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Trading zones at the extremes of
dynamics.

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In addition to the previously seen
trading zones, where the price is in the

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clear range context, or during the early
stage of the trend, we are going to

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address another potential trading zone
that we can identify if we draw the

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properly.

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We have already looked at the most
efficient way to carry out this task.

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We can do it either manually by applying
logic, allowing for some flexibility

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and based on the principle that the
lines should contain most of the price

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action. And we can also do it using the
regression channel, a completely

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objective method that allows us to
quickly adapt to market changes.

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Let's look a little at the rationale
behind this idea.

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In short, it is about identifying the
prevailing market dynamic to assign

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overbought and oversold areas in its
structure and use them as zones in which

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look for potential trades.

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Initially, if you are an inexperienced
trader, these trades should only be in

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the direction of said movement.

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and any reverse trend trading should
only be attempted by those with more

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experience. We have already seen that
one of the advantages of correctly

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the lines is that it alerts us to the
moment in which said dynamic has been

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broken, which should signal an imminent
reversal in the price.

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We already know that an essential
condition before considering a trading

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approach on the opposite side is to wait
for a break in the latest short -term

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dynamic. Well, Another of the major
advantages of drawing lines efficiently

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that it provides us with zones that
might offer us good opportunities to

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and exit the market.

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Now, say you have identified a bullish
channel, and regardless of whether you

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want to buy or sell, what are the best
locations to try to trade in?

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There is no doubt that the ideal thing
to do is wait for the price at the

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extremes.

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If we have already determined that the
control is bullish, we will only want to

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buy. and we can use the visits of the
price to the lower zone of the channel,

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the demand zone, to look for some type
of behavior that suggests that a turn in

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the market is probable, such as a
reversal of the movement, a fast

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even the development of the complete
structure of the Wyckoff method.

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Since we do not know if the dynamic
might change at any time, or when an

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acceleration or deceleration of the
price, or an excess of greater or lesser

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depth might be generated, We are going
to try to limit the influence of this

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uncertainty first by waiting for the
price in the lower third of the

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and second by waiting for the appearance
of the behavior we are looking for as

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an entry trigger.

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Let's now look in detail at what happens
in that part of the chart and how we

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can apply these ideas to our trading
approach.

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This part corresponds to the box that we
just saw in the previous slide.

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This is a perfect example because it
combines the two main concepts regarding

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the efficient drawing of lines.

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On the one hand, we have been able to
identify the prevailing long -term

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dynamic, which we have already seen as
bullish, which therefore determines the

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trading approach towards the long side.
And on the other hand, we see that the

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market, in the short term, is following
a bearish dynamic.

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suggesting that it would be best to wait
for the real breakout of said dynamic

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before evaluating the short position we
are looking for.

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We have already seen that the same idea
can be approached from different

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perspectives and in different trading
positions.

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A lot of this will depend on your
profile as a trader and the level of

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are prepared to assume with your
entries.

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In this particular example, the more
aggressive trader would wait for a false

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breakout to take place just below the
two demand lines.

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the main trend line and the line which
applies to the shorter -term context.

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Meanwhile, a more conservative trader
would also wait for the breakout of this

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short -term dynamic as a definitive sign
that it is highly probable that the

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market will resume the upward trend from
that point.

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This short -term dynamic has been
outlined through the use of a regression

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channel, which, as we already know, is
anchored between the high and the low of

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all the behavior.

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In this example, we have seen the two
main benefits of efficient line drawing.

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and this could also be combined with the
use of multiple timeframes.

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If we determine that we are in an
interesting trading zone based on the

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-term context, it might be time, if the
trader so decides, to move to a shorter

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timeframe in order to identify a shift
in the market, such as a reversal

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movement, a fast pattern, or a slow
pattern.

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Looking at the chart with a longer
timeframe, we would be located in an

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interesting area for this reversal to
take place, waiting for a movement to

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opposite extreme.

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An efficient use of the context would be
to move down to a shorter time frame to

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try to trade in that reversal behavior
that will generate the shift upwards.

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As you can see, lines by themselves
offer little in the way of predictive

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However, used together with other tools,
they can be very useful from a trading

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perspective.

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We are now going to look at a series of
step -by -step examples on how we should

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interpret things at the present moment.

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We have launched a regression channel
from the lowest low to the highest price

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level. which leaves us with these supply
and demand lines.

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They are not projected into the future,
but we can guess at what moment the

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overbought and oversold zones of this
dynamic would be reached.

