1
00:00:00,170 --> 00:00:01,770
The importance of context.

2
00:00:02,370 --> 00:00:05,130
The false breakout is the most important
trading event.

3
00:00:05,330 --> 00:00:06,570
But what is more important?

4
00:00:06,810 --> 00:00:09,510
The false breakout itself or where it
occurs?

5
00:00:10,090 --> 00:00:14,250
What should we prioritize? The most
recent action that happens in the market

6
00:00:14,250 --> 00:00:17,190
we saw in the previous section or the
general context?

7
00:00:17,950 --> 00:00:22,770
In this case, the false breakout would
be the tree while the context would be

8
00:00:22,770 --> 00:00:23,529
the forest.

9
00:00:23,530 --> 00:00:27,470
So the answer is clear. We must always
prioritize the context.

10
00:00:28,200 --> 00:00:30,880
This is one of the main advantages of
the Wyckoff method.

11
00:00:31,400 --> 00:00:35,960
In this section, we will see that we
shouldn't necessarily trade at every

12
00:00:35,960 --> 00:00:40,820
breakout, and we will develop the idea
that the general context is always more

13
00:00:40,820 --> 00:00:43,320
important than a particular false
breakout action.

14
00:00:43,760 --> 00:00:47,700
Let's imagine we are facing the possible
development of a distribution pattern,

15
00:00:47,920 --> 00:00:49,200
like the one in the example.

16
00:00:49,600 --> 00:00:52,420
If we look closely, it's practically
textbook.

17
00:00:52,740 --> 00:00:56,660
It's behaving in exactly the way we
would expect of a distribution

18
00:00:57,320 --> 00:01:02,700
high and constant volume during its
development and with unusual volume

19
00:01:02,700 --> 00:01:07,140
powerful false breakout on top, and a
good subsequent show of bearish intent.

20
00:01:07,620 --> 00:01:12,600
As we already know, the roadmap we are
expecting after seeing the upthrust and

21
00:01:12,600 --> 00:01:16,600
the first signs of the weakness is a
movement that takes the price at least

22
00:01:16,600 --> 00:01:17,660
the bottom of the structure.

23
00:01:18,080 --> 00:01:22,620
And it almost develops it. But before
reaching the low, it leaves us with the

24
00:01:22,620 --> 00:01:24,200
following, a potential spring.

25
00:01:24,660 --> 00:01:26,700
What do we do now? Do we buy?

26
00:01:27,320 --> 00:01:32,000
As you may remember, we previously
commented that we must always prioritize

27
00:01:32,000 --> 00:01:34,920
directional bias indicated by the most
recent action.

28
00:01:35,340 --> 00:01:39,520
So for this example, and based on that
assumption, we should expect the

29
00:01:39,520 --> 00:01:43,260
development of a bearish false breakout
and wait for the subsequent bullish

30
00:01:43,260 --> 00:01:44,260
movement, right?

31
00:01:44,320 --> 00:01:45,320
Well, no.

32
00:01:45,440 --> 00:01:50,000
Because the context is the most
important thing, and the location where

33
00:01:50,000 --> 00:01:53,860
potential spring is being developed will
determine the final interpretation of

34
00:01:53,860 --> 00:01:54,860
the current market sentiment.

35
00:01:55,420 --> 00:01:59,590
And again, The general context suggests
that we might be looking at the

36
00:01:59,590 --> 00:02:01,230
development of a distribution structure.

37
00:02:01,610 --> 00:02:05,950
So, we should only be looking for
potential trades that are aligned with a

38
00:02:05,950 --> 00:02:10,009
bearish sentiment, that is, taking up
short positions, not long ones.

39
00:02:10,370 --> 00:02:14,310
If the false breakout had appeared at an
earlier stage in the development of the

40
00:02:14,310 --> 00:02:18,410
structure, we could have taken this into
account even as an opportunity to buy,

41
00:02:18,610 --> 00:02:21,390
as we can see in those examples I have
marked.

42
00:02:21,650 --> 00:02:24,850
All these examples could have been
viewed as possible opportunities.

43
00:02:25,450 --> 00:02:29,530
since when they occurred, there had, at
no time previously, been a false

44
00:02:29,530 --> 00:02:33,410
breakout of the total limits of the
structure, which would have alerted us

45
00:02:33,410 --> 00:02:37,230
the possibility that we were entering
Phase C and that the market was being

46
00:02:37,230 --> 00:02:39,410
tipped in favor of one side or the
other.

47
00:02:39,690 --> 00:02:42,590
Which is exactly what happens when the
upthrust appears.

48
00:02:42,850 --> 00:02:47,550
The sentiment ends up being confirmed in
favor of the short side, and from that

49
00:02:47,550 --> 00:02:50,930
point on, we should only think about
looking for entry points to sell.

