Core Strategy Lessons. Most frequently asked questions.

1. Basic Concepts and Terminonoly

2. Types of Imbalances
3. Drawing Trendlines
4. The Creation of Imbalances
5. The Trend
6. The Range. Too low? Too high?
7. Scoring imbalances
8. Multiple Timeframe Analysis
9. The Realignment. Using multiple timeframes to locate a trade
10. Planning a trade
11. Building your own trading plan

Types of Imbalances

How many types of imbalances are there?

There are only two types.

1. Valleys and peaks (swing lows and swing highs).

Continuation patterns, also known as CP.

What are valleys and how can I locate them?

A valley is a V shape formation that is very common at the origin of a bullish impulsive move. A
valley is made of three features:

 Leg in or bearish move.

 A basing structure.
 Leg out or bullish move.
 Alternatively, the basing structure of a valley may be formed by non 50% candlesticks
and be made of only a bearish ERC and a bullish ERC (drop/rally).
What are peaks and how can I locate them?

A peak is an inverted V shape formation that is very common at the origin of a bearish impulsive
move. A peak is made of three features:

 Leg in or bullish move

 A basing structure
 Leg out or bearish move

Take a look at the chart below. We can see some peaks (Rally-Base-Drop) and (Rally-Drop). We
can see the leg up and the leg down printed lower highs and lower lows at [1] and [2]. This is
telling us that the bearish move is stronger than the bullish move. In further lessons, we will
learn what to do with these peaks and valleys and how trendlines can help us identify a trend
and new imbalances. For now, just bear in mind that these valleys and peaks together with price
action can tell us a lot about what the market is most likely going to do in the short term.

What is a continuation pattern, also known as a CP?

A continuation pattern or CP is a pause in the market before price resumes the underlying trend.
We can think of this pause as an accumulation of buy orders for longs or the distribution of sell
orders for shorts.

After a strong bullish impulsive move investors usually pause to "catch their breath" before
continuing their previous actions. Likewise, after a big drop in price, the price will usually stall for
a while with traders often closing existing short positions to take profits before continuing to sell
again. Because of those actions, price consolidates during these pauses and end up forming
certain patterns that we will learn to identify.

The formation of the CP is said to be complete after price breaks out and continues in the
direction of the underlying trend. These formations are often used by traders to make decisions.

See below a couple of examples. The first one at #1 is a bullish CP. Those at #2 and #3 are
bearish CPs.
What should I do if a CP looks like a valley or a peak?

There are times when price action can become very tricky to read. Don't worry about it, because
if you are struggling to read price action it will probably be for two reasons 1) You are not
experienced enough, 2) Price action is not clear.

Sometimes CPs will be difficult to locate and they might look like valleys or peaks (swings).
When you are in doubt, consider them as a CP.

Drawing Trendlines

Why do we draw the trendlines the way we do?

What is the purpose of drawing a trendline?

 Trendlines can tell us about the trend. A trendline can signal the continuation of a
trend (if respected), a reversal, or a bigger pullback within a higher timeframe (if broken).
Trendlines will help us identify the trend once we learn when and how new imbalances
are created.
 Learn when the dynamics of a chart are changing. By connecting the trendlines, the
way we do, you will know very soon when the dynamics of timeframe X are changing.
This is highly important in a top-down analysis. It will give us a very methodical approach
to multiple timeframe analysis that other trendline techniques don't have.
 Quickly learn if opposing impulsive moves are stronger than previous ones. If the
trend is down and bearish impulses are being created, what would you think if the next
impulse is bullish and stronger than the last bearish impulse? Wouldn't you think the
market dynamics for that timeframe are changing? Exactly. That's the reason why you will
learn to draw the trendlines in a precise way.
 Identifying potential reversals. A trendline break will help us identify new potential
imbalances. This is key to understanding multiple timeframe analysis. We will look at this
in more detail in a further lesson.
 The pullback to a trendline can provide us with trade opportunities. In a clear trend,
the pullback to a trendline can provide us with trade opportunities.

How is a bullish trendline drawn?

The description below explains how to draw a bullish trendline. The same is true for a bearish
trendline but it will be reversed, connecting two peaks.
  Connect the latest two obvious valleys (swing lows) and peaks (swing highs). These
valleys and peaks must be clear and obvious, if they are not, consider them as pauses or
CPs. If they are not clear, basing should be unclear and poor, and removal would be
expected anyway. As you gain more experience by reading price action, you will see
valleys and peaks that you could not see before.
 Each timeframe has its own trendline independent from other timeframes, and this is
where subjectivity comes in different methodologies.
 Continuation Patterns (CPs) will not be used to connect trendlines.
 Never cut through candles. What does this mean? It means that the trendlines cannot
go through wicks or candlestick bodies. You must connect the latest peaks and/or valleys
meticulously, making sure that you are not cutting through the candles, neither wicks
nor candlestick bodies.

An example of a bullish trendline can be seen on USD/CAD daily chart below. Valley V [1] and
Valley V [2] can be connected once the high of V [2] makes a high higher than [4]. The low of
Valley V [2] always has to be higher than the low of V [1].
How is a bearish trendline drawn?

 Look for tilted “inverted W shapes”, where the second high of the inverted W [P2] is
slightly lower than the first high [P1].
 Two bearish impulses must be created at [P1] and [P2].
 The low of the second impulse [L2] must be lower than the low of the first impulse [L1].
This happens exactly at the red circle at [L2].
  The high of the second peak at [P2] should not be higher than the high of the first peak
at [P1].
 Once price makes a low lower than [L1], a bearish trendline can connect peaks [P1 and
[P2].
 Always connect the latest two peaks or swing highs, [P1] and [P2].
 When a new peak is printed, we’ll have to adjust the trendline and connect peak [P2]
with new peak [P3] whenever it is created.

An example of a bearish trendline can be seen in the chart below. Peak [1] and [2] are connected
once the low of peak [2] makes a low lower than [4]. The high of peak [2] always has to be lower
than the high of the peak [1].
Can we use continuation patterns to draw a trendline?

We are not allowed to use continuation patterns when drawing a trendline. They are not the
origin of the impulsive moves, and they continue the underlying trend. We must always use
valleys and peaks.

An image is worth a thousand words. On USD/CAD H4 chart below, we will not use continuation
patterns at [1] and [2] to draw a red trendline, that trendline is invalid. The correct trendline is
the one that connects the last two bullish impulses.
On GBP/USD daily chart below, the bearish trendline is incorrectly drawn, because we cannot
use a continuation pattern as seen at [2] to draw a trendline. Peak [1] is obvious and clear. We
need a second peak that has not happened yet.
Is cutting through candles allowed when drawing a trendline?

No, cutting through candles is not allowed when drawing a trendline. You must respect price
action and must avoid cutting through it. Adjust the trendline is such a way that candlesticks will
be respected.

See the chart below, the red trendline is the correct one since it's not cutting through candles.
Do I always have to draw a trendline?

No, sometimes you won't be able to draw a trendline or you won't need to because it's an all-
time highs or an all-time lows scenario. There are times when you won't be able to draw a
trendline because there has been a very strong move or there are not two valleys or two peaks.
Use the elimination of imbalances to locate a potential imbalance instead.

Don't get obsessed with trendlines, sometimes they just can't be drawn.

How are trendlines drawn in over-extension?

In over-extension with three o more consecutive CPs, the trendlines can be drawn more
aggressively connecting the last three CPs. See an example of a bearish over-
exension on Gold XAUUSD weekly timeframe below.

The Creation of Imbalances

When is a new imbalance created?

A trendline break creates a new imbalance at the origin of the move and potentially at
the TL intersection.
A new imbalance is created when an opposing imbalance has been eliminated

Consolidation away is mandatory for an impulse to become an imbalance

New imbalances at all-time highs and all-time lows

When is an imbalance considered as broken or eliminated?

How far back should I look for imbalances?

Combining trendline breaks and imbalances in a chain analysis.

Basics concepts on drawing imbalances

When to adjust the proximal line when drawing an imbalance

When is a new imbalance created?
An imbalance is created under these scenarios

We want proof of something so that we can tell if there is an imbalance here or there.

1. The break of a trendline with a full candlestick.

2. An opposing imbalance has been eliminated.
3. All-time highs or all-time lows are eliminated by an impulse strong enough to
consolidate away. More on the concept of consolidating away further on in the course.

All three scenarios can happen at the same time.

A trendline break creates a new imbalance at the origin of the move and potentially at
the TL intersection.

Yes, the break of a trendline with at least a full OCHL candlestick creates a new imbalance at the
origin of the move or at the intersection of the trendline if the basing structure is intersecting
with it.
The same is true demand levels, that is, two peaks broken by at least a full OCHL candle.

Up to two imbalances can be created when the trendline is broken.

