Original subtitles

Let us now discuss how we can use the information provided by the volume

to locate the stop loss.

To set the stop loss, we want to identify areas where there has been a

rejection, and these are the low volume nodes.

The price generated a reversal on them, and we expect them to behave in the same

way in the future.

Therefore, it is an excellent area to place our stop protection.

The exact location of the stop should be at a level that coincides with the end

of the low volume node and the beginning of the high volume node.

Since the low volume node is a zone, the price can generate the final inflection

point at any of the levels that make up the zone.

That is why the most precise location of the stop loss should be at the end of

the low volume node.

This will give us some room for the price to turn around before reaching our

stop.

This chart example shows this very well.

If we had entered this rejection on the LVN, the stop loss would have been

placed approximately at the marked position, at the end of the low volume

and at the beginning of the high volume node.

We will now work with the examples we saw earlier.

In this case, we identify the low volume node and the stop loss would be placed

at the point where it is marked, just at the end of it and at the beginning of

the high volume node, as we have seen.

We have always been told that the stop loss is on the other side of the

inflection points that mark potential supports and resistances.

But we have never been told exactly where and why.

And the reason is this. The exact level where it should be placed is at the

point where the end of a low -volume node and the beginning of a high -volume

node zone coincide, so that the price has enough margin to generate a

at any of the levels that make up the low -volume node before moving in our

direction.

Here, we have another example.

The price generates the rejection at the low volume node and offers us the entry

trigger. If we had taken the opportunity to buy, the stop loss would have been

placed below the price and exactly at the level where the beginning and the

of the high and low volume nodes coincide.

And finally, in this other example, the situation is the same.

Short entry on a low trading zone and set the stop loss at the end of this

As in this case, if the low volume knot is relatively narrow, the stop loss will

be closer to the end of the price. However, the concept will always be the

regardless of the size of the knot.

It should also be noted that in addition to the low volume nodes, the more

trading levels we have in favor, the better.

There will be times when there is no clear low volume node on which to place

stop loss.

For these special cases, it is especially useful to use the rest of the

levels. One point to note is that in order to place the stop loss, we should

take into account the BPOC due to its own nature and implications, which we

discuss again.

In this example of trading on the value area high of the profile, if we look

closely, all this area is part of a large node of low volume, so a correct

location of the stop loss would have been at the point where the nodes

which would also be below the value area high, as it is logical.

I mentioned earlier that the VPOC should not be used for setting stop losses.

The reason is that this level suggests balance and is part of a high -volume

node, and this means that the price is likely to visit this area.

The concept is clear. The stop loss should be placed in areas where the

has previously generated a rejection, not in areas where it has generated an

acceptance.

Therefore, in this example, if we also wanted to place the stop loss below the

VPOC, the ideal location would be the one shown below, which would be anchored

at the end of this low volume node.

And as we can see, this would be a location too far away from the entry, so

should be discarded.

This will not always be the case. At other times, the best location, due to

proximity of the price to the trading levels, will be at some low volume node

below the VPOC.

The key is that we select the most favorable location while maintaining the

logic of these principles.

In this other example, we have an entry where the price is trading above the

VPOC and generates a rejection at the low volume node.

We would identify the end of this low volume node and place the stop loss

This should be the most conservative position.

As we can see, this node is quite wide, so the stop loss would be relatively far

away. We should evaluate whether this distance is sufficient for our position

management. We could decide to shorten it and place the stop closer.

but this would increase the risk of being hit.

Finally, here is another example of where the entry occurs in a confluence

of the VPOC and the weekly VWAP.

We identify the nodes at the bottom and place the stop loss at their limits.

As mentioned before, this type of entry has a high probability due to the

confluence of levels.