1 00:00:00,170 --> 00:00:05,630 Valid Liquidity Zones As we saw previously, liquidity zones are 2 00:00:05,630 --> 00:00:09,810 on pivot points, which are simply price formations where an imbalance between 3 00:00:09,810 --> 00:00:12,990 supply and demand occurs that causes a reversal in the price. 4 00:00:13,630 --> 00:00:17,310 Technically, these pivots are used as zones where different orders pending 5 00:00:17,310 --> 00:00:22,170 execution are located based on different rationale, setting a stop loss, take 6 00:00:22,170 --> 00:00:26,370 profits, entry orders for breakout strategies, entry orders for reversal 7 00:00:26,370 --> 00:00:27,450 strategies, etc. 8 00:00:28,270 --> 00:00:32,950 The only objective fact is that all this liquidity, taken together, offers a 9 00:00:32,950 --> 00:00:36,650 useful trading zone, especially when we bear in mind that practically every 10 00:00:36,650 --> 00:00:39,430 impulse movement originates from a search for liquidity. 11 00:00:40,110 --> 00:00:44,010 We will use these both to find our entry trigger and to take profits. 12 00:00:44,250 --> 00:00:48,290 The key now is to determine which of these pivots we should take as valid for 13 00:00:48,290 --> 00:00:51,230 our trading approach in terms of our market entry, not exit. 14 00:00:51,890 --> 00:00:55,730 The general rule is that we will take as valid the pivots that are generated 15 00:00:56,190 --> 00:00:59,310 most immediately and naturally during the course of the current trend. 16 00:00:59,710 --> 00:01:04,150 We may also take into account some other more distant pivots as long as they are 17 00:01:04,150 --> 00:01:07,990 aligned with the current context, although these will offer us less 18 00:01:08,590 --> 00:01:11,130 This image represents the concept very well. 19 00:01:11,370 --> 00:01:15,550 The key is to identify the current market trend and only look for those 20 00:01:15,550 --> 00:01:16,990 that are aligned with this trend. 21 00:01:17,510 --> 00:01:20,790 In this example, we see two clearly established trends. 22 00:01:21,090 --> 00:01:24,430 On the left, an uptrend and on the right, a downtrend. 23 00:01:24,840 --> 00:01:28,400 We have already seen how pivots in favor of a trend are generated and how we 24 00:01:28,400 --> 00:01:30,820 should take advantage of this. But up to what point? 25 00:01:31,340 --> 00:01:36,700 Well, until the market dynamic changes, when a new cause is being generated and 26 00:01:36,700 --> 00:01:38,400 its effect is starting to develop. 27 00:01:38,960 --> 00:01:43,040 Those trading zones that correspond to the previous trend should not be taken 28 00:01:43,040 --> 00:01:45,320 into account when searching for the market entry trigger. 29 00:01:46,000 --> 00:01:50,860 In other words, if we are in a downtrend, we cannot look for bullish 30 00:01:50,860 --> 00:01:51,880 other previous trends. 31 00:01:52,240 --> 00:01:56,620 And if we are in an uptrend, we cannot take into account bearish pivots that 32 00:01:56,620 --> 00:01:57,980 were generated at other times. 33 00:01:58,480 --> 00:02:03,260 In this example, once the market tops out, it develops a short distribution 34 00:02:03,260 --> 00:02:05,320 pattern and begins to fall. 35 00:02:05,720 --> 00:02:09,780 Right at the point when the bullish dynamic is broken, we should stop 36 00:02:09,780 --> 00:02:13,620 for pivots in favor of the upward movement and start looking for a short 37 00:02:13,620 --> 00:02:17,680 position in pivots that can provide us with bullish false breakouts or 38 00:02:18,470 --> 00:02:22,590 I have marked precisely those pivots that should not be taken into account 39 00:02:22,590 --> 00:02:24,090 they are not valid in orange. 40 00:02:24,670 --> 00:02:28,410 If the context at the moment is bearish, we have already seen the distribution 41 00:02:28,410 --> 00:02:30,570 and we are in the middle of the bearish trend movement. 42 00:02:31,010 --> 00:02:34,690 Using a pivot that belongs to a previous bullish trend is a mistake. 43 00:02:35,010 --> 00:02:36,010 But careful. 