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Trading at internal false breakouts.

By internal false breakouts, we mean those that take place within the limits

the range, not the spring or upthrust that occur at the very limits of the

structure. When these types of false breakouts occur within the range, we

generally call them a minor spring or upthrust.

As I have already commented on many occasions, I believe the false breakout

the most important event that takes place in the market and that it

trading opportunity in itself.

You can go to any chart for any asset and in any time frame and you will see

that almost every impulse movement is generated by a prior false breakout.

This is why I always recommend you focus on looking for this type of action.

In this part of the course, we are going to look in more detail at internal

false breakouts, the minor springs and upthrusts that occur during the

development of structures from two points of view.

First, We will see what conditions we should expect when executing trades at

these points to ensure a certain chance of success.

And secondly, we will see how to trade the internal false shakeout that acts as

the Phase C test event.

Let's look at the first case, our trading approach to minor false

during the development of the range, provided we have not potentially seen

genuine spring or upthrust.

As we have previously commented, in a sideways environment where the market is

zigzagging up and down, We are in a neutral context which allows us to trade

the limits, looking for bearish false breakouts at the lows and bullish ones

the highs in the expectation that the price will reverse and go back into the

range. It is a riskier type of trading as the structure is still developing,

cause is being built, and the balance of the market could be tipped in one

direction or the other at any time.

Our advantage is that we want to trade the most decisive behavior of the

the false breakout.

So my recommendation here is to wait for the market to confirm that the context

really is neutral.

How do we do this?

We wait for the appearance of the first change of character that causes the

market to move from a trend state to a sideways one.

In terms of the Wyckoff method, we see this with the appearance of Phase A,

stopping the previous trend.

This change of context will be the sign that we must wait for before considering

the option of trading at the range limits buying at the bottom and selling

the top.

Wherein lies the logic behind this type of trading?

We have already discussed it on other occasions, but it is so important that

is worth repeating.

At this very incipient moment of the structure, the valuations of the agents

will be very similar and this will generate the price shift.

Value and price will converge, generating opportunities at the limits

range, as the levels are seen as too expensive or too cheap.

This will lead to the appearance of traders interested in pushing the price

the opposite direction, offering an edge to the trader who knows to identify it.

At that point, we can draw supply and demand zones at the upper and lower

and that is where we will expect the price to develop some type of false

breakout, either complete or minor.

The combination of being in the trading zone where we expect an imbalance in

supply and demand to occur and the emergence of a false breakout that takes

price to some relevant previous high or low is key here.

We already know that we can use the rationale behind pivots to identify

turning points, although it is always better if this is something visual and

forced, since this will mean that it is very evident that we are seeing a clear

reversal in the market.

In this example, we see different opportunities at both edges.

Classic range trading.

where we look for bearish false breakouts on the bottom and bullish

breakouts in the upper limits, waiting for a return to the fair value or price.

How long can we implement this trading at the edges? We already know, until the

definitive false breakout appears that is likely to generate the start of the

imbalance of the structure.

At this point, with the development of the second change of character, the

roadmap only allows us to look for trades in this direction.

For this example, we would only look for bullish false breakouts or upthrusts

and discard any bullish opportunity that might present itself.

Therefore, the conclusions are, firstly, the appearance of the false breakout to

a previous high or low in the supply and demand zone, and secondly, to be clear

that we are only going to look for potential opportunities from the end of

A, which stops the trend up until the appearance of the Phase C test event.

Now we are going to address the second concept regarding internal false

breakouts, which is how to trade these minor false breakouts when they appear

the phase C test event.

That is, when they appear and generate the final imbalance of the structure and

start the effect of the cause.

Since you are Wyckoff traders with some experience, you already know that I am

referring to the general pattern number 2 of the methodology, where the

structure appears without a spring or upthrust.

This chart shows a clear example of accumulation structure number 2 without

total false breakout.

We can see how a minor spring takes place, hitting a previous relevant low

within the range, but it does not reach the low of the structure, and that from

there the market reverses upwards and continues out of the range.

In these patterns, where the total false breakout doesn't appear at the edges of

the structure, How can we know that the minor false breakout that we are

observing is really the LPS in Phase C that will generate the subsequent

imbalance?

Obviously, we can't for sure.

It is impossible to know in real time.

There may be some sign that suggests that it could be. For example, if the

structure is already quite mature and has already consumed a lot of time. But

even so, we will always doubt whether we are really dealing with the LPS or if,

on the contrary, the real spring or up thrust is going to happen subsequently.

This is the typical example that doesn't offer us any opportunity and it can be

somewhat frustrating, especially if you have been trying to find an opportunity

throughout the whole session.

You need to be very aware of this.

There will be days when you will be in front of the screen for hours without

identifying any opportunity.

This is normal and you should accept it as par for the course.

Let's now analyze the following situation, similar to the previous

Suppose we are in the middle of seeing a potential accumulation structure

develop, and the price behaves in a way that suggests we could be looking at a

minor spring based on the LPS, which could lead to the subsequent bullish

imbalance.