1. At the origin of the move

2. At the basing structure, if the structure intersects with the TL. That is, the basing structure
must touch the trendline

The example below should be self-explanatory.

 Two peaks connecting A and B allow us to draw a bearish TL

 Two demand zones are created, the first one right at the intersection of the TL at #1
 The second demand if created at the origin of the move at #2
A new imbalance is created when an opposing imbalance has been eliminated

It's crucial to understand this principle as it is the core rule in this "fight" of imbalances.
Understanding which type of order flow has most recently prevailed can add great probability to
an upcoming turn in price. To do this, we need first to determine where the opposing imbalance
is located.

As always, an image is worth a thousand words. An example will help clarify these concepts.
AUD/NZD Forex cross pair daily timeframe is the chart we will be using.

 Demand [1] was eliminated by an impulse at [2] that was strong enough to remove it
and consolidate away with at least one full OCHL candle as will be explained in the next
lesson, the consolidation away lesson.
 We have a valid imbalance at [2], the elimination of demand [1] happened right at [3],
the distal line of daily demand [1].
The same is true not only for any timeframe but also for any asset. New imbalances are created
on Forex currency pairs, Stocks, Futures and any market. Let's take a look at an oil-related stock
company Chevron #CVS.
Consolidation away is mandatory for an impulse to become an imbalance

An imbalance will not be confirmed if price returns to the origin of the move in the very next
candlestick, right after the original impulse has been created.

Quote
The consolidation away concept helps us identify those impulses that are not strong enough to
stay away from the original impulse.

Let's have a look at an Oil and Gas stock company, Phillips 66 #PSX monthly timeframe.

 Last monthly impulse at [2] did not consolidate away with a full OCHL candle; therefore it
cannot be a demand level because demand levels are impulses strong enough to stay
away from the potential base. What we see at [2] is a picture of balance, and as supply
and demand trades, we want to trade imbalances.
 However, impulse at [1] is a clear imbalance, and the bullish impulse was strong enough
to consolidate away with a few OCHL candles, those within the circle.
 Quote

Without the consolidation away, we will be in front of a balanced picture and not an imbalance.
Therefore, we will not have a validated supply or demand zone. Without a validated supply or
demand zone, it cannot be scored for tradeability.

New imbalances at all-time highs and all-time lows

All-time highs and lows scenarios require unique characteristics for an imbalance to be
confirmed. The reason behind these special conditions is that at all-time highs and lows there
are no opposing imbalances to be removed. How can an impulse become an imbalance is there
is no opposite imbalance to be eliminated or an opposite trendline break?

Although you need to learn about scoring to validate an imbalance at an all-time high
and all-time low, we will explain what we need to see to confirm imbalances at all-time
high and low scenarios.

 An impulse twice as wide as the basing structure, or 2:1 . The stronger the
impulse provided by the imbalance, the better.
  The new impulse must consolidate away with at least one
full OHCL candle. As explained in a previous topic, consolidation away is a
mandatory feature every imbalance must have; otherwise, the impulse will be
considered as a balance and not an imbalance.

New supply zones at all-time lows

We will start with a stock this time. We will use Luckin Coffee #LK weekly timeframe.

 All-time lows broken, nothing to the left below $14.00

 A very strong impulse that started at #1 has managed to consolidate away with
several weekly candlesticks at #2.
 Rules state that a new supply imbalance has been created at #1.

New demand zones at all-time highs

Let's have a look at a very well-known American stock as the first example, Netflix
#NFLX. We will use the weekly timeframe.

 All-time highs have been broken. There is nothing on the left to be eliminated.
  Two new impulses were strong enough to consolidate away on the weekly
timeframe at #1 and #2 with at least one full OCHL candle.
 No pullback happened at #2, but Netflix did pullback to the upper imbalance at
#1.

When is an imbalance considered as broken or eliminated?

New imbalances are created every day, every week and every hour depending on which
timeframe you are looking at.

Quote
An imbalance is eliminated if the lowest low or the highest high of the basing structure has been
penetrated through by as little as a tick or a pip.

Let's have a look at 3M #MMM American stock, we will use the monthly timeframe this
time.
  Demand level [1] has been broken. The lowest price at [1] was fully penetrated
and broken by a few ticks at [2], even a few dollars. This demand level is an all-
time high scenario, as explained in the previous lesson.
 A demand level is considered broken if the lowest low of the basing structure has
been traded through by as little as a tick. This example complies with this
definition.
 The imbalance responsible for eliminating demand [1] is located higher at [3]. We
must always look left and above the current price to find supply levels.

How far back should I look for imbalances?

You will probably be asking yourself by now how far back in time should we be looking
for imbalances? The answer depends on the timescale or timeframes you are using.

Quote
Rule of thumb: go as far back as you need to in order to look for imbalances
The timeframes you choose to trade will dictate how far back in time you should be
looking for imbalances since it’s all based on the top timeframe of that sequence. It’s
not the same looking for imbalances using lower timeframes like H1 or 15 minutes
charts than looking for them in monthly and quarterly imbalances. The time value is
important, it's all relative to the timeframes you are using.

Quote
The bigger the timeframe used the further back in time you should go and find older
imbalances. It can be hours, days, weeks, months or even years.

Let's use EUR/NZD monthly timeframe. A monthly timeframe is made of monthly

candlesticks, that is, every single candlestick is one month worth of time. You might
have to wait for months before price retraces to one of those imbalances. On the
monthly chart below, you can see a very strong monthly demand at [1] responsible for
breaking the bearish trendline. It took 18 monthly candles for price to retrace to the
imbalance, unthinkable for a day trader or a scalper. 18 months! But when it did retrace
to the imbalance, look at what happened!
Combining trendline breaks and imbalances in a chain analysis.

You are now in a position to combine trendline breaks and the creation of new
imbalances accomplishing the removal of an opposing imbalance. The process of
combining trendline breaks and imbalances is what we will call from now on "the chain".

Quote
The chain defines the relationship between the trendline break which connects the last
two impulses and the creation of new imbalances.
Let's use Tesla #TESLA stock weekly chart. See the chart below, trendlines and imbalances
resulting from the break of those trendlines will create new imbalances, and once they are
eliminated, new imbalances will be created. This is an all-time highs scenario. Do not be
overwhelmed by the number of trendlines and imbalances; everything will start to make sense
very soon.

You will need to do hundreds, if not thousands, of chain analyses to master the creation of new
imbalances. There are no shortcuts. Missing a link in the chain will ruin the analysis, potentially
resulting in a wrong trading decision.

Basics concepts on drawing imbalances

Drawing supply and demand zones is a skill that many people fail to master correctly.
There are many different interpretations of how to draw the zones accurately. This is to
be expected since everyone has their method of trading and locating these zones. Most
traders that land at the Set and Forget trading community having been trading multiple
strategies and carry with them different interpretations of support and resistance levels,
supply and demand zones and various ways of reading price action.

The base or the origin of the impulse is what matters the most. The base usually consists
of a continuation pattern made of a few basing candlesticks or a series of particular
candlestick patterns. All imbalances are made of a basing structure,

The basing structure of an imbalance can be identified by drawing two features:

1. The proximal line. The price closest to the current price.

2. The distal line. The price furthest away from the current price.

Let's see a graphical representation using USD/CAD H4 timeframe. The chart below
shows a demand level whose proximal line is located at [A] and distal line at [B]. The
distal line of an imbalance must always include the lowest low in the basing
structure when drawing a demand level and the highest high when drawing a
supply level.
 Quote

Basing structures rarely present themselves as textbook structures. There are as many different
candlestick combinations as there are colours in the light spectrum.
There are hundreds of candlesticks formations, some of them bearing very fancy names but
don't worry. You don't need to learn them all, just a handful of them. We will only focus on a few
candlestick patterns.

There are many different looks and shapes for bases. Their appearance will vary slightly
depending on the market you are trading. There are subtle differences between
candlestick patterns found on the stocks and futures compared to those in Forex, but
the patterns and their names are still the same.

The most common candlestick patterns found at the bases of imbalances are:

 Engulfing patterns (two candlesticks formation). The last candle closes below/above
previous candles open/close.
 Piercing patterns (two candlesticks formation). We could say the piercing pattern is a
failed Engulfing pattern, price fails to close above/below previous candle's open/close by
a few ticks. The bearish piercing pattern is also known as 'dark cloud cover'.
 Basing candles, spinning tops, dojis, morning stars and evening stars. One or more
basing candles at the base.

You will learn how to draw imbalances by reading hundreds of different analysis Make sure you
practice a lot and if you have any questions, don't hesitate to ask. The best way to learn is to
make mistakes and be corrected.

Using engulfing patterns to draw imbalances

We will use the bullish engulfing pattern is taken as an example.

 Locate a basing area where price has created a good imbalance.