50
00:02:51,990 --> 00:02:53,630
Exactly what we had right there.

51
00:02:54,110 --> 00:02:56,110
An opportunity aligned with the context.

52
00:02:56,370 --> 00:02:59,650
A minor upthrust in line with the major
bearish context.

53
00:03:00,170 --> 00:03:04,410
This is exactly what we should be
looking for. And when the time comes, we

54
00:03:04,410 --> 00:03:05,410
should not hesitate.

55
00:03:05,850 --> 00:03:09,570
Therefore, the appearance of a bearish
false breakout in the middle of such a

56
00:03:09,570 --> 00:03:12,990
movement should in principle be treated
as a false signal and ignored.

57
00:03:13,410 --> 00:03:15,910
And why should it be so regardless of
context?

58
00:03:16,510 --> 00:03:18,730
Isn't it a false breakout just like the
others?

59
00:03:19,030 --> 00:03:22,330
Well, regardless of the context, which
is no small thing.

60
00:03:22,720 --> 00:03:26,500
Since the implications of false
breakouts at the extremes are more

61
00:03:26,500 --> 00:03:30,700
any other, as they are based on the
principle of the counterparty, we will

62
00:03:30,700 --> 00:03:34,580
always expect there to be more liquidity
located at the extremes which are

63
00:03:34,580 --> 00:03:39,360
considered strong supports and
resistances, over and above any

64
00:03:39,360 --> 00:03:41,640
may exist at any other lower trading
level.

65
00:03:42,300 --> 00:03:46,280
This is why the context is more
important than simple false breakouts,

66
00:03:46,340 --> 00:03:47,780
regardless of where they occur.

67
00:03:48,360 --> 00:03:52,480
because the next context will also be
generally accompanied by more

68
00:03:52,480 --> 00:03:56,500
false breakouts, by those that occur in
more important areas of liquidity.

69
00:03:57,140 --> 00:04:01,240
But we have to be careful, because in
this example there was another scare.

70
00:04:01,540 --> 00:04:03,520
What do we do here? Do we buy?

71
00:04:03,900 --> 00:04:08,660
It could be that the spring unbalances
the entire structure again and sends the

72
00:04:08,660 --> 00:04:09,478
price upwards.

73
00:04:09,480 --> 00:04:10,480
What would you do?

74
00:04:11,000 --> 00:04:14,220
I would have no doubts, and we have seen
this situation before.

75
00:04:14,910 --> 00:04:19,410
If it really were a spring, it would
continue upwards almost immediately,

76
00:04:19,410 --> 00:04:23,590
good bullish candlesticks showing strong
intent and it should, of course, re

77
00:04:23,590 --> 00:04:24,590
-enter the range.

78
00:04:24,970 --> 00:04:29,970
Sure, but if I want to buy, it might be
too late if it really is the spring and

79
00:04:29,970 --> 00:04:32,350
it's about to reverse and send the whole
structure upwards.

80
00:04:33,230 --> 00:04:36,970
Buying at these levels is much more
attractive from the point of view of the

81
00:04:36,970 --> 00:04:38,250
risk -reward ratio.

82
00:04:39,190 --> 00:04:42,430
On this we agree, but don't forget the
most important thing.

83
00:04:42,800 --> 00:04:45,880
that the context continues to suggest a
bearish imbalance.

84
00:04:46,480 --> 00:04:50,700
Once again, let's remember that we are
looking at a pattern that meets all the

85
00:04:50,700 --> 00:04:55,140
characteristics of a distribution
structure, that we have a strong

86
00:04:55,140 --> 00:04:59,040
a significant sign of weakness that has
taken the price below even the lowest

87
00:04:59,040 --> 00:05:03,240
limit of the range, and we are currently
trying to confirm the possibility that

88
00:05:03,240 --> 00:05:05,640
we are seeing the successful bearish
breakout test.

89
00:05:06,360 --> 00:05:10,440
Based on this, wouldn't it be more
sensible to continue looking for short

90
00:05:10,440 --> 00:05:11,440
trades?

91
00:05:11,600 --> 00:05:16,140
If you really want to buy at this point,
remember that we are very far from the

92
00:05:16,140 --> 00:05:17,140
low of the structure.

93
00:05:17,540 --> 00:05:18,800
What do I mean by this?

94
00:05:19,220 --> 00:05:23,220
That the distance traveled down from the
broken limit of the range has been

95
00:05:23,220 --> 00:05:24,220
quite significant.

96
00:05:24,840 --> 00:05:28,320
Doesn't this sign indicate that maybe
there is more evidence of bearish

97
00:05:28,320 --> 00:05:32,820
pressure? I don't know, but personally,
I would only be looking to enter short

98
00:05:32,820 --> 00:05:33,820
in a trading zone.

