Original subtitles

Valid Liquidity Zones As we saw previously, liquidity zones are

on pivot points, which are simply price formations where an imbalance between

supply and demand occurs that causes a reversal in the price.

Technically, these pivots are used as zones where different orders pending

execution are located based on different rationale, setting a stop loss, take

profits, entry orders for breakout strategies, entry orders for reversal

strategies, etc.

The only objective fact is that all this liquidity, taken together, offers a

useful trading zone, especially when we bear in mind that practically every

impulse movement originates from a search for liquidity.

We will use these both to find our entry trigger and to take profits.

The key now is to determine which of these pivots we should take as valid for

our trading approach in terms of our market entry, not exit.

The general rule is that we will take as valid the pivots that are generated

most immediately and naturally during the course of the current trend.

We may also take into account some other more distant pivots as long as they are

aligned with the current context, although these will offer us less

This image represents the concept very well.

The key is to identify the current market trend and only look for those

that are aligned with this trend.

In this example, we see two clearly established trends.

On the left, an uptrend and on the right, a downtrend.

We have already seen how pivots in favor of a trend are generated and how we

should take advantage of this. But up to what point?

Well, until the market dynamic changes, when a new cause is being generated and

its effect is starting to develop.

Those trading zones that correspond to the previous trend should not be taken

into account when searching for the market entry trigger.

In other words, if we are in a downtrend, we cannot look for bullish

other previous trends.

And if we are in an uptrend, we cannot take into account bearish pivots that

were generated at other times.

In this example, once the market tops out, it develops a short distribution

pattern and begins to fall.

Right at the point when the bullish dynamic is broken, we should stop

for pivots in favor of the upward movement and start looking for a short

position in pivots that can provide us with bullish false breakouts or

I have marked precisely those pivots that should not be taken into account

they are not valid in orange.

If the context at the moment is bearish, we have already seen the distribution

and we are in the middle of the bearish trend movement.

Using a pivot that belongs to a previous bullish trend is a mistake.

But careful.

Let's say that these are not valid to identify potential trades in favor of

direction. In other words, They are basically invalid because the context

changed and we should no longer be looking for trades in that line.

However, they could be taken into consideration when taking profits, for

example, depending on the time that has elapsed since their creation.

We will address this later in the trading approach and management section.

This is how we FID trade once a market reversal has occurred, with no prior

reference to the left as far as past trend pivots in which to look for

are concerned.

But take care.

What happens with the pivots at the lows that have been generated during that

downtrend movement?

Are they valid?

In this case, yes, those pivots are valid, because they belong to the

trend. They have been formed during the development of the bearish movement.

The question here is not whether they are valid or not, but whether they

be taken into account, since these pivots would be used to look for

buying opportunities.

But would you want to buy in a context that is clearly bearish?

That is the key question here.

Personally, I wouldn't. I don't feel confident entering on the opposite side

the market.

But from the point of view of the concept that we are explaining, these

be considered valid pivots.

Imagine that the market continues to develop and break that bearish momentum,

starting a new uptrend.

We would be in the same situation as before, but in reverse.

At that point, these pivots that belonged to the previous bearish

should not be taken as valid.

The only use we could make of such past pivots is to place our take profits on

them, if not too much time has elapsed since their creation.

The logic behind this is that the closer the pivot is to the present moment, the

more interest it will represent and therefore the more liquidity there is

to be located at its edge.

Also, liquidity moves naturally as the market itself moves.

Therefore, we should work under the hypothesis that the oldest areas are

relevant. For this reason, With the passage of time and the distance

the price, it is most likely that in those old pivots there is no longer that

liquidity that we are looking for that would act as a counterparty to push the

market in the opposite direction.

As we will see later in the position management section, but the pivots that

can see on the left can act as a reference for taking profits if they are

too far away.

That said, in no case should they be taken into account when looking for an

opportunity to enter the market.