All language subtitles for 1. Position management

Position Management In this final module
of the course, we will cover the fifth

part of our trading plan, which deals
with position management.

Position management answers the question
about how much, in relation to the size

of the position, and, therefore, the
amount we should risk.

We would also answer the question of up
to what point, which covers everything

from the moment of entry to the closing
of the position, whether at a loss,

profit, or break -even.

Since this subject is such a delicate
one, we will go step by step, looking at

the logic behind each of our movements
and for every possible scenario we can

think of.

This will allow us to define as
precisely as possible the way we should

each situation and to be prepared when
these scenarios appear.

Position management starts from the
moment the price is in our trading zone

our potential entry trigger is
developing.

We have already performed all our prior
analyses and now it is time to take off

our analyst's hat and put on our
trader's hat.

Now is the time for action.

Classify trades according to their
quality.

First of all, we are going to start with
something simple but very powerful,

which will help us later allocate a
greater or lesser risk to the trade.

As time passes and you gain experience,
you will realize that there are trades

that offer you better guarantees than
others.

If you have the ability to identify this
sentiment in real time, one way to

improve the risk -reward ratio is to
allocate a larger or smaller position

depending on the confidence you have in
the trade in question.

One way to put this idea into practice
is to define the minimum inputs that

be met in all trades before evaluating
the trading approach.

Later, depending on the extra signals we
identify, we can increase or decrease

the size of the position.

These minimum inputs form the basis of
our entire analysis, identifying

correctly the context.

to know what we want to do, whether to
buy or sell, understanding the roadmap

we can infer what the market is likely
to do next, identifying the trading zone

where we will wait for the price so we
can make our entry, and predicting the

appropriate scenarios according to the
current market situation.

This is the minimum we must be clear
about if we want to take part in the

market. Without this, there is nothing,
and it is the most important thing

because it will help us to both identify
trading opportunities, and to discard

those that are not, that are false signs
which would ultimately cause us to

enter the market on the wrong side.

These minimum inputs, which cover much
of what we have looked at in the course,

eliminate that possibility, so we are
almost always positioned on the right

of the market.

This is often overlooked and not given
the value it really has, but knowing how

to identify the right side of the market
is vital, and something that most

people are unable to do correctly.

With these minimum inputs, we can cover
this critical aspect.

And once we have established the minimum
inputs, we look at a list of the signs

that will ultimately help us to
determine the quality of the

This does have to do with specific
aspects of market behavior, and they

differ depending on the trading zone we
are in.

We have already mentioned these
previously, but we will go over them

more detail to understand what we should
and shouldn't look for.

The main element we need to consider at
this point is the degree of intent that

the sign -in question suggests to try to
determine the level of commitment of

the participants in that direction.

The more of these inputs that are
aligned with our scenario, the greater

commitment of the agents in that
direction and therefore the greater

the sign.

The five inputs that we need to take
into account to determine the quality of

the trade we want to execute are the
interpretation of the volume in

areas, The nature of price movements, of
the impulses or corrections, the

anatomy of the false breakout, how and
in what form it appears on the chart,

whether or not the prevailing short
-term dynamic has been broken, and

the sentiment of the market driver,
which could positively or negatively

influence the result of the trade.

We will now look in more detail at each
of these.

We are now well aware of the difficulty
in analyzing volume due to the

subjectivity of its interpretation.

But with this in mind, we are going to
apply the hypothesis that the more

textbook of the representation of the
volume is, the more confidence we will

have in its analysis.

We are going to use this volume analysis
in different contexts, both in the

volume generated during the development
of a fast or slow structure and in the

volume seen during impulses and
corrections.

We already know the characteristics of
volume analysis within a structure.

Therefore, if we see decreasing volume,
this is an added input that suggests a

bullish scenario, whereas if we see high
volume with unusual peaks during the

structure's development and basically
anything other than a pattern of

decreasing volume, this would be an
added input in favor of a bearish

With respect to impulse movements and
corrections, The theory tells us that to

denote harmony, an impulsive movement
should be accompanied by an increase in

volume, demonstrating an increase in
participation, and therefore interest in

that direction, while a correction
should be supported by decreasing

thus demonstrating a lack of interest in
that direction.

Well, assuming this to be the textbook
ideal, a bullish impulse pattern with

volume and a bearish correction with no
volume would be an added input in favor

of a bullish movement.

while a bearish impulse pattern with a
volume and a bullish correction with no

volume would be an added input in favor
of a bearish movement.

This is the maximum representation of
harmony of the movements, and therefore

will use it to determine whether our
potential opportunity is of a higher or

lower quality.