99
00:05:34,080 --> 00:05:38,160
And if I really wanted to assess the
possibility of buying, I would at least

100
00:05:38,160 --> 00:05:41,180
wait to see the buyer send the price
back within the range.

101
00:05:41,460 --> 00:05:42,640
Those are my conditions.

102
00:05:43,040 --> 00:05:44,220
That is my checklist.

103
00:05:44,840 --> 00:05:48,280
Those are the filters that would make me
feel more comfortable with my decision.

104
00:05:49,040 --> 00:05:53,880
There are always viable alternatives,
such as entering with a similar amount

105
00:05:53,880 --> 00:05:58,900
setting a tighter stop loss. But never
forget, as long as the price does not re

106
00:05:58,900 --> 00:06:02,080
-enter the range, the roadmap at this
point is bearish.

107
00:06:02,720 --> 00:06:04,020
And the following happens.

108
00:06:04,520 --> 00:06:08,120
As you can see, even if you had bought
at that point, you might have carried

109
00:06:08,120 --> 00:06:09,120
a successful trade.

110
00:06:09,500 --> 00:06:13,660
This is a good example of the importance
of false breakouts in the market, which

111
00:06:13,660 --> 00:06:17,480
shows that even when they are in the
wrong location, they can offer up an

112
00:06:17,480 --> 00:06:18,940
opportunity to turn a profit.

113
00:06:19,620 --> 00:06:23,160
Assuming we had closed our position
after seeing that new upthrust, of

114
00:06:23,560 --> 00:06:26,840
Because once again, entering the market
in the direction of the prevailing

115
00:06:26,840 --> 00:06:29,360
context is exactly what we were looking
for.

116
00:06:29,880 --> 00:06:32,300
And it happens in a very authentic way.

117
00:06:32,840 --> 00:06:37,660
The non -entry into the range occurs in
the trading zone. We even see how the

118
00:06:37,660 --> 00:06:41,820
movement that will develop the potential
break and retest is also accompanied by

119
00:06:41,820 --> 00:06:44,860
a decrease in volume, suggesting a lack
of participation.

120
00:06:45,400 --> 00:06:50,240
And below the structure, a minor
redistribution scheme with an upthrust

121
00:06:50,240 --> 00:06:53,940
a bearish breakout test that establishes
the beginning of the continuation of

122
00:06:53,940 --> 00:06:58,020
the bearish slide outside the range in
favor of the entire distribution

123
00:06:58,020 --> 00:07:00,140
structure. Simply wonderful.

124
00:07:00,940 --> 00:07:05,140
But this concept does not simply end
here in the behaviors that can occur

125
00:07:05,140 --> 00:07:07,540
we are inside a structure or interacting
with it.

126
00:07:07,920 --> 00:07:12,500
We can also continue to apply this same
idea to other environments, where the

127
00:07:12,500 --> 00:07:15,740
general context and the roadmap point us
in a particular direction.

128
00:07:16,440 --> 00:07:21,480
At this point, it should be quite clear
to everyone, but just to be sure, let me

129
00:07:21,480 --> 00:07:22,500
repeat it once more.

130
00:07:22,960 --> 00:07:27,480
Trades should not be executed at false
breakouts that are not aligned with the

131
00:07:27,480 --> 00:07:28,480
general context.

132
00:07:29,040 --> 00:07:32,980
The general context is more important
than any single false breakout.

133
00:07:33,240 --> 00:07:38,740
In summary, in a bearish context, once a
distribution appears, trades should

134
00:07:38,740 --> 00:07:40,900
only be executed on the upthrust.

135
00:07:41,220 --> 00:07:46,200
In a bullish context, once an
accumulation appears, trades should only

136
00:07:46,200 --> 00:07:47,280
executed on the spring.

137
00:07:47,880 --> 00:07:52,940
In a neutral context, where the market
has not yet become unbalanced, Trades

138
00:07:52,940 --> 00:07:57,140
be executed after false breakouts at
both edges until the potential phase C

139
00:07:57,140 --> 00:07:58,320
false breakout appears.

140
00:07:59,040 --> 00:08:03,360
Let's work with the following example. A
situation in which we find ourselves in

141
00:08:03,360 --> 00:08:07,560
the middle of an uptrend that is
developing an accumulation, giving us a

142
00:08:07,560 --> 00:08:09,460
that takes us only in a bullish
direction.

143
00:08:09,700 --> 00:08:14,500
A context which, as we have seen, should
only compel us to look for false

144
00:08:14,500 --> 00:08:17,980
breakouts in said direction, or, in
other words, springs.

145
00:08:18,400 --> 00:08:22,750
And suddenly... an upgross can appear
contrary to the general market

146
00:08:22,970 --> 00:08:24,890
like the one highlighted on the chart.

147
00:08:25,150 --> 00:08:27,210
What do we do then? Should we go short?