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What we are going to do, therefore, is
wait for this to happen, for the market

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to reach our demand trading zone, and
then we will begin to look for our entry

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trigger. And here is exactly what we are
looking for, on the trading zone with a

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shakeout at the level of liquidity that
had been previously generated with that

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pivot. If everything is aligned, there
is no reason not to take the trading

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opportunity to buy.

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If you look carefully after breaking the
low of the pivot, the price has an

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initial bullish reaction but then
develops a new bearish candlestick. We

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talk about this later, in the section on
trading approaches, but that bullish

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candlestick would not act as an entry
trigger since it closes at the middle of

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the last large bearish candle and also
has a wick at the top, denoting an entry

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to sell.

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On the other hand, In the last action,
we see the appearance of an SOS bar that

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closes at the top of the last SOW bar
and therefore could serve as an entry

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trigger to go long.

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We would then wait for the market to hit
a new high to restructure the

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regression channel. And from there, the
reasoning would be the same. Wait at the

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demand zone and see how the price
interacts when it reaches it.

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On this occasion, after the last high,
the price then develops three false

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breakouts. which in principle could be
seen as possible entry points.

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The first one is technically a false
breakout, as it objectively meets the

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criteria of the two candlesticks that we
need for a pivot to be generated, on

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the left and on the right.

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Moreover, the bullish candlestick that
follows denotes a good presence of

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buyers, so while it is certainly not a
visually appealing pivot, the trade

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have been taken and it would have
resulted in a loss.

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To try to avoid this type of situation,
we can add a filter that will stop us

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from taking into account these types of
pivots that are certainly difficult to

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see and do not fill us with confidence.

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The second false breakout has the same
characteristics as the first, and again

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strong demand candlestick appears.

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As we will see later, I always recommend
the use of stop -type orders to enter

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the market, an order that in this case
would be located above the bullish

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candlestick, and that fortunately I
would have not taken, as I had entered

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would have meant a new loss.

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Finally, the third false breakout once
again meets our criteria, both regarding

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the pivot and the SOS bar.

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This so, added to the fact that we are
still in the trading zone, means we

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should take this opportunity to enter.

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In this case, it would have gone well
and we would have made a profit.

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These three entries, as you may have
guessed, would correspond to a more

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aggressive trader profile since they do
not wait for the latest prevailing

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market dynamic to change.

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What would have happened had we adopted
a more conservative profile?

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Well, we still would have had our chance
to enter the market at that false

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breakout, and we would have been
successful. A sniper approach to

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Just one shot.

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This is why we need to first decide what
kind of trader we are and what kind of

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trading we feel most comfortable with.

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We could adopt both forms of trading by
carrying out an appropriate risk

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management, but we will also address
this later.

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Again, once the upward trend movement
has restarted, we would readapt the

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regression channel towards the new
highs, reaching that present moment in

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the market revisits the previously
identified demand zone.

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If we look closely, we could even be
seeing a small structure where a new

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is being built.

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The market seems overextended, that is,
it seems to have already traveled a

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certain distance upwards, so we could be
facing a possible end of the movement.

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The key here, if you remember, is to
analyze the power of this structure with

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respect to the accumulation structure
that generated all this bullish effect.

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Since this would be off the slide, I
have added it in the box.

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As we can see, the structure that gave
rise to the bullish trend is quite a bit

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larger, which suggests that a
considerable cause has been built. This

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should rule out the possibility of this
small structure exerting any effect and

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reversing the market.

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Therefore, with this basic premise Our
position at this point should be to

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continue to expect the development of a
reaccumulation structure rather than a

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distribution. What does this mean?

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Well, as in this particular example,
even though we have seen an upthrust in

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this minor structure, we should continue
to expect the possibility of a spring

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being developed in favor of the context,
and if so, depending on this anatomy,

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we should consider entering the market
to buy.

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And indeed, We then see a new bearish
false breakout at the trading zone that

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ultimately shows the structure to be a
reaccumulation.

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Remember that the market loves to give
off false signals, so it is vital that

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understand the prevailing context.

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Of course, it won't always be this way.

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Sometimes this same behavior will cause
the entire market to reverse and

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generate a bearish trend, but this
wouldn't be the norm.

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Our advantage lies in expecting the
price move in line with the overall

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of the market up to that point in time.

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And, as happened previously, another new
false breakout then occurs that can be

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used by those more conservative traders
who have waited for the break from this

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last dynamic and have wanted to enter
once the sentiment of this minor

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has been confirmed.

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And there is still one more opportunity
at that confluence of the false breakout

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with the trading zone.

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Without a doubt, these are simple but
very powerful ideas that can give us an

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advantage when trading.