Original subtitles

Entry Let's now address the most operational section by first looking at

should enter the market.

Why you shouldn't trade with limit orders.

But before answering this question, let's talk about how not to enter the

market. I often see Wyckoff traders use limit orders to somehow anticipate the

entry. A very common example is when trying to take advantage of a potential

spring, in the event it finally occurs, of course.

What these traders usually do is identify the low of the structure and

limit order there to buy below the current price.

In other words, a buy limit.

In this way, when the price reaches that level, it activates the order and the

trader enters the market long, with the hope that the spring will be confirmed

and the price will rise.

Personally, I don't relate to this way of trading at all, since it goes against

the reactive approach of the methodology.

Our advantage lies in confirming the actions as they appear.

So if we were to trade in this manner, we would simply be gambling on the

reversal taking place at that moment without the slightest idea of whether

will happen.

We know this is a key trading zone, a potential bearish breakout or a

spring. Why not gamble on the potential bearish breakout?

If the answer is simply based on the fact that the sign suggests that we

go long, that's not good enough for me.

We know how volatile the markets can be and how any news or the entry of traders

with a greater capacity can reverse the sentiment at any given moment.

So being predisposed to only accept that particular action seems too risky to

me. Also, where do you put the stop loss?

I wouldn't be surprised if a trader using this approach didn't bother with a

stop loss either.

What difference does it make? Well, it makes a huge difference because you can

bankrupt your account in a single trade.

So where do you put it?

You don't have any reference.

You would have to do it arbitrarily, so most likely it will either fall short or

be placed too far away.

Imagine something like this happens, that the entry order is executed.

You place your stop loss at some indeterminate point and the price hits

before reversing again.

I'm sure this happens.

Worth of all, your scenario might have been as predicted, but by not waiting to

confirm behaviors, you will have made bad decisions.

By placing a buy limit, you are gambling on the price developing two movements,

the bearish one to generate the test and the bullish one that will take the

price to the high part of the range.

The key here is that we can only really predict the development of one movement.

In this case, we might initially predict the bearish movement that will lead to

a potential spring, once the price reaches the area where it should turn.

have to analyze the price action and the volume again to see if the imbalance

that generates the bullish reversal occurs.

But anyway, you know that the Wyckoff method provides you with different

opportunities, so now you definitively decide to execute the same type of

this time looking for a successful test of the spring.

But why not even consider that said test might never take place, and that

instead of confirming the test of the spring, the price might continue to

which would confirm that our analysis was not correct.

We shouldn't be biased in one direction, let alone execute those kind of orders.

The problem is that this approach to executing trades is completely wrong.

And what happens, although it seems strange, is a real example.

It is very erratic behavior but can often happen, so there is no point in

trading under the premise of trying to guess.

Fundamentally, the idea is that we should be continuously analyzing the

interaction between buyers and sellers, though we may be directionally biased

towards one side based on the context.

We need confirmation when the time comes that the approach is sound and that the

market itself confirms it.

During a potential test of the spring, if we see that aggressive buyers appear

to push the price up, this is a sign we need to see in order to confirm that our

analysis is correct.

In this case, it would offer us a trading opportunity.

It is also important to remember that even if we see our entry trigger in the

predicted zone, there is no guarantee that our trade will end in a profit or a

loss. As we have already seen, new information is constantly entering the

and this could change the perception of value by participants at any time. But

at least we will be more likely to make the right decision at all times.

This is not the only example of making an incorrect use of limit orders to

the market.

There will also be the trader who, believing that in the current position

spring is going to be confirmed, instead of having previously bought with a buy

limit order, decides to launch a buy stop order above the current price to go

long in the event the price re -enters the range again in the hope that the

spring will be confirmed and a strong upward imbalance will be generated.

We are in exactly the same situation as in the previous example.

Why couldn't this be the real breakout?

We have already seen what happens, which is activation of the entry order and

the exit due to the stop loss.

I repeat, it's true that this market behavior is somewhat strange.

But just because it's strange doesn't mean that it cannot appear.