Special mention should be made about the
volume seen at the moment of the

breakout of any trading zone, not just
in the structure.

Let's remember what we learned
previously.

The only scenario we don't want is to
see a volume peak at the end of the

impulse movement, which would be
followed by another movement in the

direction. This would be an input that
goes against the predicted scenario.

By contrast, seeing a volume peak before
the moment of the breakout would be an

input in favor of it, while observing a
volume peak during the breakout of said

zone should be conditioned by the
subsequent price reaction, as we already

Regarding the nature of price movements,
We are going to do the same as with the

volume. We are going to identify the
most genuine patterns of behavior that

allow us to determine the intent and
lack of interest of the participants.

First of all, let's analyze the type of
candlesticks that develop.

Candlesticks showing intent represent an
imbalance in one direction or the

other. Buyers or sellers have gained
control by trading more aggressively

the other side.

It is a candlestick with a large body
and a wide range.

whose closing price will be in the final
third.

It may or may not have a wick, but if it
does, this should be on the opposite

side to the direction of the
candlestick.

Meanwhile, indecision candlesticks
represent a lack of interest or balance

between buyers and sellers.

These candlesticks usually have narrow
bodies and ranges and closing prices in

the middle third, although they may also
appear with a wide range and a small

body. In other words, with very long
wicks at each end.

Where would we expect to find
candlesticks showing intent?

Well, in the movements that are
principally impulsive in nature, such as

impulsive movements after a false
breakout and breakout movements from

zones. And in terms of indecision
candlesticks, where would we expect

appear? Well, in movements that are
principally corrective in nature, such

all those tests of the trading zone, be
it the test after spring or upthrust, or

the test after breakout.

This accumulation chart offers a good
example of these two concepts.

After the development of the spring,
good bullish candlesticks showing strong

intent and bearish indecision
candlesticks start to appear.

This is the combination we want to see.

And likewise in the trading zone after
the breakout.

The comparison is very evident between
the strength of the bullish candlesticks

in the impulse movements and the
weakness of the bearish ones in the

corrections.

Seeing this pattern of behavior offers
us another input in favor of the bullish

scenario.

Here is another example, this time of a
distribution structure.

Good bearish candlesticks showing strong
intent and bullish indecision

candlesticks from the moment of the
upthrust to the final development.

It is also very clear at the aggregate
level how impulse bearish movements are

accompanied by increased volume as
evidence of interest in that direction

bullish corrections with a decline in
volume.

as evidence of a lack of interest.

We know that volume can be interpreted
subjectively and that its representation

will vary depending on the current
market conditions.

But for the purposes of defining what
the ideal signs would be, we will assume

that the classic textbook concepts
represent the optimal behavior.

Therefore, seeing these signs would add
an input in favor of the bearish

scenario.

Meanwhile, we should also analyze how
easily the price travels thanks to these

impulse movements.

and its ability to break key levels.

We know that most of our analysis should
be done on comparative terms.

So, if we intend to judge the nature and
intensity of a movement, we must

compare it with a similar, previously
developed one.

In this case, if we intend to analyze
the capacity of the bullish movement, we

need to look at a previous similar
bullish.

Here, we see noticeable differences in
the first case.

the price needs up to four small upward
impulses to travel through the entire

range, from the bottom to the top.

By contrast, the second movement only
needs two upward impulses to travel even

further. This is an input in favor of
the bullish scenario.

We should take that into account in our
future decision -making.

In the case of a distribution, the
reading is similar, but in reverse.

By analyzing the anatomy of the last
bearish movements, we can see that they

have traveled a fairly short distance in
relation to those seen after the

bullish -false breakout.

We can also see how these signs of
weakness develop very vertically,

certain force and urgency in the
movement.

This is what we want to see when we're
looking for a good display of bearish

intent. In the case of analyzing
movements in a trend, we can apply

same concept.

and we can inform ourselves of the type
of trend by interpreting the scope and

depth of the impulse movements and
corrections.

If we see that the trend is normal or
fast, this would be a positive input in

favor of the scenario.

If, on the other hand, we see that the
price moves below the last edge in the

direction of the trend, we could take
this to be a negative input with no

to the scenario, or, if not negative, at
least not positive.

Sometimes we also need to know when it
is best to stay out of the market and

look for any type of trade, be it buying
or selling.

The trend context in this example is
precisely one of those situations.

We have seen a large uptrend develop
with corrections which have generally

traveled a certain distance that would
suggest to us that this is a fast trend,

like those we have seen previously,
since the end of each correction does

always reach the end of the previous
impulse movement.

