Original subtitles

Which trading level should you prioritize?

Having addressed in which zones we should observe the market to find our

we may sometimes see that there is more than one trading level in which to look

for the definitive entry trigger.

To apply this concept, we are going to follow the same principle that we have

been using up to now, which is to let the market confirm which one it should

We will suggest scenarios and it will be the market that confirms the right one.

If we summarize all the possible trading opportunities, The only two levels that

we need to consider arise from only two different situations.

On the one hand, we have the trading levels that are established by the edges

the structure, which are where we will subsequently hope to see the Phase B and

C false breakouts develop, as well as the test after the breakout of the

structure. And on the other hand, we have the trading levels that are

established by the generation of pivots, where we are going to look for all the

false breakouts, be they within the range or outside.

in the direction of the trend.

Because in the vast majority of cases structures are quite erratic,

trading levels that can be complicated or subjective, especially when it comes

to identifying the edges of the structure where we are looking for that

and retest movement that confirms the accumulation of distribution patterns.

The key idea here is that there is no level that is better or more important

than another, that we must take into account all the trading levels that

and that it must be the market that confirms which one it will follow.

This puts us in a very comfortable position of not having to guess which

to use.

We simply need to identify all the trading levels to forecast the scenario

let the market decide.

In this example, we see that two trading levels have been generated at the upper

end of the structure, the first which is set by the automatic rally, and the

second established by that up thrust action.

When the breakout finally occurs, we don't know which one the market will use

leverage and to create the imbalance out of rain, and that's why we need to take

both into account.

In this case, it supports itself on the resistance generated in the AR,

developing a good bullet reversal pattern there, confirming the BUEC and

offering up an opportunity to buy.

Subsequently, the market made some use of the trading level created by the

upthrust type action.

developing a minor false breakout on it before continuing the trend movement.

This situation sets up a high -quality opportunity as we have a confluence of

levels. First, the old resistance of the AR that would now act as the support,

and in addition, the generation of a pivot that has allowed a false breakout

the lows, also a good bullish SOS bar candlestick that would act as the

definitive entry trigger.

Since the subject has come up, Let me explain why I haven't used the broken

support and resistance levels as trading levels when we're in favor of the

trend, although we do use it when we find ourselves in a potential break and

retest situation.

As we know, those levels are useful because they identify turning points,

imbalances between supply and demand.

They are areas where there has been a price reversal and, based on the

principles of technical analysis, we would expect it to act in the same way

the future, in other words, by generating another imbalance.

One of the drawbacks of this concept is that the trend will be determined by the

momentum it carries.

This means that which on some occasions it will behave normally, but on others

it will be fast and the correction will never reach the previous edge or it will

be slow and the corrections will exceed the previous edge.

This leads to a certain ambiguity in its application, which translates into

uncertainty when trading.

But the main problem that I have identified with experience is that the

can move very erratically at times, and it's really very difficult to find this

kind of genuine behavior in which the price respects the old broken resistance

and uses it as a support, allowing us to look for the entry trigger.

It is very difficult to see these kinds of examples.

My point of view is that this tool is more useful for assessing the market

sentiment to see if it is gaining or losing momentum.

as an added input to evaluate the anatomy of the trend, but that's it.

useful to assess potential opportunities.

Going back to how we should prioritize trading levels, here we have another

example. In this case, we can identify up to four potential trading levels that

we should take into account.

But if you look closely, numbers 1 and 2 are too close together, as are 3 and 4.

Well, in this case, I would simply take for granted that the distance between

these levels is very short.

It is always important to apply logic and common sense so as not to force the

analysis too much.

It is not necessary to calibrate everything exactly to the millimeter,

the market is not like that. The market is flexible.

By this, I mean that level 1 and 2 can be taken to represent the same thing,

that 3 and 4 can also be considered as 1.

there is not a significant enough difference to treat them completely

independently. We could even accept that the whole distance between the levels

as a single zone.

This wouldn't be a bad idea at all. In the end, in such short distances, going

little higher or lower does not substantially change anything.

In essence, the strength of the concept is represented by that zone, on which

the market has rotated multiple times when interacting with it previously.

And that is why we hope that somewhere in the space covered by those levels,

that reversal will appear once more.

Other than that, we see two other potentially high -quality trades

the confluence of trading zone plus false breakout event.