This is the mindset we need. Our job is not only to try to guess, but to try to

confirm market behavior as soon as possible.

And of course, there is the classic entry in favor of the breakout.

For me, a breakout does not offer a trading opportunity.

We already know why. It is a trading zone where anything can happen.

Gambling on the generation of a real breakout is just as bad as gambling on

of a false breakout.

In this case, the trade would place a sell -stop order at the lows of the

structure, waiting for the bearish continuation of the movement.

Unless you have taken profits quickly on the initial continuation of the

movement, chances are you will eventually end up with a loss if you

this way.

As I said, it is not a type of execution that fills me with trust.

since it goes against the principles of the methodology.

If you are using any of these methods to enter the market, unless you have them

properly back -tested, my recommendation is that you think logically to see if

they really make sense to you.

The Entry Trigger In this part, we are going to look at the different behaviors

that we can use as a trigger to launch our orders on the market.

We find ourselves at the point where the opportunity has been confirmed by going

through our trading checklist.

and we have the green light to look for the last element we need to definitively

confirm our participation in the market.

More often than not, our main trigger will be to wait for the appearance of a

candlestick showing intent, a candlestick that denotes aggressiveness

direction we want to trade.

Because of the message they convey, this is the best way of definitively

confirming the opportunity.

If we are in a trading zone where we want to buy, and after seeing all the

necessary signs discussed previously, we observe a candlestick showing bullish

strength, This informs us of a clear intention on the part of the buyers.

The candlesticks that meet the characteristics we are looking for are

a wide range, high volume, and a closing price at the extremes, regardless of

whether or not there is a wick at the opposite end, and always analyzing in

comparative terms with respect to the previously seen candlesticks. We have

looked at this previously with respect to the nature of the spring. That

made up of a single candlestick, directly activates the trigger for us.

since it complies with the price and volume characteristics that we would

for it to denote strength.

Moreover, regardless of the pattern generated by the false breakout, they

all ultimately made up of a candlestick denoting strength that ends up

confirming the pattern, and this candlestick denoting strength is our

trigger. So the idea is clear.

If we are in the trading zone, we have already done all our prior analysis and

some form of trigger appears, we have the green light to launch the order.

The appearance of candlesticks showing intent ultimately confirms a change of

control among market participants in the very short term.

At that point, we will have everything aligned. The context and the roadmap,

which will always refer to the longer -term control, and the appearance of the

entry trigger, which refers to the shorter -term control.

Here are some examples of our triggers, both for the long and the short side.

If we look at it from the point of view of market fractality, In essence, they

all represent exactly the same type of reversal, with the only difference being

that some develop faster than others.

This concept of fractality is very powerful and easy to understand.

Imagine that we observe a one candlestick trigger on a daily chart.

Well, if we go down in time, for example, to a four or eight hour chart,

observe that same behavior as the two candlestick trigger.

And if we go down to the hourly chart, we will observe the same behavior as the

three candlestick trigger, and so on.

And those last triggers would probably represent the behavior seen on a chart

15 and 5 minutes approximately.

So you need to be aware that the triggers that we have just seen are a

reference, and that the market can tell us exactly the same thing in multiple

ways, depending on the time frame in which we are working.

Here we see two very different examples that ultimately represent the same

thing.

Ultimately, the key is to determine the reversal by identifying a candlestick in

the opposite direction, plus another one in favor of the movement we expect, and

preferably with the latter showing a closing price at the opposite extreme to

the previous one.

Let's look at some particularities we should take into account with respect to

the entry trigger.

For example, the fact that one candlestick trigger should be composed

bullish candlestick in the event we want to buy and that the remaining triggers

should fail to close above the last big bearish candlestick that would establish

control. We can also use this as an extra input that will add more or less

strength to the scenario.

This slide shows practically the same behavior with the only difference being

the closing price of the bullish candlestick, which would ultimately

greater or lesser aggressiveness.

In the pattern on the left, we see that the bullish candlestick manages to close

in the upper third of the bearish one.