 Find a bullish ERC candle that closes above basing bars.
 The bullish candle must close above the previous candle's open/close (candle's body).
 If there are several candles at the base with similar open/closes around the same price
area then the engulf could cover all of them.
 If one of those basing candles is at a different "height", above the previous basing
engulfed candle then skip them and only take into account the ones at the same level.
 The proximal line will be right at the open/close of the first engulfed candle or further
back in time if there is no candle closing above/below the first engulfed candle's range.
 The distal line will be at the lowest low of the engulfing pattern (no matter how many
candles there are on the left).
 The engulfed candle can be either a 50% candle or a non 50% candle.
Using piercing patterns to draw imbalances

These two patterns are similar to the engulfing pattern covered above. The main difference is
that the new candle never closes above/below the previous candle's body. The dark cloud cover
is also a reversal pattern. We could say the piercing pattern is a failed Engulfing pattern, and
price fails to close above/below previous candles open close by a few ticks. Bearish piercing is
also known as 'dark cloud cover.'

 The Piercing Pattern = Dark Cloud Cover

 Piercing pattern = demand reversal pattern
 Dark Cloud Cover = supply reversal pattern
When to adjust the proximal line when drawing an imbalance

There are times when you can be flexible drawing the imbalances, but before you start being
flexible, you must understand and sink in the rules for quite some time, spend a lot of time in
front of the screen and see thousands of scenarios. It's imperative to understand that before you
tweak any rules, you must first master them.

There are some cases when you can adjust the proximal line:

 There is a single candle at the base.

 Several candlesticks whose bases are tight and small.

In both cases, you can draw the proximal line covering the lower shadows (supply) or upper
shadows (demand).

Option 1: proximal line at the lowest open/close of the basing candles.

Option 2: proximal line covering the lower shadows since both bodies and wicks are very
tight and small.
The Trend

How to define an uptrend

How to define a downtrend

What is the out of alignment (OOA) stage?

When is the market considered to be over-extended?

A trendline does not equal a trend

How to define an uptrend

Let's define an uptrend by using supply and demand imbalances and the core of supply
and demand.

Quote
An uptrend is defined as demand levels being created and respected, and supply levels
are eliminated. This must happen in the context of new bullish impulses where each
successive peak and trough is higher than the ones found earlier.
In other words, an uptrend requires at least one supply level eliminated and two new
bullish impulses connecting a bullish trendline, as defined in the trendline lesson. An
uptrend requires an accomplishment, not just successive higher highs and higher lows.
At least one supply level must be eliminated. An example can be seen in the figure
below.
 Quote

An uptrend is also created when two supply zones have been eliminated and without the
possibility of drawing a trendline.
Let's see an example of an uptrend using Coca Cola #KO American stock.

 Monthly chart printing higher highs and higher lows, all-time high broken at [A].
 All-time high [A] has been broken by last bullish impulse which starts at [1], the
impulse was strong enough to consolidate away with one full OCHL candle at,
and thus a new demand imbalance has been confirmed at [1].

A bullish trendline which connects last two bullish impulses can be drawn, plus all-time
highs broken equals to an uptrend.
In an ATH scenario and IPOs, it's very common to see price action unable to create two impulses
that can be connected with a trendline. However, a new demand level is created.
This IPO scenario is also considered an uptrend. These new imbalances are often eliminated in
new assets since there is not too much price action available. Trading IPOs is trickier and more
challenging. You'd better focus on mature stocks with at least two clear impulses and a TL if you
are new to supply and demand, or wait for the creation of new imbalances.

How to define a downtrend

Let's define a downtrend by using supply and demand imbalances and the core of supply and
demand.

Quote
A downtrend is defined as supply levels being created and respected, whereas demand levels
eliminated. This must happen in the context of new bearish impulses where each successive
peak and trough is lower than the ones found earlier.

In other words, a downtrend requires at least one demand level eliminated with at least
two new bearish impulses connecting a bearish trendline as defined in the trendline
lesson. A downtrend requires an accomplishment, not just successive lower lows and
lower highs. We need at least one demand level eliminated. An example can be seen in
the figure below.

A second definition of a downtrend would be:

Quote
A downtrend is also created when two demand zones have been eliminated without the
possibility of drawing a trendline.
Le'ts use Alcoa #AA American stock to define a downtrend on the weekly timeframe.

The weekly downtrend is official once we see weekly demand [2] eliminated by the
strong supply level at [1]. We then can connect two bearish impulses at [A] and [B].
We have an official downtrend.
In an ATL scenario and IPOs, it's very common to see price action unable to create two impulses
that can be connected with a trendline. However, a new supply level is created. This IPO scenario
is also considered an downtrend. These new imbalances are often eliminated in new assets since
there is not too much price action available. Trading IPOs is trickier and more challenging. You'd
better focus on mature stocks with at least two clear impulses and a TL if you are new to supply
and demand, or wait for the creation of new imbalances.

What is the out of alignment (OOA) stage?

There are times when a timeframe is neither trending up nor trending down. This stage
is classically defined as consolidation. Consolidation can be defined in many ways; it all
depends on the strategy that you are trading and how an uptrend and a downtrend are
defined.

We cannot let that happen. We can't have two traders trading the same set of rules, look
at a chart and obtain two different responses.

An asset can only be in either one of three stages:

 1. Uptrend
2. Downtrend
3. Out of alignment stage (OOA)

The out of alignment stage will also use supply and demand to define it, both the
uptrend and downtrend can enter the out of alignment stage.

The out of alignment stage will be triggered under two scenarios:

1. A trendline which connects the last two valleys or peaks is solidly broken with at
least one full OCHL candle.
2. An imbalance is eliminated.

Let's use Facebook #FB American stock to define the out of alignment stage on the monthly
timeframe

In this new example, we have two different scenarios, bullish out of alignment and
then a new uptrend created once the newly created supply at #2 was eliminated. Let's
describe this scenario in more detail below.

 The first dotted bullish trendline that connects the two valleys was solidly broken
with a couple of full OCHL candles at #B. Not only that, but tested M demand #1
was also eliminated.
 If demand is eliminated, there must be a bearish impulse that accomplished it.
We can find that impulse and supply at #2 by doing the chain analysis.
 At that time the M timeframe was OOA. However, a few months later, M supply
#2, which was responsible for eliminating M demand #1 was eliminated.
 Supply #2 was eliminated by an impulse strong enough to consolidate away. We
are talking about #3. Price returned to M DZ #3 and rallied again printing a
higher high.
 Supply eliminated plus two valleys equal to an uptrend.
When is the market considered to be over-extended?

An over-extended market is one where price has been moving in the same direction without
any correction.

Quote
Over-extesion is defined as the creation of three or more consecutive CPs, and/or three or more
large ERCs.

Once a certain timeframe is over-extended, that timeframe can no longer be used to place a
trade. We can see an example of over-extension on Gold #XAUUSD with the creation of three
CPs.
Let's look at another example of over-extension, this time a chart with three or more ERCs.
Apple #AAPL monthly timeframe is said to be over-extended on the monthly timeframe after
printing not only three but four large ERC candles.
A trendline does not equal a trend

A trendline that connects two impulses does not necessarily mean there is a
trend. The understanding of this concept is critical. Please review the definition of an
uptrend and a downtrend to fully understand this concept.

Let's look at Coca Cola #KO monthly chart below.

 We can draw a bullish trendline that connects valleys A and B.

 However, the fact that we can connect a trendline that connects two valleys does
not necessarily mean there is an uptrend. We need the all-time highs at C
eliminated.
The Range. Too low? Too high?

Definition of the range

You know how to draw imbalances and trendlines and also how to define a trend. But
there is more to it than just locating the imbalances and assessing the trend of a certain
timeframe. We must put all of that information into context. It might be that we are
trying to buy new demand levels on a smaller timeframe with a bigger timeframe supply
level in control and a downtrend. That's why we need to learn about location and
context, more specifically about the "altitude" in the supply and demand range. That's
what this lesson is all about.

Quote

The supply and demand range is the percentage used to define how expensive or cheap
any given asset is.
How is the range calculated?

Each timeframe has its own range, no matter how big or small the timeframe is. Each
timeframe range must be calculated and respected. We must use two opposing
imbalances, one above the current price (supply) and another below the current price
(demand) in the same timeframe to have a range. A single imbalance cannot tell us how
far or how close the underlying price is from another imbalance, making it impossible to
establish a range or percentage.

In all-time highs and all-time lows scenarios, we will not be able to calculate the range
because there is no opposing imbalance to do the math. We will only know when price
is too low or too high, but not both at the same time.

Let's take a look at Cisco #CSCO American stock. Try to read my mind. What am I going
to tell you?

 Monthly in a downtrend, price is within monthly supply #1.

 Longs? No way! It's not possible to go long. As of the 18th June 2020, #CSCO has been
reacting to that imbalance. It dropped almost $5 since it reached it, nearly 10%.
 What do you think happened to the retail traders that purchased shares of the stock at
$48? Exactly, they lost! Why? You should know the answer if you have been paying
attention to the range lesson.

