All language subtitles for 4. Scenario management

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.