In this other example, the market again visits the low and initially develops a

good reversal of candlesticks that we could and should have used as an entry

trigger.

Subsequently, the market returns to the same area and develops a small shakeout

at that low before starting the actual imbalance outside the range.

One important aspect to consider is that it is not very common after a breakout

for markets to develop a perfect test at the level of the broken structure

before starting a trend movement from that point.

On many occasions, the price moves sideways, outside the range, for a while

before continuing, and on some occasions, the price develops further

breakouts at some previous pivot point, as in the example.

This is why, if the price initially appears to be developing a perfect

test, as is the case in this example, and if the entry trigger appears, then

simply must enter the market, though we need to be aware that the imbalance may

not be generated immediately and the market is likely to build some

before starting a trend movement.

We'll get into this in more depth when we talk about position management.

The only thing that we must be clear about in this potential break and retest

scenario is that we are not going to enter with limit orders. And since we

want to enter the market early under any circumstances, we will wait for the

trigger to appear on the level of imbalance that the market chooses.

Our task as analysts is to consider all possible scenarios.

After that...

Our task as traders is to act once the entry trigger appears.

When it comes to the creation of pivots on which to look for the false breakout,

objective logic suggests that the more candlesticks that have been used to

generate said pivot, the greater the strength.

However, I personally recommend having all of them identified, since all pivots

create liquidity zones, zones of potential imbalance between buyers and

and therefore they can all provide us with trading opportunities.

Ultimately, it will be the price that confirms which level is more important

that particular market situation.

We must not get ahead of ourselves.

Our interpretation of the market is reactive and herein lies the importance

the appearance of our entry trigger as the last indicator of the intention of

the major players to move in that direction.

We simply have to analyze the action of the market at those levels that we have

identified and look for the entry trigger on them.

the price could reach our first trading level and not develop the trigger,

visiting instead the second trading level lower down, where it might or

not develop the trigger.

In this example, many of the pivots I have marked were left unvisited.

But that doesn't matter. Our task is to ensure we have them all identified if we

are looking for an entry.

Many of them did not offer us an entry trigger. Others did, but the trade would

have resulted in a loss.

while some others would have resulted in profits.

This is the nature of the business.

Opportunities don't always appear, and when they do, some will be winners and

others losers.

And here we have another example, this time showing the search for pivots at

highs on which to wait for a bullet -false breakout or upthrust.

Again, there will always be some pivots that offer no entry opportunity since,

once the price is there, it does not develop the entry trigger, and others

that... also depending on the type of management, can result in a break -even,

loss, or profit.

An important point to remember is that we may not always be able to make a

profit from a trade because we have placed the stop loss too close or

have not identified the entry trigger, but with the context and the roadmap

we have already assimilated, it would be very difficult for us to be positioned

on the wrong side of the market.

With everything we've seen over the course, we shouldn't be looking to buy

bearish context like this.

so we shouldn't be focused on looking for bearish pivots on which to expect a

potential spring.

Knowing how to identify the correct side of the market is something that gives

us a major edge over the standard trader.

I'm going to refer back to pivots since these are an essential element in our

trading approach.

As we have seen in the previous examples, there are trading levels that

not have been taken into account depending on the configuration that we

generate the pivots.

Remember that the traditional configuration recommends that we use two

candlesticks on the left and right of the edge.

But this, like everything, is not universal.

As analysts, we have the ability to decide which configuration offers us the

greatest confidence when trading.

You may decide that instead of two, you will use three or four candlesticks to

the left and right, and this is perfectly valid.

The greater the number of candlesticks with which you configure your pivot, the

greater strength they will have since you can expect more liquidity at their

edges. The drawback is that configuration is less likely to appear

and you will therefore have fewer opportunities for trading.

You might find it interesting to use one type of configuration or another,

depending on the time frame you are using.

In very short time frames, the number of pivots that will be created if you

configure them with two candlesticks to the left and right will be very high.

This might be a good context in which to increase the number.

Since each market is a world of its own, I recommend that you analyze the

history of the market to find out what configuration has worked well in the

past. You can do this in different ways depending on how dedicated you are,

visually, through a manual analysis, or even using an automatic tool.

Conversely, if we use a large number of candlesticks in our configuration of

pivots for higher timeframes, we may never find an opportunity to trade.

The recommendation here is that you lower that figure.

In this context, on daily or weekly charts, a traditional configuration

two or three pivots is usually a wise choice.