Although it is true that it could be taken as valid for use as an entry

the fact that it is unable to close higher suggests that the aggressiveness

the buyers is not at its peak, which could make us doubt whether to execute

trade or at least make us reduce our exposure.

In the middle pattern, we see more commitment from the buyers who have

to push the price to close above the opening price.

This representation provides us with greater confidence than the previous

And finally, on the right, we see the representation that most suggests the

strength is on the buyer's side, with the bullish candlestick closing even

the maximum of the bearish one.

These three representations should be enough to activate the entry trigger.

Here is a specific example for the case of a one candlestick trigger.

Can it be traded? Of course. It's exactly the same as we saw on the

slide. As I said, Personally, I feel more confident if the candlestick is

bullish since it represents even more commitment from the buyers.

But let's not forget that the most important aspect of a trading

the previous analysis that we have done.

That is, the context, the roadmap, being in the trading zone, and observing most

of the differential inputs.

We should simply treat the inability to close above the opening price,

ultimately resulting in a bullish candlestick, as one more input.

Another, perhaps trickier, particularity regarding the entry trigger is what

happens if the candlestick that determines the last control is broken,

candlesticks that do not appear to show intent.

Here we have two examples, one bullish and one bearish. If we refer back to the

concept of fractality, in the end, if we wanted to represent everything that

happened there in a single candlestick, the result would be our single

candlestick trigger.

So, should we execute our trade in this case?

In this situation, I would be more reticent to trade following that type of

behavior. Although it is true that, as I have just said, the behavior at the

aggregate level would create our entry candlestick, implicitly I would need to

see that final element of clear intent in the movement in favor of our

direction, which is why I wouldn't take up a position in this case.

But that's everything.

Remember that we've previously talked about being more conservative or

aggressive in our approach as traders.

We already looked at this in terms of trading zones, and here we can also

the concept.

From what point of view?

Well, let's consider the last major candlestick that we have against our

direction. Let's then also apply the concept of a reversal movement.

That last candlestick is going to represent the short -term control.

So, a conservative trader will wait for this control to have been broken.

while an aggressive trader might consider entering the market even before

change in the short -term control takes place.

We have seen this previously and it all has to do with the level at which the

candlestick closes.

The conservative trader will wait for it to close at least in the final third of

the previous candlestick, while the more aggressive trader could enter

regardless of where the current candlestick closes relative to the

indicating the short -term control.

In other words, if we are looking for a buying opportunity and we take a more

conservative approach, we will wait until the price has closed at least at

upper end of the last bearish candlestick.

This is what we have in this example.

The bearish candlestick that establishes control closes below the trading level.

A rejection candlestick is generated that fails to recover the level, and

subsequently our bullish strength candlestick appears.

which re -enters above the trading level and manages to close at the maximum of

the candlestick indicating bearish control, establishing the definitive

trigger. Moreover, the last dynamic established by the short -term control,

this case bearish, would already have been broken by this point.

Could the aggressive trader have entered in that middle candlestick with its

bottom wick?

From my point of view, it would be too aggressive an entry.

If that candlestick had closed above the trading level, At that point, its

closing price would at least be in the middle third of the bearish one. And

would give us a bit more confidence.

In terms of the entry order, I always recommend using a stop order in the

direction of the movement.

In other words, if what we want is to buy, we will use a buy stop located

the current price.

And if what we want is to sell, we will use a sell stop located below the

current price.

The development of a candlestick showing intent is a clear sign of interest, but

it is worth using a stop order as a definitive filter that suggests a

continuity in the movement started with the trigger candle.

Continuing with the example of our entry triggers, in the case of long trading,

we would place the order above the candlestick. If we are going short, we

place the sell stop entry order below the trigger candlestick.

This process will always be exactly the same.

How far below?

at least one tick below the high or low of the candlestick and preferably two to

avoid micro false breakouts.

Although it may seem ridiculous, it happens. A mini false breakout on the

previous candlestick and reversal.

In this way, we can enter in favor of the momentum and avoid these

microstructure behaviors.

The reason for using this type of order and not any other is that it provides us

with even more confidence.