How low is too low, and how high is too high?

 As a rule of thumb, we will use 20% and 80% to determine that the underlying asset is
too high or too low in the range to trade against it.

Quote
When an imbalance on timeframe X has gained control, trading at timeframes smaller than X will
not be allowed. For instance, if weekly supply is in control, no longs will be allowed on
timeframes smaller than the weekly.

Let’s use the previous example to determine how high or how low it would be. The next
chart shows the following calculations.

 7.5 points were the distance between opposing imbalances proximal lines. This
means the price has 7.5 points to reach the proximal line of these imbalances.
 We will use this figure to calculate the altitude based on the default of 20%.
 These are the figures we have, 113.50 as the top of the range and 106 as the
bottom of the range.
 How much is 20% based on 7.5 points? 20% of 7.5 points is exactly 1.5 points.
 Let’s subtract 1.5 from both weekly proximal lines. We end up with 112 for the
top of the range and 107.5 for the bottom of the range.
What is an imbalance in control?

As explained in the range concept, once the underlying price is very close, or within an
imbalance, it's not a good idea to trade lower timeframes against it. When do we know
that we should not be trading against an imbalance? Price should be either too high or
the imbalance should be in control. What does “being in control” mean?

Quote
An imbalance in control is an imbalance that has been tested (any number of times) and
remains unbroken. It must be hit and unbroken to remain in control without an
opposing zone gaining control.
Let’s review this concept using BlackRock Inc #BLK monthly chart. See the chart below.

 There was a monthly supply level created at [1], which was responsible for
eliminating the monthly demand at [2] that broke the all-time high after creating
a very strong impulse that consolidated away with a few bullish ERC candles.
 Once price reaches the supply [1] proximal line at [A], we consider the imbalance
to be in control. As long as the imbalance remains in control, unbroken and an
opposing zone does not gain control, then we will say that supply [1] is in control.

What should I do if the price is too high or too low in the range?

If the price is too low in the range, stop selling into it using lower timeframes. If the price is too
high in the range, stop buying into it using lower timeframes. Pretty simple! If you break this
simple rule, you will see your live account diminish very rapidly.
For instance, NetFlix #NFLX fresh weekly supply has gained control. No more buying at
timeframes lower than the weekly. No trading on daily, H4, and smaller timeframes.

There are many different scenarios where the range will tell you what to do or what not to do.
You could be one of those aggressive traders that trade into bigger timeframe ranges in control
using smaller timeframes.

Make sure to have the highest odds possible in your trades. Trading against bigger timeframe
ranges is not one of such scenarios.

Quote
The bigger timeframe always comes first, and in the long run, the bigger timeframe will win
most of the time.

An image is worth a thousand words. We will use Altria Group #MO monthly range.

 Monthly demand level in control at #1, monthly uptrend.

 At #2 price is just too low in the monthly range to go short, the bias would be to go long
at nested levels of demand on W and D1 timeframes like #4.
 We need a bigger timeframe supply in control like W SZ at #3.
 We can look for nested D1 demand levels at the new W DZ to go long.

Scoring imbalances

The importance of scoring imbalances

Qualifiers (parameters) used to score an imbalance

Consolidation away

The strength of the impulse

Freshness of a level

When is an imbalance considered as tested?

Determining the freshness of an imbalance

Basing stucture

Minimum reward/risk and profit margin

A bigger timeframe impulse that doesn't become an imbalance negates lower timeframe
imbalances
 Success at trading supply and demand imbalances is mostly based on choosing very
strong and quality imbalances that follow a clear trending market. We expect traders to
sell at quality supply zones in a clear downtrend and buy at quality demand zones in a
clear uptrend.

There is much more to it than just the trend and the strength of the imbalance. No
matter how strong an imbalance may look, many of them will just not work. We need to
somehow come up with a mechanical and straightforward scoring system that clues us
in as to what makes a quality zone.

Quote
Scoring the imbalances is very important. Everyone should stick to it to control our emotions
and all the noise that is being fed to us through various media channels. The scoring will prevent
us from having second thoughts or doubts about taking the next trade. If the particular trade
gets a passing score, it must be traded. It is for that reason that is called Set and forget.

See below the picture of a strong imbalance. We will use Snap Inc. #SNAP monthly
chart.

 New supply zones have been created at [1] and [2] at an all-time low after new
bearish strong impulses have consolidated away with at least one
full OCHL candle.
 Both supply levels have a very strong departure, that’s the kind of imbalances we
are looking to trade.
 Price did not retrace to supply [1] by a few dollars, but it has retraced to supply
[2] after a few months of correction.
Qualifiers (parameters) used to score an imbalance

See below the list of qualifiers that we will use when scoring an imbalance. These
attributes will help us filter out the good imbalances from the bad ones. There are a few
basic qualifiers that we must consider when scoring an imbalance.

1. Accomplishments. An impulse must accomplish something. Else it will not

become an imbalance. An accomplishment = trendline break or opposing
imbalance taken out.
2. Consolidation away. Consolidation away is a mandatory feature that we must
see in all imbalances.
3. Strength of the impulse. How fast or how slow price departs from a basing
structure. The stronger the impulse, the better.
4. Basing structure. Candlestick formation at the origin of an imbalance is critical.
5. Freshness. We only want to lean on fresh levels, that is, levels that have not been
tested in the past
 6.
7. Consolidation away
8.
9. Consolidation away is mandatory for an imbalance to be confirmed. It price fails to
consolidate away we will be in front of the picture of balance and not an imbalance. We
want to see an impulse strong enough to stay away from the potential base for at least
one or more full OCHL candles. These candles should, by no means, have tested the
potential imbalance, it must consolidate away and stay away from the base.

Let's look at an example of an impulse that did not consolidate away and another one that did
consolidate away. We will use Activision Blizzard #ATVI American stock. The bullish impulse at
#1 ws not strong enough to consolidate away. The impulse at #2 did consolidate away and is
confirmed as an imbalance.
No consolidation away = no imbalance = no trade

The strength of the impulse

The move away from a level or impulse is the most essential feature and odds enhancer.

How did price leave the level?

 Strongest Impulse (gap). Think of it like a NASA rocket taking off, i.e. large ERC candles
or a gap away from the level. You can give a gap away an extra point if you like because
it is the biggest representation of an imbalance in supply and demand.
 Strong Impulse. Think of it as a shot from a land-based world war cannon; those were
usually fired at an angle rather than space rockets that go vertical into the atmosphere.
This kind of departure is excellent, better if supported by an HTF imbalance.
 Weak Impulse. Think of it in terms of you pushing a car up a hill, that’s hard work!. The
candles leaving the zone are usually weak and a mixture of small bullish and bearish
candles, often 50% basing candles. Very low score = 0
 Quote
The impulse created after the basing structure has to be twice as wide as the basing structure
measured from the proximal line to the distal line. It also has to be made of at least two ERCs.
That is, a minimum 2:1 reward/risk.

Example of a strong impulse on CSX Corp #CSX daily chart

A gap is the strongest form of imbalance. A clear example can be seen on CSX Corp Stock daily
chart at [1]. A single candle at the base, the upper shadow can be used as a proximal line.
See below a second example of a very strong impulse on Pinterest #PINS on the monthly
demand level at #1.

See an example of a very week demand level on Apple Inc #AAPL weekly timeframe.
Freshness of a level

The freshness of a level is a crucial odds enhance in supply and demand. The more a level is
tested, the weaker it gets. If those retests do not accomplish anything, we should expect a
bigger penetration of the level which could end up being eliminated after a series of retests,
moreover if there is an HTF opposing imbalance in control.

 The first pullback is always the highest odds. We will only trade the first pullback
to an imbalance, that is, only fresh levels.
 The second pullback does not have the same odds. We want the highest odds for our
trades; thus, we will skip second pullbacks and wait for confirmation. Tested imbalances
require new imbalances to be traded.
 Taking a third pullback to a level is not allowed.
When is an imbalance considered as tested?

An imbalance will be considered an imbalance tested if the price retraces to its proximal line
and consolidates away with at least a full OHCL candle away from the original imbalance
proximal line.

Interactive Brokers #IBKR weekly chart example explains it in more detail.

Determining the freshness of an imbalance

The freshness of a level is essential to planning our trades and what to expect from an
imbalance. We've learnt already that we only want to trade off fresh levels since they provide the
highest odds. But when is a level considered to be tested or used-up? Every retest usually wears
a level out until it's finally broken, however depending on the bigger picture trend, a level could
be tested ten times and still hold various attacks.

There are different stages we will see when the price is approaching a fresh level:

 The level is fresh.

 The level is being tested.
 The level is tested with full OHCL candle consolidating away from the level's proximal
line.
 The level is being tested a second time.
 The level is used-up or tested a second time with full OHCL candle consolidating away
from the level's proximal line.

