Original subtitles

The Adaptability of Markets All the concepts and ideas that I will be

are fundamentally underpinned by the aforementioned theory, the basis of

is the adaptability of markets.

Understanding this conceptual framework in itself is the most powerful tool for

taking on the financial markets, placing you in a context in which you will

understand that anything is possible due to changing conditions.

Applied to the matter at hand, These changing conditions exert their

during the development of structures, in which two sides are fighting for

control of a continuously changeable market, which can change in favor of

or sellers.

The main variables that make the adaptive markets hypothesis the only

contextual framework for trading in the market are traders with different needs,

traders with different valuations, traders with different capacities.

As I've already mentioned, not all trading is speculative in nature.

There are many types of participants that interact in the market and each has

different needs, with hedging the most significant of these.

As well as the intent behind each trade, it is worth noting that different users

have timeframes that some traders work with.

While some take into account the very short term, others adopt medium or long

-term strategies.

Moreover, the different valuations of each trader will obviously have an

at the aggregate level.

The general consensus regarding an asset may be that it is oversold and worth

buying, but the target price could change, and after a movement in that

direction, the closing of positions of those where the price and valuation

would hinder the subsequent movement, even leading to a reversal to the

side.

Finally, it is also important to be aware that we don't know the capacity of

traders involved to continue controlling the market.

At any moment, a trader with greater capacity could appear and cause a

What at first seemed to be unbalanced in favor of one side with the appearance

of this new player may suddenly be tipped in favor of the opposite side.

When analyzing market movements, there are two very important factors to

We don't know the intention of traders who are supporting the current movement.

If they are short -term traders who will close positions in the next liquidity

zone or if, on the contrary, they have a longer -term perspective and will

continue to further develop a trend.

We don't know if traders with greater capacity might suddenly intervene.

When the price reaches any liquidity zone, aggressive traders may appear with

greater capacity to move the market by pushing in the opposite direction.

since they may have different longer -term valuations.

When the price reaches a potential spring at the lows of the structure and

there manages to reach the top again, it is obvious that the buyers have entered

down there with a certain amount of aggressiveness.

However, we don't know when they will decide to close their positions.

They may simply be short -term traders taking advantage of a visit to a

liquidity area to find the counterparty to which to match their orders, either

at the highs of the structure, or in an intermediate area, so they can close

their positions there and take profits.

This closing of long positions would cause a loss of bullish momentum and

possibly a further downward turn.

We also don't know if there may be long -term traders involved with a greater

ability to move the markets who are looking for this bullish movement in

to take advantage of it and go short aggressively.

Or maybe the traders who have bought at the spring have a longer -term

perspective and will do their best to stay in the market and defend their

position if necessary, leading to the full development of the accumulation.

An action that would attract other traders who, driven by the fear of

out, would enter the market and push the price even higher with their activity,

which could also activate other momentum strategies and raise the price even

more.

You also need to bear in mind that not all large traders win in a systematic

recurring way over time, and on many occasions, they are forced to accept

losses. As Albrook says in his books on price action, in liquid markets even the

slightest price movement is generated because a large trader is buying and

another is selling.

It is a battle between these large institutions and therefore some of them

incur losses in some of their trades.

This is a problem we will often come across, so our advantage lies in trading

favor of the last imbalance.

For this, it is crucial that we identify the most critical event, the false

breakout plus the signal of intent.

The false breakout is the most decisive action in the functioning of the market.

Its underlying logic is so strong that we should always be compelled to align

with it.

Therefore, if all other signs are consistent, we should always trade in

direction of the last false breakout. That is, we should go long after seeing

potential spring.

and short after seeing an up thrust we will explore this concept in more depth

throughout the course