We might feel comfortable trading in
favor of said trend, but there comes a

point when the price develops that the
final bearish movement that it has

marked. This bearish movement is much
more powerful than any of the other

bearish behaviors seen up to that point.

In fact, given its force, it should be
seen as an impulse that could generate a

change of character.

We know that this kind of behavior is
what we would expect from an AR event

after a buying climax.

The only problem is that it visually
denotes too much bearish intent.

It almost looks like the behavior you
would see at the end of a bubble, where

the market generates almost a V -shaped
reversal.

And the problem with these behaviors is
that their appearance indicates a very

distinct bias in their direction.

Therefore, once this type of sharp
action appears, any potential trading

against said behavior should be
allocated a negative input.

Even so, we see in the example how a
shakeout at the low, generated by the

still provided a significant upwards
movement.

At the same time, we can see on the same
chart an example of the concept of

structural failure, in this case of
weakness.

This is something we have looked at
previously and it has to do with what

market is unable to do.

What it is unable to do is just as
important as what it is able to do, and

this case, what it is incapable of doing
is reaching that high part of the

structure. At no time during the
development of that range have buyers

enough to send the price to the high
point.

To do this, regardless of the point
structure development, buyers must

demonstrate a certain commitment and
capability.

Well, in this case, at no time is the
market able to generate said movement,

it remains at all times in the middle of
the structure at most.

This sign in itself indicates a lot of
underlying weakness.

And once we are aware of this, we should
pretty much discard the search for any

buying opportunities, or, at the very
least, assign them a negative input.

With regard to the false breakout, one
of the signs that we should be analyzing

is its impact.

In other words, the distance the price
travels once it breaks out of the

zone. The reading here is that the
further the price moves beyond the edge

the structure before re -entering and
moving toward the other end, the more

confidence we should have in this sign.

The reason is simple.

Based on the counterparty principle, we
will assume that the greater distance

traveled corresponds to a greater
liquidity consumed in said area.

Therefore, we can expect a greater
effect from this particular cause.

We've previously seen examples of charts
in which, after very minor false

breakouts of the zone, or even with no
false breakout, the structure has

developed successfully.

So we know it's not something that's
absolutely essential to see.

But I repeat, we are identifying those
behaviors that give us the most

confidence, and therefore, the more the
false breakout travels, the more

powerful the interpretation.

In this example, we see how the price
travels exactly the same distance as the

width of the range before generating the
reversal.

This is a really considerable distance,
so we can assume that the market has

consumed a lot of liquidity at all of
these price levels, which will add great

strength to the bullish scenario.

Therefore, A false breakout that has
traveled a long distance before re

-entering the trading level should be
added to our checklist as a positive

input. Another key element that we must
take into account is the way in which

that false breakout develops.

The key here will be that the more
urgency the behavior seems to show, the

better. That the more force we observe,
the better.

In this case, the concept reflects the
speed at which the market generates a

reversal after reaching the liquidity
area.

The ultimate representation of high
urgency would be to observe a V -shaped

reversal.

Let's go back to the previous example,
which shows an almost textbook example

this concept.

Look at the speed with which it undoes
all the previous downward movement.

This is the ultimate representation of
what we would like to see, and

we would include this as an input in
favor of the bullish context.

In this chart, we see the same pattern,
but for a distribution structure.

It also combines the two aspects we have
mentioned, both the distance it travels

upwards, which is significant, and the
speed with which it goes up and comes

down, implying an extremely bearish
sentiment at that point.

Does this mean that any false breakouts
we see that follow a different sort of

pattern should be considered negative
inputs?

Not at all. I repeat, we are identifying
the ideal examples, those that will add

additional confidence to our analysis.

If a normal false breakout appears,
following any type of behavior other

what we have just seen, it will simply
be an important sign to take into

account, and it should bias our trading
in this direction.

Before going any further, let's look at
some of the ways in which a false

breakout can be represented.

Originally, the Wyckoff method has
always treated this behavior as an

that takes place across one or a few
candlesticks, which is fine.

But we can also include in this approach
the textbook representation as we have

just seen in the previous examples.

But the reasoning doesn't end there. I
believe that a false breakout could

implicitly develop in multiple ways,
from a single candlestick to an entire

structure. This slide shows examples of
different types of Barrett false

breakouts or springs.

From the point of view of giving extra
weight to the scenario in favor of this

behavior, we would ideally want to see
false breakouts that denote maximum

aggressiveness, So the faster that
action takes place, the better.

At the end of the day, what is a false
breakout?