Fresh level
Tested level

Basing stucture

Scoring the structure at the base of a potential imbalance is crucial. The basing will tell us a lot
about what is going on before price creates the final impulse to become an imbalance. It would
help if you had experience and screen time to read price action. The basing structure will tell us
if the accumulation or distribution that happened in the area was caused or created by
professional investors. It takes time, a lot of time, to gain the experience to distinguish proper
basing from bad basing. You will not be able to identify a good structure from a bad structure
unless you spend countless hours in front of your trading platform analysing price action. There
are no shortcuts.

Quote
Remember basing candles are pauses. If you see candlestick price action at a specific price area
and you don't see a clear pause with tight candlestick bodies, then it won't be a pause. If it's not
a pause, then it's not an imbalance.

Rules are very specific about the basing structure:

 We want to see a maximum of 4-6 candlesticks at the base—no matter which

timeframe.
 Tight candle bases with bodies <= 50% of the candle range. Remember a base is a
pause, a wide body or ERC candle is not a pause.
 Strong impulse, the second leg out after the base (impulse) with ideally 2 ERC candles
closing at its high or near its high (about 80% of the whole candle range).

Example of a bad basing structure on #AWK

Basing structure is key to setting and forgetting trades and to plan new trades on the
confirmation. On #AWK weekly chart, I have drawn four areas to compare the basing structure.

 [1] has a lot of trading, more than six as per the rules. Not good to plan a trade on
nested levels
 [2] has a very similar structure to [1], too much trading. It was not respected
 [3] had a lot of trading at the base as well; it was respected for a couple of weeks and
then eliminated.
 These three zones have nothing to do if compared with the basing structure at [4], just
four tight candles accompanied by a very strong decline. That does not mean we can
short because the weekly trend is up; we must wait for confirmation. But if supply at [4]
starts playing out, price action at [1] is most likely going to be eliminated on the way
down.
See below an example of a bad basing structure on Gilead Sciences #GILD monthly timeframe.

Minimum reward/risk and profit margin

A minimum 2:1 imbalance and one full OHCL candle consolidating away from the level is
needed, as well as 3:1 profit margin or more to the opposing level.

If the imbalance has not accomplished a minimum 2:1 R/R, it will be considered as non-
tradeable and confirmation will be needed. Not having met the minimum 2:1 RR criteria does
not mean that it's not a valid imbalance. The imbalance will be valid but non-tradable
(confirmation needed), do not confuse these terms. The only compulsory factors necessary for
an imbalance are consolidation away, taking out opposing zone and/or breaking a trendline. A
2:1 RR is a minimum .requirement for tradeability. It does not negate the level as a valid
imbalance.

Quote
Different trading plans can have different Reward Risk criteria, yours could require a minimum
3:1 RR, 2.5 or even 1.5:1. That does not change the fact that an x:x RR imbalance has eliminated
an opposing zone, an opposite zone can be eliminated by an imbalance that accomplished a 1:1,
2:1, 3:1 or higher RRs, we must decide which is the minimum RR we want to use to validate a
potential zone, else wait for confirmation
A bigger timeframe impulse that doesn't become an imbalance negates lower timeframe
imbalances

If any of the three timeframes in our sequence stops creating impulses that consolidate away or
the newly created imbalance doesn't score high, it will negate lower timeframe imbalances
nested at those HTF impulses that do not consolidate away. Remember that not all impulses
become correct imbalances, but all imbalances are made of impulses.

Let's have a look at an example using Nikkei 225 Index

 A bigger timeframe impulse doesn't consolidate away negates lower timeframe valid
imbalances.
 Monthly is in a clear uptrend. However, the last impulse at [1] was not strong enough to
consolidate away, thus, negating demand levels in timeframes lower than the monthly.
One of those imbalances is weekly demand [3] responsible for eliminating strong weekly
demand at [4].
 Now the weekly chart created new supply zone at [4].

Multiple Timeframe Analysis

How to use multiple timeframe analysis to plan a trade

What timeframe sequences can I trade?

What's the role of each of the timeframes in a sequence?

I have a job, what is the best sequence?

What type of trader do you think you are?

How to use multiple timeframe analysis to plan a trade

Multi-timeframe analysis (MTF) is a process in which traders assess at least three

different timeframes to make proper trading decisions. MTF will also allow us to put the
charts price action in the context with the long-term trend.

Typically, novice traders lock in on lower timeframe sequences, ignoring the more
powerful primary trend. Alternatively, traders may be trading the long-term trend but
underestimating the importance of refining their entries in an ideal short-term time
frame. Which time frame should you track for the best trading outcomes?

Multiple timeframe analysis is paramount in any strategy, supply and demand is

not an exception. To make a top-down analysis, we need to choose a sequence of
timeframes. The smaller the number of timeframes used in your sequence, the lower the
odds of the trade setups you will find, because you will have a distorted view of what
the bigger picture trend is doing.

Don't worry. Multiple timeframe analysis isn't as complicated as it sounds! Multiple

timeframe analysis will help us to be on the right track and multiply returns if done
correctly. To consistently make money in the markets, as traders, we need to learn how
to identify the underlying trend and trade around it accordingly. Typical clichés like
"trade with the trend" or "the trend is your friend" can be read everywhere.
Let us imagine a juggler, using two identical balls. At some point, the two balls will be at
the same height - with one going up, and the other coming down, the force of gravity is
playing out here. Both are moving under the momentum of exterior forces. The same
could even be true of four, six or any number of balls. At any one time, several variations
of momentum could be in play.

In terms of an absolute price, what is the difference between a stock that is rising and a
stock that is falling? If you believe that the true value of that stock is much higher than
the current price, then how does the recent history and current momentum of price
action affect your decision to buy or sell? The answer depends upon your personality,
the type of trader you are and your market psychology. Is the current 'glass' half empty,
or half full?

Quote
Basing our decisions on the analysis of a single timeframe is not enough to make a
trading decision. We need more timeframes. We need multiple timeframe analysis. The
more timeframes aligned in the same direction, the better. We will have more
information to base our trade decision than just a few candles (or balls) rising and
falling.

As you can see, this poses a problem. Traders sometimes get confused when they look
at the daily timeframe and see an excellent supply zone and a sell signal, then they hop
on the 4-hour timeframe and see price slowly moving up in an uptrend. What are you
supposed to do? Stick with a single timeframe? Take the sell signal and completely
ignores the other timeframe?

You won’t be able to see the woods for the trees, because you will be so involved in the
details of something that you will not notice what is important about the thing as a
whole. By looking at lower timeframes or a single timeframe, you will miss the woods or
the big picture trend, the location and context of bigger timeframe price action.

Each timeframe has its imbalances. Imbalances and trend in a single timeframe are not
enough to make a high probability decision. Once you have decided on your timeframe
sequence, you will have more tools to produce high probability decisions by
triangulating the location of new imbalances against the overall big picture trends,
context and location.

What timeframe sequences can I trade?

One of the reasons traders don't do as well as they should is because they're usually
trading the wrong timeframe for their personality. New traders would have heard a few
of those charlatans promising them to get rich quick, so they'll start trading small
timeframes like the 1-minute or 5-minute charts expecting the miracle to happen. Then
they end up getting frustrated when they trade because those timeframes do not fit
their personality. It's like trying to drive a Formula 1 car at 300 km/h when you just
passed your driving license exam. You are going to likely end up in the hospital (or
worse) driving at such high speeds.

Multiple timeframe analysis involves monitoring the same instrument across different
timeframes. While there is no real limit as to how many timeframes can be monitored or
which ones to choose, there are general guidelines that we should follow as a trader.

Quote

Using multiple timeframe analysis with at least three different timeframes will give you a
broader view of any market.

Using fewer than this can result in a considerable loss of data while using more typically
provides redundant analysis and indecision.
Selecting the correct timeframes in your sequence is the first and the most crucial step.
A long-term trader who holds positions for months will find little use
for M15, H1 and H4 charts.

There are different sequences you can choose. You need to choose the one that fits your
personality. Base your timeframe sequence decision on two things:

 The amount of free time you have available for trading.

 The amount of free time you want to have to enjoy the company of your friends and
beloved ones.

Quote

If you have a non-professional mindset and expectancy, that's what your results are going to
look like. You are going to get non-professional results and end up blowing up your trading
account again and again.

When all three timeframes are combined, you will easily improve the odds of success for
your trades. Performing a multiple timeframe analysis helps you trade with the larger
trend, what we usually refer to as the bigger picture.

Timeframe sequences

Find below a list with the different timeframe combinations we can use together with
the timeframes in each sequence:

 Quarterly sequence (long-term): Quarterly (3M), Monthly and Weekly charts.