148
00:08:27,510 --> 00:08:28,570
Of course not.

149
00:08:28,830 --> 00:08:33,390
The market balance has been tipped
upwards, so it makes no sense to believe

150
00:08:33,390 --> 00:08:37,350
the market is reversing just because we
have observed a certain presence on the

151
00:08:37,350 --> 00:08:38,350
part of sellers.

152
00:08:38,490 --> 00:08:42,809
We have to let the cause that has been
previously built exert its effect on the

153
00:08:42,809 --> 00:08:47,470
market. Once again, we come across
another potential bullish -false

154
00:08:47,790 --> 00:08:48,790
What should we do?

155
00:08:49,370 --> 00:08:51,670
Well, once again, you shouldn't do
anything.

156
00:08:51,890 --> 00:08:54,530
At least, you shouldn't consider going
short here.

157
00:08:54,990 --> 00:08:58,810
Absolutely nothing has changed to make
us believe that the market might turn

158
00:08:58,810 --> 00:09:00,330
that control has changed sides.

159
00:09:01,130 --> 00:09:05,710
As we can see, the market continued
upwards with more bullish false

160
00:09:05,710 --> 00:09:07,030
against the main direction.

161
00:09:07,470 --> 00:09:11,890
The market loves to continually give off
false signals. You can observe a

162
00:09:11,890 --> 00:09:15,930
behavior that is conducive to executing
a trade and still not earn any money

163
00:09:15,930 --> 00:09:18,390
because you didn't execute in the right
location.

164
00:09:19,290 --> 00:09:23,050
understanding the context and the
importance should have on our decision

165
00:09:23,050 --> 00:09:24,050
essential.

166
00:09:24,370 --> 00:09:30,050
Even so, as you can see, the behavior
itself is so powerful that even when it

167
00:09:30,050 --> 00:09:34,090
appears in the wrong location, it often
leaves potentially favorable movements

168
00:09:34,090 --> 00:09:35,090
before turning around.

169
00:09:35,790 --> 00:09:40,230
When we talk about incorrect location,
what we really mean is that it is

170
00:09:40,230 --> 00:09:43,490
incorrect for the trader that is
operating in this time frame.

171
00:09:43,730 --> 00:09:47,510
However, things might be different if we
trade in lower time frames.

172
00:09:48,000 --> 00:09:51,600
It would be more complicated to manage
since the long -term context would

173
00:09:51,600 --> 00:09:55,620
continue to be bullish but in the very
short term. And if we have properly

174
00:09:55,620 --> 00:09:59,420
identified the trading zones and the
objectives we are aiming for, these

175
00:09:59,420 --> 00:10:02,680
behaviors could also offer opportunities
for executing trades.

176
00:10:03,260 --> 00:10:05,080
But let's not complicate things.

177
00:10:05,360 --> 00:10:09,640
We need to keep our trading approach as
simple as possible until we have gained

178
00:10:09,640 --> 00:10:10,740
the necessary experience.

179
00:10:11,500 --> 00:10:14,840
Therefore, in this time frame, the rule
of thumb is simple.

180
00:10:15,280 --> 00:10:19,800
Since the roadmap and context point
upwards, we should not accept any

181
00:10:19,800 --> 00:10:23,360
false breakout until we see the
development of a potential structure

182
00:10:23,360 --> 00:10:25,340
cause a change in the control of the
market.

183
00:10:25,840 --> 00:10:28,860
Look how different things appear from
another perspective.

184
00:10:29,180 --> 00:10:33,440
In a bullish context, is it not more
sensible to only look for trades in the

185
00:10:33,440 --> 00:10:34,440
direction of the roadmap?

186
00:10:35,040 --> 00:10:39,280
This is the simplest and yet most
powerful idea that we can use to trade

187
00:10:39,280 --> 00:10:44,000
markets. Trade springs in an uptrend and
upthrusts in a downtrend.

188
00:10:44,410 --> 00:10:48,890
Based on everything that we have just
seen, it is crucial that we understand

189
00:10:48,890 --> 00:10:52,770
current market context in order to look
only for opportunities in the same

190
00:10:52,770 --> 00:10:53,770
direction.

191
00:10:54,130 --> 00:10:57,430
Obviously, this does not mean that it
will always happen like this.

192
00:10:57,650 --> 00:11:01,710
There will be occasions in which a small
false shakeout seen in what we have

193
00:11:01,710 --> 00:11:05,630
determined to be a wrong location will
succeed and reverse the entire market,

194
00:11:05,750 --> 00:11:06,890
changing control of it.

195
00:11:07,350 --> 00:11:09,610
However, this does not usually happen.

196
00:11:10,060 --> 00:11:13,740
it is more likely that the market will
continue to move in the direction of

197
00:11:13,740 --> 00:11:14,740
least resistance.