A false breakout is ultimately a
movement in the price which begins to

levels not previously seen and which the
market at an aggregate level agrees

does not represent the fair price for
the asset, generating, at that point, a

reversal that returns the price to the
old equilibrium zone.

We need to understand that all price
reversals follow the same pattern,

regardless of duration.

And this pattern will always be made up
of three steps, exhaustion, absorption,

and initiative.

The reversal of an upward movement
involves a combination of a lack of

or exhaustion from buyers to continue
buying, absorption, which is the first

entry by large traders looking to sell
in a passive way, and the aggressiveness

or initiative of sellers.

The opposite is true for the reversal of
a downward movement.

The exhaustion of sellers is the first
thing that occurs.

followed by passive positioning through
the absorption of sales, and finally

buying initiative that will push the
price up.

In essence, this three -step protocol is
nothing more than an accumulation or

distribution process regardless of the
time scale in which it develops and how

it is seen on the chart, whether as an
isolated candlestick or a complete

structure. This chart shows a very
genuine example of a bearish false

or spring on a single candlestick.

in favor of an accumulation pattern
below, which would represent a very

attractive opportunity to go long.

In this other example, we see a bullish
false breakout or up thrust in a two

candlestick pattern. An initial bullish
candlestick that breaks through the two

previous highs and a large bearish
candlestick that manages to close below

low of the first one, denoting major
intent from the sellers.

In this new example, we see how this
behavior is developed in a pattern of

several candlesticks.

Finally, here we have an example of a
minor distribution structure that would

act based on the upthrust of the major
structure to generate the bearish

imbalance.

A very visual example of this type of
representation in the form of a complete

minor structure.

Once the price is positioned at those
levels, we could decide to look at it in

lower time frame to observe the nature
of that structure during its

This is especially useful if the larger
structure has shown signs of being a

distribution up to that point, which
would lean us more towards a potential

upthrust rather than a real bullish
breakout.

And if in this context in which we are
leaning more towards a potential

upthrust, we see that the market
develops a minor distribution structure,

offers the ideal opportunity to trade
since the risk would be very limited in

relation to the potential benefit.

The risk would be determined by the
smaller structure, while the benefit

be that of the larger structure.

Having now seen the different ways in
which a false breakout might be

represented, we are going to look at
another related scenario.

What happens if too much time or
distance is passed since the trading

broken? Can we still treat that as a
false breakout?

I don't think this is a useful form of a
trading approach at all.

It may simply be a representation of a
large excess in the market.

But the implications are exactly the
same. In the end, it is still a movement

that takes the price through the level
and back again, which clearly indicates

what the market sentiment is.

We could treat these structures as
independent and determine that the

distribution cause has had its bearish
effect to the end, after which no more

traders are continuing to trade based on
that structure.

And in addition to this, we could
determine that what actually happened

a rapid accumulation structure that has
nothing to do with the distribution

above.

The key here, beyond considering this to
be a false breakout, whether we

implicitly understand that everything is
part of the same structure or whether

we consider them as independent
structures, is to try to interpret the

correctly from the point of view of our
trading approach.

And in this case, after that powerful
bullish reversal, regardless of the

duration and the distance traveled, What
we are left with is a very bullish

sentiment and a roadmap which suggests
we should only consider going long.

Therefore, this type of aggressive
behavior should be considered an added

in favor of the bullish context.

Let's look at some more inputs that we
should take into account.

In this case, trend lines.

We have already discussed how to
correctly draw efficient lines, so the

dynamic here is to draw those lines as
soon as we see that the market is moving

in a particular direction.

As we know, this will enable us to
achieve a dual objective.

On the one hand, it will identify
opportunities in favor of the trend, and

the other, we will be able to identify
when said dynamic is broken, suggesting

possible reversal in the market.

How do we apply this concept from the
purpose at hand, which is to increase or

decrease our confidence in a possible
trade?

Well, first of all, we will feel more
confident in a potential trading

opportunity whose entry trigger is in a
confluence zone, that is, in one of the

areas at the edge of the trend dynamic.

We have already seen this slide
previously, since it represents very

exactly we need to see to add an extra
input in favor of a bullish opportunity.

As previously mentioned, it would be a
more aggressive trade because we would

not have seen the breakout of the last
short -term bearish momentum, which is

exactly what is happening here.

An example of the second application is
the use of line drawing which, as I have

just said, is about at least waiting for
the last short -term dynamic to be

broken before evaluating an entry into
the market.

