Staying the Course

REVERSAL PATTERNS — Changing Course

SPECIAL REVERSAL STRATs — The Unusual Signals

Combination Quick Reference

Combo	Type	Pattern	Entry	Best For
2-2 Bull Cont	Continuation	2↑→2↑	Break 2nd high	Staying in trend
2-2 Bear Cont	Continuation	2↓→2↓	Break 2nd low	Staying in trend
2-1-2 Bull Cont	Continuation	2↑→1→2↑	Break 3rd high	Safe trend entry
2-1-2 Bear Cont	Continuation	2↓→1→2↓	Break 3rd low	Safe trend entry
3-1-2 Bull Cont	Continuation	3↑→1→2↑	Break 3rd high	Post-expansion trend
3-1-2 Bear Cont	Continuation	3↓→1→2↓	Break 3rd low	Post-expansion trend
2-2 Bull Rev	Reversal	2↓→2↑	Break 2nd high	Quick scalps
2-2 Bear Rev	Reversal	2↑→2↓	Break 2nd low	Quick scalps
3-2-2 Bull Rev	Reversal	3→2↓→2↑	Break 3rd high	Large moves
3-2-2 Bear Rev	Reversal	3→2↑→2↓	Break 3rd low	Large moves
2-1-2 Bull Rev	Reversal	2↓→1→2↑	Break 3rd high	Early trend entry
2-1-2 Bear Rev	Reversal	2↑→1→2↓	Break 3rd low	Early trend entry
3-1-2 Bull Rev	Reversal	3↓→1→2↑	Break 3rd high	Post-expansion reversal
3-1-2 Bear Rev	Reversal	3↑→1→2↓	Break 3rd low	Post-expansion reversal
1-2-2 Bull Rev	Special	1→2↓→2↑	Break 3rd high	Failed move play
1-2-2 Bear Rev	Special	1→2↑→2↓	Break 3rd low	Failed move play
1-3 Bull Rev	Special	1→2↓→3	Break 3	Range expansion play
1-3 Bear Rev	Special	1→2↑→3	Break 3	Range expansion play

"The 1 consolidation, 2 directional, and 3 range expansion candles form various, easy to understand combinations."

Execution — Entries, Exits, and Targets

Entry Philosophy

THE STRAT removes emotion from execution. Every entry is based on a concrete break of a previous candle's high or low.

The Break-Based Entry Rule: For longs, enter when price breaks above the previous candle's high. For shorts, enter when price breaks below the previous candle's low. This is confirmation.

The Non-Consolidation Rule: Do NOT enter when the timeframe above shows an Inside Bar (1). Entering within consolidation results in significant chop. Wait for the higher timeframe to show direction.

Exit Philosophy — Previous Candles Are Targets

THE STRAT's most elegant feature: your targets are already on the chart. They are the previous candlestick highs and lows — natural support and resistance levels created by actual price action.

• Mark Target 1, Target 2, Target 3 — each at a previous significant high or low.
• Scale out as each target is hit. Keep a "runner" for the final target.
• Actionable for new entry: Reversal combos (2-2 Rev, 2-1-2 Rev, 3-2-2 Rev, 1-2-2, 1-3).
• Non-actionable for new entry: Continuation combos (2-2 Cont, 2-1-2 Cont, 3-1-2 Cont). These are for staying in existing plays.

"THE STRAT gives multiple targets/exits. This enables position scaling and runners held with confidence."

The Protective Reef — Stop Losses

Every signal needs a fail-safe. In THE STRAT, stops are placed based on the candle that invalidated your thesis.

For Shares (Stocks)

Basic Rule: Place the stop at the bottom (for longs) or top (for shorts) of the entry candle.

Tighter Risk Technique: Drop to a lower timeframe and place the stop on that candle's extreme. Example: Entry on 30-min, stop on 5-min candle extreme.

For Options

• Place stops around contract value AND invalidation of the setup.
• Move With Market recommends stops at approximately 20% of premium value.
• Hard stops are essential for options due to volatility.

Stop Placement by Pattern

Setup Type	Stop Placement	Rationale
2-2 Reversal	Top/bottom of entry 2	Tight stop, quick invalidation
2-1-2 Reversal	Top/bottom of entry 2	Below/above consolidation range
3-2-2 Reversal	Top/bottom of 3 or entry 2	Wider stop due to 3's range
1-3 Reversal	Top/bottom of 3	Widest stop, range expansion
2-2 Continuation	Top/bottom of first 2	Stay in trend until broken

"Respect stop losses to minimize massive loss."

Signal Flags with the Sextant — Combining with Traditional TA

THE STRAT works efficiently by itself. But pairing it with traditional technical analysis yields even higher-probability setups.

• Support & Resistance: A 2-1-2 Reversal at major support = strong long entry. THE STRAT gives you when; S/R gives you where.
• EMA Stacks: Price above 9/21/50 EMAs + 2-2 Bullish Continuation = trend confirmation on two fronts.
• Supply & Demand Zones: A 2-1-2 Bullish Reversal inside a demand zone = optimal risk/reward.
• Volume Profile & VWAP: STRAT entries at volume nodes = institutional-level confluence.

"Although THE STRAT can be used efficiently by itself, pairing THE STRAT alongside traditional TA can yield even more."

Common Mistakes — The Reefs Below

Mistake	Why It Happens	The Fix
Trading within a 1	Impatience, FOMO	Wait for the breakout
Ignoring higher TF direction	Tunnel vision	Always CHECK the TF above
Using mental stops	Ego, hope	Use hard stops
Chasing continuation as new entry	Confusing "stay in" with "get in"	Reversals = new entries
Entering before time flip	Poor timing	Wait for the fresh candle

Psychology — The Captain's Temper

THE STRAT is not just a pattern system — it is a discipline system. The rules exist to protect you from yourself.

• The 1 teaches patience. Consolidation is the market telling you to wait.
• The break teaches confirmation. You do not predict; you react.
• The target teaches trust. Once you mark your levels, let the trade work.
• The stop teaches humility. When the market tells you that you are wrong, listen.

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