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Let's move on to the third trading
principle, the reversal principle.

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We will apply this principle in markets
that are initially unbalanced in one

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direction, but eventually refuse to move
further in that direction and generate

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a sharp reversal in the opposite
direction.

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That is, in environments where most
participants at the aggregate level

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in their valuation of the asset price.

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What the reversal principle tells us is
that if the price attempts to enter a

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value area and succeeds, it will most
likely visit the opposite end of that

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value area.

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The market has refused to trade at those
price levels, so it returns to the

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previous value area.

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Again, this principle is an adaptation
of a well -known market profile trade,

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the 80 % rule, which suggests that when
price breaks out of a value area, there

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is an 80 % probability that it will go
all the way through the area to the

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opposite end.

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Trading with the reverse principle is to
wait for the test inside the value

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area, to look for the impulsive move to
the opposite end of the value area.

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In other words, if the price is above a
value area and manages to break the

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value area high and enter this value
area, the main scenario would be to wait

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for an inside test of this value area
high to look for a move first towards

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VPOC and eventually towards the value
area low of the profile.

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As with the range principle, there is a
problem that the VPOC could act as a

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support -resistance level that blocks
the price.

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Therefore, we should always take this
level into account when managing the

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position.

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We start with the first example of
session profiles.

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As we can see, the market opens below
the previous session's value area, so it

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initially shows a bearish imbalance.

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In this price position, as the context
is bearish, we should prefer to look for

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short opportunities.

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but the market does not react at the
limit of the value area and what it does

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to recover it easily.

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After regaining the value area, we were
able to apply this reversal principle,

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which tells us that although the market
was initially unbalanced to one side,

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this imbalance has failed and a
sufficiently significant rotation has

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generated to bring the price back into
the value area.

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Therefore, the trading scenario to
consider is to look for a test of the

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area low and wait for the price to
develop a bullish rotation that gives us

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signal to enter the market, as in this
example.

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In addition, we will apply the 80 %
rule, which tells us that there is an 80

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probability that the opposite end of the
value area, in this case the value area

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high of the previous session's profile,
will also be reached, as it is.

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Here is another example of a bearish
reversal.

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The price opens above the value area
high of the previous session's profile.

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approaches it, and easily breaks it.

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On reentry, we trigger the reversal
scenario and the price develops a test

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within the value area high, giving rise
to a new bearish impulse that easily

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reaches the opposite end of the value
area.

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This reversal principle is quite simple
to understand.

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If the market manages to reenter a value
area, there is a high probability that

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it will visit the opposite end of this
profile.

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Here are two more examples.

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a bullish reversal to the left and a
bearish reversal to the right. The

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are always the same, a re -entry into
the value area, a test of the inside and

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an impulsive move to the opposite
extreme.

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We will now look at the application of
the reversal principle to multi -session

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ranges. These are the basic analysis
structures of the Wyckoff traders.

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The principle is the same, the only
difference being that instead of working

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with session profiles, we are working
with profiles of complete structures,

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accumulation, and distribution ranges.

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For these examples, we will use
structures that have already been

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the same principles could be applied
within the same structure.

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In this example, we observe two
lateralizations, an accumulation on the

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a distribution on the right.

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After confirming the distribution, the
price leaves this area and heads towards

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the lower area, towards the previous
accumulation.

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At this point, our context should be to
look for the application of the

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continuation principle, by which we
encourage the market to develop a

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test on the value area high of the
profile to expect bullish continuations

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it happens.

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The market reacts in this zone and
offers us the opportunity to enter.

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Profit taking should be established at
the high volume node of the upper

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structure.

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As we can see, the price also reaches
this area before generating a new

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rotation.

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Looking at this point where we have
taken profits from trading the lower

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structure, we are also in a position to
apply the continuation principle to the

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upper structure.

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This is a test of the value area low and
the VPOC area of the volume profile of

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this upper structure, so a short entry
could be considered.

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The entry is good and the market falls
sharply, easily reaching the volume

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profile of the lower structure.

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After another extreme bullish reaction,
it finally manages to re -enter the

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value area, at which point the reversal
principle is triggered. From there, the

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price develops an inside test on the
value area high of the profile and the

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market plummets through the entire value
area and beyond.

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This is a very complete example where we
have seen the application of several

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trading principles and also in different
structures.

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Here is another example of the same
causistry.

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The upper structure generates a bearish
move that pushes the price back into the

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value area of the lower structure.

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This is a test within the value area
high, and then the market travels

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the entire value area until it reaches
the value area low of the profile.

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Above the same area, it generates a new
rejection and develops a strong upward

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movement that begins the price back into
the value area of the upper structure.

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It develops a test within the value area
low and continues with the bullish

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imbalance until it reaches the value
area high of this profile.

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An interesting detail of this example is
the advantage of using stop orders over

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other types of orders.

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When the price reaches the value area
high of the lower profile, we should

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prefer to use the continuation
principle, at least in the first

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And as we can see, the market left two
good bullish candlesticks at this point,

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which could have been used as an entry
signal.

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If we had tried to enter the market with
stop orders placed just above these

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candlesticks, the entries would never
have occurred because the market turned

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sharply lower after developing these
signals leaving two more bearish

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candlesticks. This is why this type of
entry is useful, because we need to

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confirm that there is still continuity
in the imbalance that is being generated

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in the shorter term.

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After these two unsuccessful attempts,
the market finally enters the value area

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again and generates an inside test that
gives rise to the bearish movement.

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In this other situation, however, the
market would have triggered the entry,

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resulting in a loss.

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The price is in the continuation trading
zone and forms this strong bearish

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candlestick, which could have been used
to enter the market short.

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We place the sell stop order, and in
this case the market has a continuation

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that would activate this order.

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We identify three possible stop loss
zones at the three low volume nodes

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Each of them has its advantages and
disadvantages in terms of the risk taken

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the confidence it provides.

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The further away, the better, of course,
but it may be too far away.

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As we can see, only the last stop loss
point would not have been reached, but

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is certainly in a very distant location.

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We're taking a loss. That's absolutely
fine.

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It's normal, and it's part of the
business.

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Losses will occur throughout your
trading career, and we have to accept