How imbalances hold against bigger timeframe opposing zones, sequence Matrix

10th January 2017, 03:36 PM

This lesson is very advanced. You will need to understand all the concepts and have traded for some
time in order to have the understand why this matrix is created in the first place.

This matrix does take some understanding and can be difficult to grasp but makes a lot of sense on
what happens as each time frames realignment takes place and puts you in a safer place to the action
you should consider. You will find it best if you start slowly at the top when there are more timeframes
aligned and picture each one each at a time and no more, until you get a picture of what's happening.
Then you can move to the next scenario. There is a lot of work to this lesson just reading it will not
work and a good understanding is a must. It will probably take you ages to picture each scenario.

It deals with how imbalances hold against opposing zones in contro not with the basic realignment
rules and matrix where only one direction is possiblel. Price moves between opposing imbalances, the
bigger the timeframe the more distance it will move and the more lower timeframe imbalances price
will take up.

When price is in a clear uptrend, as defined in the trend lesson, demand is created and respected,
supply is taken out. Each timeframe in our 3 timeframes sequence has a different trend, so we need
to have a series of rules that will allow us to link all three timeframes in our sequence together.

Below there are common questions you will be asking yourself over and over. I will try to address
them in this lesson:

• What happens if the daily is in an uptrend and a valid weekly or monthly supply gains control?
Should we keep on taking longs? If so, where?

• What if weekly is in an uptrend and we reach a monthly supply zone?

• All timeframes are up, new daily demand areas are being created, where do I place my buy
order?

• Weekly is down, but monthly is up, what do I do?

There are important things to bear in mind in the different matrix scenarios below. The scenarios
below refer to a bullish trend, change demand for supply and peaks for valleys to obtain the Matrix for
a bearish trend.

There are some facts to bear in mind when reading this Matrix, please read them

• ZIC: zone in control. This this the latest zone in control against current bias. With a long bias
the zone in control must be an opposing supply zone. If there is a short bias the ZIC will be an
opposing demand zone.

• Freshness and opposing zone in control. The freshness of an imbalance is very important. We
only trade fresh zones. However, the opposing zone in control can have three different
statuses: fresh, tested and used-up. The freshness of a zone will dictate if we can be more or
 less aggressive in our trading. Taking a long at D1 DZ against a used-up D1 SZ does not have
the same odds as a D1 DZ CP with a fresh W SZ in control

• HTF patterns formed against your bias. You must pay close attention to the candlesticks
patterns formed on the intermediate and top timeframe of your sequence. Shooting
stars/hammers, engulfing and piercing patterns on your intermediate and top timeframe
create support/resistance areas that usually produce a bigger retracement to the opposing
pattern or imbalance. If an engulfing or shooting star is created on the intermediate
timeframe’s clear uptrend (for instance a W chart), it’s very likely that price will retrace to the
opposing intermediate demand zone (W DZ) or opposing bullish engulfing pattern.

• Over-extension. If there is over-extension on our sequence’s entry timeframe, we should

expect and wait for a bigger retracement at a HTF imbalance or HTF confluence before
resuming trading in the previous direction. D1 over-extended? Wait for a retracement at W
DZ or HTF 20 EMA and/or TL

• Consolidation. Tilted arrow or --. It mens that TF is consolidating

• Level scoring. Do not forget about scoring every single level. Having green light to buy D1 DZ
does not mean that we must take all levels that we spot. Levels have to be filtered out through
the scoring system: quality of the base, freshness, departure, etc. If the level does not score
high, it will still be a valid imbalance but a non-tradable one.

• Confirmation and stacked odds. Confirmation means nothing if the odds are being stacked
against your trade. If you are planning to go long at a D1 CP DZ but there is a brand new W
bearish engulfing pattern right above, odds are against you since there is HTF resistance
(potential SZ) being formed. Don’t forget that confirmation neither confirms anything or
enhances the odds of any trade

• Confluences. There are several odds enhancers and limiters which affect price action as per
the rules: HTF 20 EMA, HTF Trendline and engulfing patterns. These confluences add or
subtract odds to the trade setups. If you are opting for a counter-trend trade make sure there
are as many confluences supporting the trade as possible. Planning a D1 SZ at a nested W SZ
bearish engulfing + W 20 EMA confluences is a good idea if M DZ has not taking control yet
and there is compression to the left.

• Action to take. This matrix deals with a bullish trend, so the action to be taken will always be
to take long trades unless you are doing counter-trend using a lower timeframe sequence like
the Weekly where counter-trend shorts will be possible. The action column will display the
trading decision to be taken in every scenario. The distinction is made between valleys/peaks
and CPs, why? If a HTF intermediate TF (W SZ) is being tested usually price retraces to the
opposing intermediate TF imbalance (W DZ), if we are expecting that to happen, entry TF CP
DZ (D1 DZ) will have lower odds, therefore we should al least lean on D1 DZ valleys with extra
confluences if we still want to go long