Original subtitles

Take profit.

In this part of the course, we will look at the different options we have for

taking profits.

Based on the price action and volume, we are going to work with four possible

take profit options, which will depend on whether or not we have previous

references. By this, I simply mean looking at whether there are any past

not too far to the left of the chart that we can use as a reference.

If we do see historical data that we can use as a reference, we will use it to

establish two possible take profits.

First, the liquidity zones, which we have looked at so many times during this

course. And second, if we find ourselves in a trend context, we will use

previous structures that have been developed to place our take profits

On the other hand, if we do not have any previous prices to refer to, as is

often the case when we are at record highs or lows, we will use behaviors

can alert us to the end of the movement, such as evidence of climatic action and

the development of structures.

Let's take a look at each of these.

We're going to start with liquidity zones.

There's nothing new to discover here.

We presented the concept at the beginning of the course and it has

us throughout.

These are areas of price reversals, of previous highs and lows.

We know that in these zones there are always a large number of orders waiting

be executed and that is why they are very interesting areas in which to wait

the price to arrive.

The greater the pivot, the greater the strength of the zone.

since you can expect more liquidity at their edges.

We can find them both within a structure and in the middle of a trend.

Here is a real example.

Broadly speaking, these are the liquidity areas of the chart.

We have simply marked pretty much all the pivots.

Depending on the context and the prevailing roadmap, we will use certain

liquidity zones as zones in which to look for an entry, and the opposite ones

zones in which to look for our exit.

But the principle is the same.

Based on the concept of liquidity zones, we are going to use them to do some

type of position management at those points, either entering or exiting the

market. For example, in the first part of the chart, the context is bearish, so

ideally we should be looking to enter the market short.

For this, we know we need to hold out for the creation of pivots and the

subsequent false breakouts on them, and search for the trigger for sale there.

Of the identified areas, the only ones that would have offered our entry

are these three.

At entry number one, we would establish two exits.

Exit number one, which is in the first liquidity zone that the price finds

entry, and exit number two, that is the next area which the price reaches after

we have taken our first profit.

At that point, we would already be out of the market.

In terms of entry number two, we see that it breaks through the previous high

and the entry trigger is activated.

The first liquidity zone, the price comes across.

Exit number 3 doesn't seem to be very significant, but profit should still be

taken there as it is technically a pivot.

Meanwhile, if we have divided the position into two parts, the second part

the profit should be taken at exit number 4, since it is the next liquidity

that the market hits.

The dynamic will always be the same.

a liquidity zone for entering the market, and another liquidity zone for

it. The case of entry number 2 is a little bit different.

Let's look at it in more detail because this is an important concept.

If you look closely at the moment the entry trigger is activated, the two

liquidity zones that can be identified are number 3 and number 5.

That is where our take profit order should be located.

And the following happens, that the market falls.

reaches our first take profit zone and generates a new zone before reaching the

liquidity zone that we had initially identified, number 5, and here things

change. We need to bear in mind that the market is constantly changing and that

it will continue to generate new price reversals which will establish new

liquidity areas.

So our targets need to be adapted to this new market information.

In other words, say we had originally established a take profit level in a

distant liquidity zone.

but while developing a movement the price generates a new closer liquidity

we should also now take this one into account for our position management and

this is exactly what has happened here so the second exit for entry number two

is exit number four and not five because exit four has been generated during the

course of the trade and has led us to modify our position management lastly

regarding entry number three This one does make use of the liquidity zone that

we have labeled as exit number 5, although if you look closely there is

another pivot prior to it, but I have ignored it because it doesn't travel any

considerable distance.

And in the event you had split the trade, the second part should have been

released in exit number 6.

As you can see, there is no pivot there.

This type of exit has been taken due to the appearance of climatic action,

another type of exit that we will look at later.

Looking at the second part of the chart, as the price begins to move sideways,

our bias should continue to be toward going short since the imbalance is

bearish. With that in mind, we could have taken entry number 1, which would

close out taking some of the profit in the liquidity zone labeled exit number

If we had next set the stop at breakeven, as I recommend doing after

initial partial profit, we would have missed the stop due to the subsequent

bullish rebound.

From there, we see how the price visits the lower part of the small structure

and generates a strong false breakout, which would establish entry number 2.

Entering here would allow the price to travel some distance, since the first

take profit would be in the liquidity zone labeled exit number 1, and the

would be above the break of a pivot generated during the development of the

operation.

This is the management dynamic with respect to taking profits in liquidity

created by the generation of pivots.