Although it is true that the previous
situation adds strength to the scenario

due to the confluence of behaviors that
take place, this situation is even more

reliable because, in addition to what
was previously seen, we have another

input, which is the break of the bearish
dynamic that established the short

-term control.

Confirmation of that test of the spring
and that strong demand candlestick would

definitely set up a very high quality
trade, as I say, higher than previously

seen. This would be acceptable to a
slightly more conservative trader than

the previous opportunity.

Although the most conservative trade
would definitely be found in the test

the breakout, at that point, the trader
has already seen all the signs of prior

strength, the confluence zone, the
spring, the test, the breakout of the

structure. Moreover, The price generates
a new false breakout at that point in

the form of a break and retest of the
entire reaccumulation structure.

It may well be one of the trades with
the highest probability of success.

The more of these signs that we have in
our favor, the greater confidence we

will have in the trade.

Last but not least, it is vital that we
also talk about the sentiment of the

market driver.

When we trade in certain markets, it is
essential to take into account the

context and the roadmap of the main
asset, that is, that asset that has a

positive correlation with the one we
want to trade in and whose behavior can

influence it to a significant extent.

Today, the market driver par excellence,
in terms of equities, is the S &P 500

Index. If you're here, you already know
about it. There's no need for an

introduction.

My recommendation is that if you trade
in any equity asset, use the S &P 500,

whether you trade stocks or even
cryptocurrencies.

Up to now, there has been a certain
positive correlation between the

market and Bitcoin, so in this case, you
should also take it into account.

If, for example, you want to trade only
in cryptocurrencies, you should know the

sentiment of Bitcoin at all times, since
this is the main driver of this market.

The idea behind this concept is that
since we know that the S &P 500 can

influence the results of our trading, we
need to somehow reduce this risk. For

this reason, we should also analyze the
context and roadmap that it proposes.

Based on this analysis, we can draw two
basic conclusions.

If the sentiment of the S &P 500 index
is bullish or neutral, this would give

the green light to execute the trade,
while if the S &P 500 roadmap is

we should avoid buying in that
particular equity market.

I currently trade in stocks, and I use
this approach to know when is a good

to be in or out of the market.

If the S &P 500 roadmap is bullish, I
would assign greater confidence to this

particular input for any potential trade
I find on the stock market.

If, meanwhile, the S &P 500 roadmap is
neutral and a good opportunity still

appears for a certain stock, I would
take it anyway.

assuming that a context of equilibrium
in the driver may be more than enough to

ensure my trade is successful.

Finally, if the roadmap for S &P 500 is
bearish, the most sensible thing to do

is aggressively manage the positions
that we have open and not open new

positions since the probability of a
fall exists.

And if the S &P 500 falls, it will drag
down most of the market with it.

Obviously, those assets that naturally
have a non -existent or negative

correlation with the S &P 500, are a
different case.

For these, either this will not affect
them or it will affect them inversely.

Finally, here is an extensive summary of
what our trading checklist could be,

that is, everything we should take into
account before executing a trade.

We have covered most of these concepts
during the course so far, so having them

in a list like this is a very useful
resource.

For the video, take a screenshot or take
notes in some way.

because in essence it is part of the key
content of the course.

Not all of these signs will appear
during every trade we execute.

There are some that are common to all
trading zones, but there are other

specific ones.

Let's finish this first major section in
position management by looking at the

issues that we need to address even
before opening the position.

To start with, we need to be clear about
the minimum input.

This includes being clear in which
direction we are going to trade in which

we will wait for the price and how we
expect the scenario to develop.

Subsequently, we must identify those
signs that, based on their behavior, can

instill in us greater confidence in the
trade.

It is about analyzing all those
differential signs with respect to the

and nature of the market's actions to
add inputs in favor or against the

scenario with the ultimate goal of
defining the quality of the trade.

The more inputs we have in our favor,
the more confidence this trade will give

us.

Carrying out all these steps leads us to
two possible end uses.

First, we can use this as a trading
checklist and decide whether to execute

trade or not depending on whether it
complies with the signs that we have

previously established.

In this way, we will define our trading
plan in maximum detail, only trading

when these signs appear.

Perhaps you might decide that you will
only trade if you have at least 6 out of

10 differential inputs in favor of the
scenario.

This is one example.

Also, we can use this tool as a way of
managing the size of our position.

We can define the quality of the trade
depending on the number of favorable

inputs that we have identified.

For example, we can determine that the
quality is low if it only has 5 or 6,

that it is medium if it has 7 or 8, and
that it is of high quality if it has 9

or 10 inputs.

Based on this, we will assign a higher
or lower risk to the trade.