44 00:02:36,270 --> 00:02:40,590 Let's say that these are not valid to identify potential trades in favor of 45 00:02:40,590 --> 00:02:45,430 direction. In other words, They are basically invalid because the context 46 00:02:45,430 --> 00:02:48,330 changed and we should no longer be looking for trades in that line. 47 00:02:48,950 --> 00:02:52,690 However, they could be taken into consideration when taking profits, for 48 00:02:52,690 --> 00:02:56,430 example, depending on the time that has elapsed since their creation. 49 00:02:57,070 --> 00:03:00,650 We will address this later in the trading approach and management section. 50 00:03:01,310 --> 00:03:05,590 This is how we FID trade once a market reversal has occurred, with no prior 51 00:03:05,590 --> 00:03:09,810 reference to the left as far as past trend pivots in which to look for 52 00:03:09,810 --> 00:03:10,810 are concerned. 53 00:03:10,950 --> 00:03:11,950 But take care. 54 00:03:12,440 --> 00:03:15,980 What happens with the pivots at the lows that have been generated during that 55 00:03:15,980 --> 00:03:16,980 downtrend movement? 56 00:03:17,100 --> 00:03:18,100 Are they valid? 57 00:03:18,300 --> 00:03:22,960 In this case, yes, those pivots are valid, because they belong to the 58 00:03:22,960 --> 00:03:26,620 trend. They have been formed during the development of the bearish movement. 59 00:03:27,360 --> 00:03:31,140 The question here is not whether they are valid or not, but whether they 60 00:03:31,140 --> 00:03:35,420 be taken into account, since these pivots would be used to look for 61 00:03:35,420 --> 00:03:36,420 buying opportunities. 62 00:03:36,920 --> 00:03:40,020 But would you want to buy in a context that is clearly bearish? 63 00:03:40,490 --> 00:03:42,210 That is the key question here. 64 00:03:42,450 --> 00:03:46,850 Personally, I wouldn't. I don't feel confident entering on the opposite side 65 00:03:46,850 --> 00:03:47,429 the market. 66 00:03:47,430 --> 00:03:51,570 But from the point of view of the concept that we are explaining, these 67 00:03:51,570 --> 00:03:52,890 be considered valid pivots. 68 00:03:53,790 --> 00:03:57,630 Imagine that the market continues to develop and break that bearish momentum, 69 00:03:57,870 --> 00:03:59,050 starting a new uptrend. 70 00:03:59,410 --> 00:04:02,690 We would be in the same situation as before, but in reverse. 71 00:04:03,210 --> 00:04:06,830 At that point, these pivots that belonged to the previous bearish 72 00:04:06,830 --> 00:04:08,530 should not be taken as valid. 73 00:04:09,050 --> 00:04:13,670 The only use we could make of such past pivots is to place our take profits on 74 00:04:13,670 --> 00:04:16,850 them, if not too much time has elapsed since their creation. 75 00:04:17,589 --> 00:04:21,990 The logic behind this is that the closer the pivot is to the present moment, the 76 00:04:21,990 --> 00:04:25,610 more interest it will represent and therefore the more liquidity there is 77 00:04:25,610 --> 00:04:27,190 to be located at its edge. 78 00:04:27,510 --> 00:04:31,030 Also, liquidity moves naturally as the market itself moves. 79 00:04:31,350 --> 00:04:35,670 Therefore, we should work under the hypothesis that the oldest areas are 80 00:04:35,670 --> 00:04:40,680 relevant. For this reason, With the passage of time and the distance 81 00:04:40,680 --> 00:04:45,240 the price, it is most likely that in those old pivots there is no longer that 82 00:04:45,240 --> 00:04:49,360 liquidity that we are looking for that would act as a counterparty to push the 83 00:04:49,360 --> 00:04:50,600 market in the opposite direction. 84 00:04:51,520 --> 00:04:55,780 As we will see later in the position management section, but the pivots that 85 00:04:55,780 --> 00:04:59,500 can see on the left can act as a reference for taking profits if they are 86 00:04:59,500 --> 00:05:00,500 too far away. 87 00:05:00,780 --> 00:05:05,040 That said, in no case should they be taken into account when looking for an 88 00:05:05,040 --> 00:05:06,620 opportunity to enter the market.