Original subtitles

Scenario Management This part of the module will explain how to manage

situations in which the observed behavior initially suggests we should

the original scenario and only activate it again if we see that the market

resolves this tricky situation.

In other words, situations in which the context and the roadmap are called into

question due to a specific action.

Before specifically addressing the first of these situations, it is important to

understand the anatomy of these movements that take the price into the

zone, since the feeling we get from these movements will largely determine

type of scenario management we should carry out.

Generally speaking, when we look for our trigger entry to appear in a trading

zone, we are looking for the best conditions that might favor a market

at that point.

Regardless of the trading zone and the strategy to be used, we enter the market

in the hope that a reversal will be generated at the point that causes a

of direction.

Therefore, the price reaching the trading zone with a certain momentum

movement that appears to be an impulse is not the same as the price reaching

trading zone with a loss of momentum with what appears to be a correction.

The why is simple. If nothing else changes, what is most likely to follow

impulse? Well, a correction, so that the price can subsequently develop a new

impulse in that direction.

And what is most likely to follow a correction? Well, an impulse in the

direction.

This is why it is crucial that we analyze the anatomy of the movements

the price into the trading zone, because the feasibility of the scenario will

depend on their nature.

If the movement to reach the level is corrective in nature, then it will

activate the scenario and we can look for the entry trigger.

If, on the other hand, the movement is impulsive in nature, we should discard

the scenario until we see some loss of momentum in that movement.

Let's look at an example of a trading situation in which this problem will

generally appear.

Looking for the test after a breakout.

As we have already said, the fact that the market is developing a very genuine

structure does not mean that our scenario is confirmed 100 % of the time.

It is highly probable that this is the case, but it will not always be so.

If we see a strong bearish price reaction after the impulse upwards, Be

careful because even if it has traveled a long distance, the market could still

return to equilibrium again.

The situation would be especially tricky if we also see high volume at the high

point of the bullish movement, as we saw previously.

For whatever reason, the buyers have exited and the sellers have aggressively

entered. The lack of interest of the former and the initiative of the latter

generates an impulse downwards that denotes a lot of momentum.

Right at that point, The bullish continuation scenario supported by the

of the accumulation pattern should be called into question, since we might now

be facing a potential upthrust that would completely change the market

sentiment. If we are hoping to see higher prices, we don't want to see a

price action that shows a lot of intent.

Seeing this, we should dismiss the bullish scenario and only reactivate it

some type of behavior is observed to indicate the bearish momentum has

or disappeared.

A very good example of this would be the appearance of a fast reversal pattern

in two or three movements, or any type of extended consolidation, or even one

the methodology's complete patterns.

Going back to the example, something like this is what we should expect at

before reassessing the bullish continuation scenario at the test after

breakout. We already know the patterns that are normally generated by a

in the market.

we must wait for the appearance of at least a fast two -movement pattern to

confirm the loss of momentum.

The key when implementing this type of management is seeing that this downward

movement is sharp, as we already know. This must be very visual if we are to

confirm it. A V -shape reversal that is a mirror image of the previous impulse

with practically the same speed.

Let's now address another problem that we might come across.

When the price reaches the trading zone with the structure against us, What do I

mean by this? Well, if a minor distribution structure appears just

we are going to look for the entry trigger when predicting a bullish

how do we handle this?

The worst possible scenario for us regarding the nature of the movement

takes the price to the trading level is that a distribution pattern has

developed at its origin, which would be the cause of a subsequent downward

movement that would visit said level.

In this context, we would observe how this bearish movement is being supported

by a significant cause that has even managed to generate a complete

A structure that would suggest there is significant interest from the

participants and would represent a certain amount of bearish control in the

context of the market, at least in the short term.

A behavior that would definitely suggest that the imbalance is downwards and

that the most likely result is a bearish continuation at that point.

Going back to the same trading situation as in the previous example, We find

ourselves in a bullish breakout situation, having just seen a potential

accumulation pattern, and just above the high of the bullish movement, the

market leaves a minor distribution structure, which acts as a cause that

generates the subsequent bearish effect.

Seeing this is initially a bit scary, really. But what does the context and

roadmap tell us? While the price does not effectively re -enter the range, the

context continues to indicate that the structure is potentially an

In addition, the behavior that we have just seen according to the roadmap is

perfectly valid since, if everything goes well, it would be the bearish

that develops the test after the bullish breakout.

In other words, the context and the roadmap continue to be in our favor, at

least initially.

Nevertheless, the distribution pattern is so evident that it should at least

make us reconsider the scenario.

First, we could analyze the composition of said distribution structure to draw

some objective conclusions.

And second, we need to see how the price reacts when interacting with the

trading zone.

What does the volume tell us?

Well, if we analyze both movements, we can see that the bullish momentum is

accompanied by an increase in volume, and that the bearish one actually shows

pattern of decreasing volume.

This would denote a certain harmony between the price action and the volume.

although it is true that, as previously mentioned, volume analysis involves a

somewhat subjective interpretation, it is ultimately a sign that we can take

into account and that can help us to better understand what is happening.

Meanwhile, and even more importantly, what about the definitive sign that

confirms whether the breakout is real or false?

The market might develop a minor distribution at the end of a breakout

but if the larger structure is maintained, without the price re

range, the context would continue to suggest a show of strength since,

regardless of what happens after the breakout, The price's inability to re

-enter the range is the definitive sign that the development of the bullish

roadmap will most likely continue.

The main problem is, how do we enter the market in that particular action?

We have a potential larger accumulation scheme, suggesting a certain directional

bias in the general market context, and at the same time we have a smaller

distribution pattern that suggests there is a certain amount of bearish control

in the shorter term.

The problem is that the minor distribution pattern has already been

since it has already had the effect of the downward movement, but the larger

accumulation is still only a potential pattern based on the level of

seen on the chart.

We are going to continue with the hypothesis that as long as the re -entry

the range does not occur, the context is favorable for going long.

From this point onwards, as we can see, the bearish movement continues with a

lot of momentum.

So the first thing we are going to do is apply the previous concept and wait for

the appearance of some type of consolidation that generates the loss of

momentum.

As always, in terms of our trading approach, we have various options for a

situation like this depending on our profile as traders.

From entering the market as if it were any other structure, without taking into

account all this information, all the way through to discarding the trade and

staying out of the market for now.

The more aggressive trader should wait at least for the loss of bearish

with some type of pattern before entering.

The main premise is that as long as the price doesn't re -enter the range, the

context remains in our favor.

On the other hand, the more conservative trader might consider entering the

market once the price re -enters the minor distribution range.

We know that this structure has generated interest.

There is participation from agents.

and, to a certain extent, it represents bearish control of the market in the

very short term.

We want to enter in favor of the potential accumulation that we have

without facing that bearish control of the minor distribution that we have

too soon.

The solution would be to wait for said control to break, and an initial sign of

this break is if the price manages to re -enter the structure again.

From that moment, we will have greater confidence in the scenario.

and we can start looking for our entry trigger in some kind of quick test or

even a new false breakout in favor of the bullish bias.

In these types of breakout contexts, we would hope that a large amount of volume

is not generated in this action, supporting the subsequent downward

that will visit the trading level of the broken structure.

If we want to treat a movement as a correction instead of an impulse, we

expect to see low volume at its origin, denoting a lack of institutional

participation in said movement.

Also, ideally, we want the movement that leads to the test to be a correction,

evidenced by candlesticks with little distance between them and low volume.

And if in the end the market develops a fast pattern as well, so much the

better.