Sometimes we will see the development of what initially looks like a candlestick

showing intent and right after it closes, the price reverses sharply in

opposite direction.

What happened here is that an absorption process has been carried out internally

at all those price levels and traders with greater capacity were positioning

themselves on the opposite side.

By using this type of order, although we won't be saved from this potential

situation, On many occasions at least, it will prevent us from entering the

market where this has happened.

Any movement that tips the balance of the market will have strong momentum,

pushing it in the same direction. With this type of limit order, we will be

entering in favor of the momentum of the imbalance.

If the order is not triggered on the next candlestick, what can we do?

The ideal behavior would be the activation of the entry order in the

candlestick due to the aforementioned momentum.

So here we have several options, from basically eliminating it and discarding

the opportunity, to waiting for the subsequent price development.

Personally, I would hold the order for two or three candlesticks maximum, after

which I would cancel it.

Something that would also make me discard the opportunity and cancel the

is when the price reaches the opposite extreme.

Our position was in favor of that short -term momentum.

So the non -activation of the order and of course the reversal in the opposite

direction leads us to think that there really was no directional interest

that first impulse.

So it is best to stay out of the market and look for a new opportunity later.

Going back to the example we saw earlier, since we are considering an

opportunity to buy, we would use a buy stop and place it just above the high of

the trigger candlestick. This is the location we will always work with.

We will look at some tips regarding the location of the stop loss later, but I

can tell you now that it will be on the other side of the entry trigger.

Another important particularity involves breakout trading, and more

specifically, those situations where our entry order would be relatively close

to the breakout of a liquidity zone, be it a simple prior pivot or the extreme

of a structure.

Imagine that we are trading this structure and we observe that after a

evident spring in sign of strength, We are in trading zone number 5.

Continuation strategy within the range in phase D and the market generates that

pivot plus the subsequent false breakout.

As we see, the trigger candlestick is also the candlestick that generates a

false breakout of the previous low and even manages to close at the upper end

the last big bearish candlestick. We have a 2 candlestick trigger.

But what happens? If we look closely, we are relatively close to the high of the

structure.

If this trade had been taken, the result would have been a win, but that is not

what this is about, because on this occasion it has gone well, but on many

others it won't, and our main objective should always be to favor the

preservation of capital over and above the search for profit.

This is about applying the knowledge that we have acquired throughout the

course, that we know that this area, the end of the structure, is a very

important trading zone that will generate major interaction between

participants.

and we do not know what will happen. The breakout could be real and continue

upwards, or an upthrust may be generated and the price may fall.

And since we don't know what might happen, once the price reaches this

must at least carry out the most defensive position management possible.

And this basically means setting the stop at break -even, that is, just a bit

above the entry level.

We will talk about this in more depth in the section about position management.

For now, Simply keep in mind that if the entry order is located relatively close

to a liquidity zone, we have two options.

Either we enter but manage the position with a stop at break -even when the

price reaches that zone, or we don't even enter and we look for a position

on. In this example, if we have entered and carried out the proper management,

we would have quickly been ejected from the market at the break -even point.

We might also find ourselves in this situation.

where the entry trigger closes above the trading level.

This would require us to place the entry order right in the liquidity zone.

What do we do?

Well, the rationale is exactly the same as in the previous situation.

We find ourselves in a situation where there are two highly possible scenarios,

and we have no way of knowing what will happen. This means that buying in that

area would be too risky.

We would be gambling on the market continuing to rise.

But at that point, we do not have any clear signs indicating whether the

breakout is going to be confirmed or not. For this reason, the most sensible

thing would be to discard that opportunity in the first instance and

monitoring it in the event that it offers up a second opportunity to enter.

Something else to bear in mind is that there will be occasions when, even

seen the genuine entry trigger on the trading zone, we may see an excessively

wide candlestick which we need to be careful with.

especially if it is accompanied by very high volume.

This is because the type of candlesticks which manage to travel a long distance

and generate a large volume of trading generate doubts about the real intention

behind those trades.