Although it can be used in any timeframe, this management is especially

for short -term operations where rapid fluctuations can generate sudden

reversals that could take us out of the market.

This exit strategy is ideal for scalping or day trading.

Meanwhile, the type of management described here, using previous

focuses on the search for broader movements, which is why it is especially

useful in medium and long -term trading.

Position management using previous structures is based on auction theory as

key tool for setting objectives.

After an imbalance, the market will seek to find traders with the opposite bias

who are willing to trade again.

This is why the price will move to those areas where there was previously a high

volume of trading, since the same thing is expected to happen again.

We can do this by identifying old equilibrium zones.

which are nothing more than previous accumulation or distribution structures.

It is very important to stress once again the short -term mentality of the

market. The most recent trading zones generated by the market will be more

significant in terms of attracting the price attraction than the older zones.

Imagine that we are at this point on the chart, assessing whether the price is

developing a distribution pattern. If confirmed, what would be a good target

look for? At this moment in time, the most recent structure is just below so

establishing the take profit in that structure would be the best

as we can see the market went looking for it and a new sideways movement began

this is an ideal example to illustrate the concept that past structures create

certain magnetic attraction for the price as a result of the oxen theory

have already looked at

There is an implicit agreement at the aggregate level that if a structure

represented the equilibrium and fair price of the market at some past moment,

will most likely recreate this at a future moment.

Obviously, this only applies when not too much time has elapsed or the

underlying situation could change.

A common issue regarding this type of management relates to where exactly the

take profit level should be set.

Because the structure has a more or less wide range, but the take profit must be

established at a specific price level.

To do this, we can simply assume that the middle of the range represents the

maximum equilibrium, and therefore it could be the price level that we were

looking for.

It is simple logic.

If the structure represents an equilibrium zone, the point of greatest

equilibrium would in principle be its middle section.

Here, we see the market is in the middle of developing a new structure.

So what previous equilibrium zone should we take into account when the imbalance

begins, assuming we have been able to enter the market?

In this case, we now have structures above and below.

So if this turns out to be an accumulation and the price shoots up, we

establish the take profit in the distribution structure.

On the other hand, if a redistribution pattern is confirmed, we should set the

initial target at the level of the small sideways movement below.

What finally happens is that a redistribution is confirmed and the

continues with the bearish trend movement.

And indeed, we see that it manages to reach the last structure, where again

appearance of the buyers can be seen.

What a coincidence that the bearish movement stopped right there, right?

Well, no, it doesn't seem to be the result of pure chance.

The market has developed a bearish movement with a lot of momentum, and

momentum is partly due to the fact that the buyers have withdrawn from the

market. And as we explained before, if one of the forces denotes a lack of

interest, this facilitates the movement in the opposite direction, which is

exactly what happens there.

And at what point have buyers reappeared again? Well, in an old zone where there

was previously interest on the part of buyers.

So what should we expect from now on?

Well, at the present time, we don't have any more references below.

So, if a new redistribution is confirmed, we should apply one of the

that we will look at later on.

But if the price generates an accumulation pattern in that zone, the

level further up can be clearly found in the old redistribution structure.

And finally, the market confirmed the accumulation and the balance tipped to

upside with the price reaching almost to the tick the halfway point of the

previous redistribution that we could have used as a target.

This will always be the work dynamic with respect to taking profits using

previous structures.

Keep in mind that this chart could be of a longer period than your trading

period.

Sometimes, it is very useful to go up a time frame and see the general context

and to be able to identify these types of previous structures.

For example, if you trade on minute charts, trying to identify these

on the hourly chart could be helpful.

If you trade on the hourly chart, Moving up to the daily might allow you to

better identify this context.

And finally, we reach the present moment, waiting for that small pause in

market to determine whether the price moves up or down.

Our job is to have previously identified the targets that we have above and

below the current price.

At this point, we already know that since the price is coming from an

accumulation structure, we should expect the development of some type of

reaccumulation. either a simple consolidation through a minor structure

through the development of a slow structure. And if this behavior is

the upper level target should be set at the highest distribution.

If on the contrary, there is a reaction from the sellers at that point, which is

feasible since the price is currently in a previous equilibrium zone, the target

that it could easily go for would be the previous accumulation pattern.

Although it is true that it could encounter a certain reaction in the

test after the bullish breakout since, as we can see, it also generated a small

reversal. We will now look at the two behaviors that we could use to take

profits if we find ourselves in a trend context in which we don't have any

reference levels to the left on which to base our management.