 Monthly sequence (medium-term): Monthly, Weekly and Daily charts.
 Weekly sequence (swing): Weekly, D1 and H4 charts.
 Daily sequence (intraday): Daily, H4 and H1 charts.
 Scalping sequence (scalping): H4, H1 and M15/M5 charts.

The bigger the timeframes used in your sequence, the longer you are going to have to
wait for new imbalances to be created. The smaller the timeframes, the more imbalances
will be created in a shorter period of time. This creates more trading opportunities, more
winners, and more losses.
What's the role of each of the timeframes in a sequence?

Each timeframe has its own role. For instance, in the the medium-term sequence also
referred to as the "monthly sequence" from now on, is composed of three timeframes.

 Top timeframe: Monthly

 Middle timeframe: Weekly
 Lower timeframe: Daily

We might also refer to the monthly sequence by using the MWD abbreviation, which
stands for the three timeframes used in the sequence.

What is the function of each of these timeframes?

The top timeframe will give us direction

The top timeframe (monthly) will give a directional bias. We will only trade in the
direction of this chart. If the Monthly is trending up, only longs will be allowed. Likewise,
if the Monthly is trending down, only shorts will be allowed.

The middle timeframe will give us intermediate direction

The middle timeframe (Weekly) will give us an intermediate direction. The middle
timeframe (Weekly) can also be used as the execution timeframe.

The lower timeframe will be the execution timeframe

The lowest timeframe in the sequence (Daily) will be the execution timeframe. We will
locate imbalances on this timeframe to plan our trades in a medium-term sequence.

I have a job, what is the best sequence?

Most traders who look to make a change in their life and career try to make a living by
trading with a full-time job. Having a full-time job is the most common scenario; it can
limit their time and energy for trading. At least, in the beginning, it’s likely that they’ll
need to juggle working full time with their new trading career as studying and
backtesting is far more critical at the start than actually making trades and making
money.
It can take you years to become consistently profitable, and that can only happen by
studying and practising every day, so it takes time to make enough income from trading
to quit your job.

This brings the question: how can you pursue trading with a full-time job? How do you
make time for trading and studying while maintaining a good work ethic at your full-
time job? This can be a challenging time of transition.

We don’t want to discourage you by saying this, but it’s a simple fact that by juggling
working full or part-time and trying to be a trader will be challenging. Many of today’s
successful traders formerly held full-time jobs. Yours can also be a success story.

You must be clever with time management

Trading with a full-time job will require some creative time management. You’ll need to
juggle commitments and make time for your trading. You were waking up earlier,
researching potential setups very early or very late in the day depending on your shifts,
or coming up with possible trade setups on Sundays when you will probably have more
free time to look at the charts. These are a few ways that you can make use of your free
time so that you can maximize the minutes you have to trade during market hours.
While many people will claim “I have no time,” it’s incredible how much time you can
make if you cut out frivolous things like mindlessly watching TV, reading your Facebook
wall or watching Youtube for hours at a time.

You will have to say no to many things

To pursue trading with a full-time job, you're going to have to learn the power of saying
no. Your time and mental energy are at stake now, and you don't want to overexert
yourself, or you'll burn out. You don't want to have a mental breakdown, and end up
giving up trading before you even start.

So, what's the best sequence if you have a full-time job? The answer is simple. There are
two sequences you can use.

The monthly sequence is the first option

You would use the Monthly, Weekly and Daily timeframes as explained in a previous
lesson and you would plan your trades at daily imbalances. A daily imbalance takes a
few days to be formed, and it may take a few more for price to retrace to it, if it ever
does. You will have plenty of time to do your top-down analysis. You can look at the
charts day in day out, no worries with missing trades.
The weekly sequence is your second option

You would use the Weekly, Daily and H4 timeframes as explained in a previous lesson.
You would plan your trades at H4 imbalances. This is a faster sequence
since H4 imbalances can be formed in a single day. You would also have plenty of time
to do your top-down analysis without fear of missing out on too many trades.

Both the monthly and weekly sequences are ideal if you have a full time or part-time
job. Using smaller timeframe sequences like the Daily sequence will provide with more
setups, but you will have to pay closer attention to the charts. You will have more trades
on the H1 timeframe (or even smaller timeframes) but also more losses. The lower the
timeframe, the more imbalances and the faster trading decisions must be taken. You
need much more experience to trade the lower timeframes imbalances, not
recommended if you have a full-time job.

Since time will be at a premium as you embark on trading with a full-time job, it's
essential to get organized. Being organized both at work and home will reduce mental
clutter and maximize free time so that you can focus on trading.

For example, if you have a family, you might consider establishing blocks of time that
are reserved for you to focus on trading. During these times, your partner might be
responsible for cooking, taking care of the kids, and so on. Anything that you can do to
organize your life will give you more time and space for trading, and there's a real value
in that.

To help maintain motivation for trading with a full-time job, consider your ultimate
goals. What is it that you hope to get out of trading? It's common to think of quitting
your day job. Does that sound like you? Perhaps you want to try something different.
Trading can be the vehicle that helps you make change happen.

But don't just think about career goals. Think about your long-term goals and what you
hope to gain from trading. Do you want to buy a new house? Or maybe have a better
life with more time for your family and your beloved ones? Considering these long
terms goals can help give you the determination and energy required to start trading
while maintaining a full-time job.

What type of trader do you think you are?

At this point in the course, you should have all of the essential tools necessary to make some
sense of the markets and to make well-calculated forecasts of future trends and movements.
What you have learned will help you incorporate these supply and demand tools into a more
personalized and concrete trading strategy.

Strategies can be broken down across many different lines. Short-term strategies must be
distinguished from long-term strategies. Strategies based on fundamental analysis (not ours)
will be different from strategies based on purely technical analysis. Leveraged Forex spot trading
will require a different kind of strategy from trading options, and so on.

Set and Forget’s supply and demand strategy is purely a technical strategy. Those with
larger profit goals and shorter attention spans will probably gravitate toward trading strategies
that are grounded in technical analysis. There is plenty of evidence that the majority of currency
traders fall into this category.

For example, many Forex brokers do not offer long-term charts and historical data because most
traders aren’t interested in them. News releases are in and of themselves noteworthy, but are
only relevant, because of the volatility that they generate may threaten lower timeframe trading
strategies.

Quote
My definition of a short-term strategy duration is anything less than one day, where positions remain
open for minutes and hours.

The advantage of closing all positions at the end of each trading day is that you don't have to
worry about how the market performs when you are not active in front of your trading platform.
Besides, intraday leverage is free, as rollover interest rates are usually charged on overnight
positions.

The downsides of having an intraday time horizon are increased pressure, stress, and higher risk.
Profits on individual trades may not exceed a few dozen pips, which means that the trades need
to be timed perfectly, and the spread becomes a critical variable in the trading decisions.

For better or worse, tremendous leverage exceeding 200:1 and up to 400:1 are available at many
Forex brokers. It is the rule for these kinds of trades, adding to the sense of pressure and stress.

If you choose to adopt a short-term technical trading strategy using very small timeframes,
otherwise known as scalping, you will be limited to a handful of the most liquid currency pairs
during the most liquid hours of the day.

There will always be technical traders that complain about the lack of flexibility inherent in
mechanical trading strategies. For these traders, technical indicators are an essential guide for
making trades but are no substitute for experience. These traders might try to adhere to a
handful of technical trading rules. At the same time, they will probably believe that "rules were
made to be broken". They might start ignoring the indicators they use and enter a trade
prematurely or not enter at all, wary that a potential rally may turn into a fake-out and lose the
trade. They may take profits early or hold the trade for longer than allowed when their rules and
indicators show that the asset has reached an overbought or oversold position. As supply and
demand traders, we will tend to do exactly that. We will believe that the opposing supply level
will not hold and give away all our profit because the level held. Above all else, most technical
traders trust their intuition more than the technical indicators they are using to enter and exit a
trade.

Quote
As with most aspects of a trading strategy, there is no right answer to which approach is better. My
advice is that you should always lean on the side of trusting the rules that you have committed to
learning.

You have chosen to trade Set and Forget's supply and demand strategy, so please err on the
side of trusting what I have developed and traded for a long time. Without experience, you
don't have much of an alternative. Even with experience, you should trust these rules, and
maybe once you've mastered them, you could think of incorporating extra variables that you've
tested yourself. At this point, you are most likely to confuse emotion with intuition, which could
lead to expensive mistakes early on in your trading career. As you hone the strategy, trust the
imbalances and begin to achieve a certain degree of success, you might relax the reins slightly
and allow yourself some flexibility in the way that you execute the trading strategy.