Note that there is a double false breakout.

The price has reached two liquidity zones established in those two pivots

the range, so if possible, This confers even greater strength to the potential

scenario.

And to add even greater strength, the last bullish candlestick certainly

a major bullish intent.

It is what we call an SOS bar.

What do we do?

Do we buy?

Well, what eventually happened on this occasion was that the market plunged

below the total lows of the structure before generating from there the effect

imbalance and launching the price upwards, confirming the accumulation

My conclusion regarding alternative structures where the total false

does not appear is that we will always be wondering whether the market will hit

that low further down to reach the total edge of the structure and that,

therefore, it would hit our stop loss if we entered.

This is quite worrying for the Wyckoff trader, which makes me very wary of this

type of behavior.

For this reason, my direct recommendation on many occasions is not

type of structure, which does not appear to have a total false breakout.

There are always opportunities in the market, and I particularly prefer to

risk by avoiding trading here.

We may find ourselves before other types of situations where I believe trading

an internal false shakeout offers a better chance of success.

This would be the case after seeing a false breakout at the very limit of the

range, in other words, after having seen a spring.

Since we know that the roadmap puts us in a position to expect an upward

movement, it would be a good time to look for some type of internal false

breakout during the development of said movement.

In many cases, this will not happen due to the momentum that the market is

carrying, and it will simply quickly move all the way through the structure

the opposite end, as in this example.

However, on other occasions, we will observe this behavior, especially if we

make use of multiple time frames and go down to a shorter one.

Remember to make use of the logic behind the creation of pivots to correctly

identify this.

This type of entry, after having seen the spring and the sign of strength,

offers us a high probability of success since we are entering in the direction

of the most immediate imbalance.

Structural Failure Before we go any further, let's address the concept that

actually lies behind the behavior of the total false breakout pattern, the

structural failure.

Be very careful.

because the fact that the market has not had enough capacity to reach the total

lows of the structure in itself is a signal that denotes strength.

The agents that are trading in that market have not even allowed the price

down to those lower levels before them buying more aggressively.

This somehow tells us that they have found those prices to be cheap enough to

start buying without expecting lower prices.

This is very interesting.

From a trading approach, we would love to see a total false breakout.

because of the implications it has and because it is very convenient for us not

to have to think about whether that intermediate false breakout will be the

potential phase c test event that will unbalance the structure but a structural

failure like this also has very powerful implications as i have just mentioned

sometimes i say that what the market manages to do is just as important as

it fails to do and generally what the market fails to do tends to go unnoticed

by the inexperienced trader.

What the market manages to do is important and evident.

This information is available to everyone.

But what it fails to do, such as in this example, is also very important in its

analysis and very few are able to decipher it.

In this case, the market has not made it all the way down to visit the bottom of

the structure, and this, by definition, is a strong signal that we should watch

out for.

In this example, A structural failure of strength can be observed, but it

applies equally to distribution patterns in which the price does not develop a

total upthrust over the highs of the structure, which would imply a

failure of weakness by not being able to reach said highs.

Does everything previously discussed mean, then, that we cannot take

of the alternative pattern? Of course not.

We probably won't be able to take advantage of that minor false breakout

will occur at some low inside the structure.

but this is not the only trading zone.

If the market does eventually leave the structure, without having performed a

false breakout at the very edge of the structure, we can still take advantage

this situation.

Let's look at this example.

I purposely use examples that are difficult to recognize, whose price

not very genuine, so that you have to force your minds to look for this type

rare structure.

In real trading, this is what you will often see in the market.

I have already said several times that you should forget about looking for

genuine structures because the behavior of the market in general is very

erratic. Let's imagine that the price is breaking through the highs of the

structure and that up to that point we have not yet seen a spring that has

destroyed the lows of the structure.

We will always have the doubt as to whether the market is really breaking

before continuing in that direction or if it is a potential bullish false

breakout. At that point, we must ask ourselves, what inputs do we have in

of one side or the other?

If we want to buy, what signals do we have in favor of the buyers?

Looking at the chart at this point, we could already observe at least the

following.

Reduction in volume during range development, which we already know is a

characteristic feature of accumulation patterns.

Structural failure, hidden and high -quality information that signals to us

there is underlying strength.

The minor false breakout inside the range, which plunges through a

intermediate liquidity zone.

The bullish breakout with good demand candlesticks, denoting the presence and

aggressiveness of the buyers.

And the non -reentry into the range, evidenced by that sideways movement

the high of the structure.

Well, in the end, it seems that we do have enough signs to start assessing a

possible purchase opportunity, right?

And finally, On top of the five aforementioned signs, an entry trigger

in the trading zone, another input that should have led us to assess the

possibility of entering the market, since at that point there are several

indicating a bullish scenario.

Once out of the range, several more opportunities to re -enter appeared

the development of the uptrend.

As we can see, the fact that we cannot initially see a total false breakout at

the edges of the range does not mean that we should discard the asset.

We should keep monitoring it, because the methodology offers us more possible

entries on top of that one. We just need to be clear about the context and what

we expect the market to do.