Such a high volume puts us at least in a position to wait for a later test to

verify the intention of the participants.

In this example, we see two similar situations.

We are in a range context where we have previously seen a potential spring and a

good sign of strength, so we are ready to look for any opportunity to enter the

market long, and we can observe a large candlestick showing bullish intent with

a closing price at the top and a huge wick at the bottom, denoting the

aggressive entry of buyers.

The key is that it is accompanied by a really high volume, so the market is

forced to perform a test in that direction to be able to assess the

towards it.

After a new false breakout, the market develops upwards.

An entry with a very tight stop loss would probably be triggered.

And a little higher, there is another trading opportunity.

Small sideways movement and the appearance of a large bullish

accompanied by another large volume peak and with exactly the same result.

The key is to observe the big difference between the size of the previous

candlesticks and that of the trigger candlestick.

You just have to be alert to this potential situation.

Entry by the context.

Since we're now looking at more advanced content, it is worth looking beyond the

classic types of entry and explaining a more complex type, which I have called

by the context.

This type of entry is based on the idea of prioritizing the development of the

context and the roadmap over any other element.

This is why decision making based on this idea should meet the recommended

characteristics that any trading approach should have, based on the

the structures.

And what I am referring to is nothing more than the trading checklist that we

have previously defined, as we mentioned earlier.

The more of these inputs we have in our favor, the greater confidence we will

have in the trade.

In this case, for entries by context, we need the market to follow almost the

perfect textbook behavior.

Applying this concept should be almost exclusively limited to a situation in

which we are looking for the potential test after the breakout, whilst waiting

for the confirmation and subsequent development of the trend outside the

Imagine that you are somewhere in the orange box, trying to find the

entry trigger.

And herein lies one of the problems we might come across when trading in real

life. What can we do if we aren't in front of the screen at that moment?

Perhaps the most logical thing to do would be to discard the trade and not

the market since we cannot verify the appearance of our trigger.

A second option would be to prioritize the development of the general context

over the appearance of the trigger specifically.

This is the rationale behind the type of entry by the context.

If we perform our analysis and identify all of these signs, this suggests we are

in the best possible context.

and all this should carry more weight than the latest action represented by

trigger. Well, this would be an example of which we could enter by context.

What inputs do we have in our favor?

We have the context, determined by the potential accumulation pattern.

We have the roadmap, which suggests to us that the price will most likely

develop a test after a bullish breakout before continuing a trend movement out

of the range.

Obviously, we are in a trading zone. The overall volume during the development

of the range is declining.

The false breakout travels a significant distance and reverses quickly.

The impulses and corrections follow a harmonious pattern, both in price and

volume, evidenced by the increase in volume in the impulse breakout movement

the decrease in corrective test movement.

There are no significant movements against our scenario.

The price has not re -entered the range and there is proportionality between the

breakout and test movements.

In short, There are a large number of inputs in favor of the bullish scenario,

so we would consider it highly likely to develop as expected.

From here, we must determine what type of risk management we perform, since it

is an entry by context and it is not clear what the trigger is.

It may be best to reduce the risk a little, since you never know what might

happen. In this case, we are looking at an example of a distribution pattern.

Right at the point where we're looking for the test after a bearish breakout,

what do we have?

context, roadmap, trading zone, volume increase during part of range

development, a very clear display of weakness stemming from a minor false

breakout, although it breaks through several previous highs, decreased volume

after the breakout, no re -entering of the range, and no big bearish movement

volume against the scenario.

All this means we should consider the significance of the structure when

assessing our entry trigger.

We should simply enter with a market order, and that's that.

If we enter without having identified our entry trigger in advance, this can

lead to doubts about where to place the stop loss. In this case, the most

sensible thing would be to place it at some point within the structure, at

which, if reached, could turn out to be a false breakout rather than a real

breakout.

Like I said, you don't have to allocate all the risk to it.

One way to manage it is to enter with 50 % of the position and add the other 50

% if you see the definitive trigger.

candlestick or enter expecting a continuation as happens in that

thrust