Before you can decide how much faith you put in a trading system, you must first create such a
system. You don't need to do that though, because you have decided to trust Set and Forget's
system. Give it a chance, follow its rules, test it over a long period of time, and master it. Spend
your time and resources doing the right thing, do not even try to tweak a system you have not
mastered, and are not successful at. Spend your time opening up hundreds of charts using your
preferred timeframe and sequence and try to loosely identify the current imbalances that apply
to the asset you've selected. Is it trending upward, downward, or out of alignment? From here,
you can layer on a couple of indicators to help you identify 50% basing candles and engulfing
patterns. The next steps would be to fine-tune your understanding of the rules. You must
analyze how the asset has performed in the past following the same rules and patterns.

When an asset is following a long-term trend, a long-term fundamental analyst will usually treat
any deviations from that trend as random or inconsequential. Their goal is to profit from the
overall trend, not from the ebbs and flows along the way. Are you the type of a trader that is
willing to hold a trade for long periods, withstanding the ebbs and flows of that particular
underlying trend you have decided to trade?

A short-term trader, in contrast, probably won't find much use for fundamental analysis unless
he is intentionally trading the news. The benefits of medium-term trading should be easy
enough to understand.

Quote
Fundamental analysis is used by many analysts to predict trends, and technical analysis is used
to confirm them. Technical analysis is used to spot trends, and fundamental analysis is used to
understand them.

Do you think that you can understand fundamental analysis? Every time there is a news release
in the currency world, analysts will have different opinions about what might happen after the
announcement. Do you think that you can outsmart those experienced fundamental analysts? I
don't think I can, do you? Fundamental analysis should not be part of your trading rules. Set and
Forget's strategy does not use it.

I started as a short-term trader, trading 5M and 15M charts on Forex and I now trade weekly and
monthly imbalances, and even bigger timeframes. I've evolved as a trader, I've learned what is
essential and what it is not. I learned that I am a big-picture thinker, and I thoroughly enjoy
attempting to untangle the massive puzzle that is supply and demand trading and how it affects
the global markets.

What type of trader are you?

You must make a decision and decide what type of trader you are. This decision is the most
important one in your trading career, so do not rush. You have learned about the imbalances,
the bigger timeframe sequences, you've seen how price reacts to these imbalances as if they
were magical zones. Are you the type of trader that is willing to spend many hours a day looking
at the charts trying to get a paycheck at the end of the week? Or are you the type of trader that
would love the markets to reveal their true nature over a longer period of time while enjoying
the pleasures of life and doing the things you love?

You probably have a full-time job, haven't you? You don't have too much choice here. If you
start trading the smaller and faster timeframes to make sense of the markets in the short-term,
you will end up losing your money. Working full-time is very demanding; your energy and focus
will be dedicated to your job because it provides you with the one thing that keeps your family
together, money. Trying to incorporate trading in such a life is very stressful and could end your
relationship and lead to filing for bankruptcy.

Do not rush. It might take months or years before you learn who you are and what you want. I
will end with something that has stuck with me for many years.

Quote
Most people don't get what they want not because they can't, but because they don't know what
they want.

I do know what I want, do you?

The Realignment. Using multiple timeframes to locate a trade

The Sequence and The Realignment

What is a nested imbalance?

Can a zone be nested if it's not contained entirely within a bigger timeframe?

Different sequences result in different trading deicisons

The Sequence and The Realignment

The sequence and the realignment concepts are a mechanical approach for a top-down analysis
that will allow us to do the same kind of analysis over and over again, thus reinforcing the rules
and our beliefs in what the rules we trade. We must choose three timeframes for our sequence
and learn about the trend for each of them.

Each timeframe will have its trend and imbalances, completely independent from other
timeframes. The main idea is to have aligned as many timeframes as possible in the same
direction.

Quote
These rules state where the price is most likely that a predictable move will happen. Price can do
anything, we're talking about probability and tested scenarios/environments here

 Choose three timeframes for your sequence. MWD, WDH4, anything, and stick to this
combination. Don't add more. If you add more you will always find a reason not to take a
trade, don't over-complicate things.
 Draw last bullish and bearish trendlines on all the three timeframes to locate the latest
imbalances.
 Start your analysis from the highest timeframe in your sequence and step down
timeframes until you find the first timeframe where the trend has been broken, as shown
in the screenshots attached.
  Once we have located the timeframe that has lost momentum and alignment, switch to
one timeframe higher than the one where the trend is broken, and wait for the price to
hit a valid imbalance to keep on trading in the direction of the higher timeframe's
direction and realign with the HTF sequence and trend.

The following slides use the Monthly, Weekly and Daily timeframes as an example. Any
timeframe combination can be used, but I highly recommend you to use this combination
because I guess you want to have a life, maybe I am wrong, and you love staring at your trading
platform for hours chasing for trades. The number of trading opportunities often limits traders
due to the time it takes to analyse multiple markets. When analysing the bigger imbalances and
sequences, we will be able to move through hundreds of markets at a relatively fast pace. Less
time in front of the computer, less stress and less over-analysis and over-trading, resulting in a
better life and relationship with your couple, children, family and friends. Family and friends are
away more important than your trading my friend, do not ignore that fact, far more important.

Quote
The scenarios below do not explain all possible combinations where one each timeframe has a
different bias. The idea is to trade in the direction of the top timeframe of your sequence.
Any scenario not included in these three slides will be considered advanced and will require a
thorough understanding of price action and counter-trend scenarios (not covered in the core
rules).
What is a nested imbalance?

Nested zones are supply and demand imbalances that are located within a higher timeframe
zone than the one where the imbalance has been detected. These nested zones can be used to
lower our risk by drilling the entry timeframe to a smaller zone at a lower timeframe.

For example:

 An H4 demand zone at a D1 demand which is at a WK demand zone with the WK/MN in

an uptrend is a way to drill down our entry to have a lower $ risk entry at a much
narrower level.
 A D1 demand zone within a WK demand zone with a WK/MN uptrend is an excellent
way to reduce our entry-level for a lower $ risk entry.
For a zone to be considered nested, does the LTF zone has to have both their distal and
proximal lines inside the HTF zone, or can the LTF have only the distal line inside the HTF and
still be considered nested?

The nested LTF zone may straddle the HTF zone: e.g. a nested D1 DZ within a WK DZ -
the D1 DZ may have its proximal line slightly above the proximal line of the W DZ, subject to
the D1 DZ having its distal line within the W DZ.

See an example below using Netflix #NFLX American stock. Strong D1 demand level at #2 is
nested (contained) inside the W demand level at #2

Quote
Nested zones combined with the sequence and the realignment concept is a very powerful and
mechanical way of lowering the risk in our entries.

Can a zone be nested if it's not contained entirely within a bigger timeframe?

Yes. A nested zone can be contained entirely within the bigger timeframe. The zone will be
considered nested as long as it's touching or overlapping the bigger timeframe's proximal line.

Different sequences result in different trading deicisons

Multiple sequences can coexist. You must choose a sequence and stick to it. Experience will tell
you how to use multiple timeframe sequences in your favour.

It's very common to see multiple sequences happening at the same time, which is why you
should always stick to the timeframe sequence you've decided to trade and ignore the other
sequences. It's a good idea though to have a look at one timeframe higher to see whether your
sequence might be going against a strong opposing imbalance on a bigger timeframe.

See below a few nested sequences for US DOLLAR #DXY

  3M sequence. 3M SZ in control, too high in the 3M range to go long at W demand
zones. We would be waiting for new W SZ to be created instead. Shorts if new W supply
zones are created.
 M sequence. M SZ [1] in control. Last M bullish impulse not strong enough to
consolidate away or accomplish anything. No longs allowed against it at lower
timeframes.
 W sequence. W uptrend with W DZ [2] in control responsible for eliminating [3]. Longs
bias.

Seeing the big picture location on both M and 3M sequences, it tells us that the W DZ is in
jeopardy and will most likely be eliminated. If unaware of those bigger timeframe supply zones,
then longs are possible. It's highly recommended to take a look at the bigger timeframes to
learn why the price could be reacting the way it does. In this case, we learned that M and
3M SZ are in control, so it's a big NO to longs.

Planning a trade

The waiting game. You need to be patient.

How many different order types are there?

How can I plan a trade?

Set and Forget versus confirmation type of trades

Should I trade against the trend by taking counter-trend trades?

Always ask yourself the $1 million dollar question before placing a trade

What to do if the top timeframe of my sequence is out of alignment?

The waiting game. You need to be patient.

Trading is all about waiting and being patient. We could say that we are emotional
beings with a rational mind that helps us analyze our environment to make decisions.
However, if we are impatient, our emotional mind will take control of our mental
processes that pertain exclusively to our rational minds. We must not let our emotional
mind take over our rational decisions. Otherwise, we are doomed to fail in our
endeavours.

Trading is not an exception. As a technical analyst, all the decisions must be based on
raw data derived from your technical multiple timeframe analysis. The rules in your
trading plan will decide what you can do and what you cannot do.