We will start with the appearance of a climax.

Regardless of how the candlestick is represented, whether it is wide or

Here the key lies in the volume, which is excessively high, and tells us that

there are a lot of large traders in the market.

If the market is at a price ceiling or floor and a huge volume appears, we need

to be alert because this increases the chances of a sharp reversal.

We already know that market reversals usually require some construction of the

cause, even if it involves a fast structure at least, but this will not

be the case.

sometimes the market manages to turn sharply in a V -shaped reversal.

We can use this type of exit to avoid this particular type of behavior.

Because a potential climax pattern could reverse the entire previous trend

movement, this is reason enough to perform some kind of active position

management. Here, we have a very genuine example of this climax event.

If we have taken up a short position, are in the middle of a bearish movement,

and we see the appearance of this kind of volume, the most sensible thing would

be to automatically close the position because, as I say, the probability of a

sharp reversal being generated is high.

Remember, we have previously explained how all market reversals go through a

three -step process, which is generally observed through fast or slow patterns.

In this case, we have the entire process compressed into two candlesticks, the

bearish one, which represents the exhaustion of sellers and the absorption

sales, and the next bullish candlestick showing bullish intent that represents

the initiative of the buyers.

After the appearance of a climax event, the market, on some occasions, may not

turn precisely in that same candlestick, but it should still be taken into

account. This is especially the case if, after a few candlesticks, the market

starts to reverse, as happens in this example.

Often, This event will simply be a buying climax that will later generate a

sideways movement, which will allow us, if we are still in the market, to exit

in a more advanced position on the development of that structure. We will

this in the next point.

However, on many other occasions, the momentum will be so strong that it will

either turn the entire market around in one or two candlesticks, as we saw in

the previous example, or it will not leave us with a clear later exit, as in

this example.

which could result in losing a certain percentage of profits in the trade.

For this reason, one type of management we should consider when we find

ourselves at the edges of the range is to wait to see the appearance of ultra

-high volume.

Here we have another example of a climax event, but as you can see, it is not a

candlestick with a wide range and a closing price at the highs, as a buying

climax is theoretically supposed to be represented.

This is another type of behavior that the VSA methodology labels the end of a

rising market, or the end of the uptrend, and the differentiating element

that the range of the candlestick is not excessively wide, it is quite narrow,

but it still generates climatic volume.

On this occasion, the market did develop a subsequent distribution structure

before falling.

However, there is no doubt that using this particular action to exit a long

position would have been a wise move.

Finally, the second position management strategy for use in a trend context in

which we have no reference level to the left would be to wait for the

development of a complete structure.

Within this type of management, we are going to differentiate two subtypes

depending on the degree of development of the structure, whether we are in a

Phase A or in a potential Phase C.

It is important to note that the new structure should develop in the same

frame in which we identified the previous structure, which gave us our

point. It would also be interesting to assess other elements to make a better

decision, such as analyzing how far the trend has traveled to see if it may

already be in an overextended and exhausted position.

The more trend movement there is, the more likely the future structure is to

a reversal rather than a continuation.

Continuing with the previous example, if you have decided not to carry out any

type of management after the appearance of the climax, perhaps you could

consider doing so after the confirmation of Phase A, which stops the previous

trend.

After the development of Phase A, we know that the market will probably move

from a trend to a sideways environment, and that in this sideways market the

cause of the subsequent movement will be constructed.

This subsequent trend may start again in the same direction, but we cannot know

this at that time.

For this reason, at that point the most sensible thing to do would be to carry

out some type of management.

But if you still don't intend to do so after confirmation of the change of

character, the appearance of the potential Phase C test event, which in

example is a possible upthrust, should be the definitive signal to abandon the

position entirely.

After seeing this, it makes no sense to hold on to the position any longer.

Could the market reverse later and end up as a reaccumulation?

Yes, of course, anything is possible.

But at that point, we already have two major signals that indicate underlying

weakness, climatic action and the potential upthrust.

We know which context and roadmap would be triggered, so it doesn't make any

sense to hold a position in the opposite direction.

There is no point losing a percentage of the amount traded.

in the simple hope that the price might continue in the direction of the

previous trend.

If there really are interests in pushing it back in the direction, we can look

always for a new trading opportunity during the subsequent development of

new structure.

That is the mindset we need.

As I have said before, protecting capital is more important than adding

profit. And once you are very clear about this, you won't hesitate to adopt

most conservative strategy.