Quote

Waiting is the action of staying where one is or delaying action until a particular time or until
something else happens. As a trader, you just have to do that, putting aside all your emotions,
fear and greed included.
How to turn waiting into patience

First, get clear on what you're waiting for. For instance, the realignment rules tell us that
if the weekly is out of alignment and the monthly is still trending up, we should be
thinking of going long at monthly imbalances and nested imbalances.

Putting patience and waiting into context

Let's put patience and waiting into context by looking at a trading scenario.

 Coca Cola #KO stock is rallying on the weekly chart. It starts to pull back but then stalls
out at [1].
 You buy expecting the uptrend to start again, but instead, the pullback continues, and
you find yourself in a losing position.
 Price stalls again; thankful for the pause in the selling you get out with a loss. You're
upset you didn't wait for a better entry point, right at the weekly demand level [2] you
had set an alert at.
 You aren't even paying attention to the stock again because you are angry with yourself
and you don't look at it for some time.
 You just missed the real entry point and a winning trade. Sound familiar? See the chart
below. It shows the scenario explained for Coca Cola #KO weekly timeframe.

The trader in this example not only lost on a trade he jumped into prematurely but then
he also missed the real, textbook entry point at weekly demand [2] that he would have
executed at had he been a bit more patient and followed his trading plan.

f you're still getting into trades too early, use a bigger timeframe sequence to force you
into waiting longer. If you were using a weekly sequence, switch to the monthly
sequence. This simple action will force you to be more patient, keeping you out of some
of those losing impatient entries and getting you into more profitable trades. As a
bonus, you'll have less stress and frustration in your trading.

As a member of Set and Forget's trading community and one of its subscription
plans, you will be able to ask for feedback on the potential trades that you have located.
This kind of feedback will help you tremendously accelerate your learning curve.

How many different order types are there?

You’ve got everything you need to plan your first trade. Once we choose a sequence of three
timeframes and learn about the trend of the top timeframe, you should be ready to go and plan
trades by using the realignment rules as our guideline.

But how do I plan a trade? Where should I place my entry? What about my protection? When
should I exit my trades and take profit? There are certain variables you need to take into account
when planning a trade. We are going to cover all of them in this lesson.

Quote

You should never place a live trade using this strategy or any other strategy unless you've been
profitable for at least 6-9 months on a paper account and then 6 more months in a small live
account. You would be breaking every single rule!
Order Types

There are several order types we can use to plan and execute a trade. Your trading terminal
might have some more, but mostly there are four types.

 Market Orders
 Limit Order
 Stop Loss
 Take Profit

An order is a client's commitment to a brokerage company to perform a trade operation. The

following orders are used in all trading platforms.
Market Order

With a market order, you’re indicating that you’ll buy or sell the stock at the best available
current market price. Because a market order puts no price parameters on the trade, your order
will be executed immediately and fully filled, unless you’re trying to buy a million shares and
attempt a takeover coup.

Don't be surprised if the price you pay — or receive if you're selling — is not the exact price you
were quoted just seconds before. Bid and ask prices constantly fluctuate throughout the day.
That's why a market order is best used when buying stocks that don't experience wide price
swings — large, steady blue-chip stocks as opposed to smaller, more volatile companies.

Good to know:

 A market order is best for buy-and-hold investors, for whom small differences in price
are less important than ensuring that the trade is fully executed.
 If you place a market order trade “after hours,” when the markets have closed for the
day, your order will be placed at the prevailing price when the exchanges next open for
trading.

Limit Order

A limit order gives you more control over the price at which your trade is executed. If ABC stock
is trading at $50 a share and you think a $48 per-share price is more in line with how you value
the company, your limit order tells your broker to hold tight and execute your order only when
the asking price drops to that level. On the selling side, a limit order tells your broker to part
with the shares once the bid rises to the level you set.

Limit orders are a good tool for investors that are buying and selling smaller company stocks,
which tend to experience wider spreads, depending on investor activity. They’re also good for
investing during periods of short-term stock market volatility or when the stock price is more
important than order fulfilment.

There are additional conditions you can place on a limit order to control how long the order will
remain open. An "all or none" (AON) order will be executed when all the shares you wish to
trade are available at your price limit. A "good for day" (GFD) order will expire at the end of the
trading day, even if the order has not been fully filled. A "good till cancelled" (GTC) order
remains in play until the customer pulls the plug or the order expires; that's anywhere from 60
to 120 days or more.

Good to know:

 While a limit order guarantees the price you'll get if the order is executed, there's no
guarantee that the order will be filled fully, partially or even at all. Limit orders are placed
 on a first-come, first-served basis, and only after market orders are filled, and only if the
stock stays within your set parameters long enough for the broker to execute the trade.
 Limit orders can cost investors more in commissions than market orders. A limit order
that can't be executed in full at one time or during a single trading day may continue to
be filled over subsequent days, with transaction costs charged each day a trade is made.
If the stock never reaches the level of your limit order by the time it expires, the trade will
not be executed.

There are several order types you need to be aware of:

 Buy Limit – buy provided the future "ASK" price is equal to the predefined value. The
current price level is higher than the value of the placed order. Orders of this type are
usually placed in anticipation of the security price, having fallen to a certain level, will
increase.
 Buy Stop – buy provided the future "ASK" price is equal to the predefined value. The
current price level is lower than the value of the placed order. Orders of this type are
usually placed in anticipation of the security price, having reached a certain level, will
keep on increasing. This type of order is commonly used for breakout trading.
 Sell Limit – sell provided the future "BID" price is equal to the predefined value. The
current price level is lower than the value of the placed order. Orders of this type are
usually placed in anticipation of the security price, having increased to a certain level, will
fall.
 Sell Stop – sell provided the future "BID" price is equal to the predefined value. The
current price level is higher than the value of the placed order. Orders of this type are
usually placed in anticipation of the security price, having reached a certain level, will
keep on falling. This type of order is commonly used for breakout trading.

Stop Loss

This type of order is used to minimize the losses if the security price has started to move in an
unprofitable direction. If the security price reaches this level, the position will be closed
automatically. Such orders are always connected to an open position or a limit order. The
brokerage company can place them only together with a market or a limit order.

Take Profit

This type of order is intended for gaining profit when the security price has reached a certain
level. The execution of this order results in the closing of the position. It is always connected to
an open position or a limit order. The order can be requested only together with a market or a
limit order.
How to buy a stock or any asset

Today, the easiest option is to buy stocks or a Forex currency pair through an online
stockbroker. You first need to open a brokerage account. Opening an online brokerage account
is as easy as setting up a bank account: You complete an account application, provide proof of
identification and choose how you want to fund the account. You may fund your account by
mailing a check or transferring funds electronically.

How do you find a broker that’s worthy of your dough? It’s not just about finding the one with
the cheapest trading commissions. Paying a few bucks more per trade at a brokerage that
provides high-quality customer service is worth it, especially when you’re new to buying stocks.

Some other things to consider when opening an account to buy stocks:

 How much money you have. Many online brokers have a $0 minimum requirement to
set up a traditional individual retirement account or Roth IRA. For a regular brokerage
account, the minimums can range from $0 to $2,000 or more.
 How frequently you plan to trade. At most brokers suitable for new investors, online
stock trading commissions run between $5 and $10. Low commission costs will be more
important to active traders, those who place 10 or more trades per month. Infrequent
traders should steer clear of brokers that charge inactivity fees.
 How much support you want. Consider the broker’s offerings of educational tools,
investment guidance and access to real, live humans via phone, email, online chat or
branch offices.

We will discuss different online stockbrokers in another lesson in more detail. Let’s focus on how
to plan a trade based on an imbalance. We are taking for granted that this imbalance is a high
score valid imbalance that follows the realignment rules.

Before we plan our first trade and protect it with a stop loss we need to review a couple of
trading terms that are critical to planning a trade., the bid and the ask price.

 Ask. For buyers: The price that sellers are willing to accept for the stock.
 Bid. For sellers: The price that buyers are willing to pay for the stock.
 Spread. The difference between the highest bid price and the lowest ask price.

There are a lot more fancy trading moves and complex order types. Don’t bother right now — or
maybe ever. Investors have built successful careers buying stocks solely with two order types:
market orders and limit orders.

You are now ready to plan your first virtual trade.

How can I plan a trade?

How can we calculate risk when looking at a price chart and an imbalance? An
imbalance can be traded in multiple ways depending on the entry timeframe that
you use and available capital in your trading account.

Remember, the lower the timeframe you use, the higher the odds of missing the trade
by having price react to the bigger timeframe imbalance and falling short of reaching
the lower timeframe imbalance.

The same type of calculation will be done on Forex cross pairs, ETFs, Commodities and
Futures. Each market has its own peculiarities. When trading stocks, you buy shares in
multiples of 100 (odd lots with less than 100 shares are allowed in some brokers). When
buying Forex, you buy lots, mini lots and micro-lots. When trading options, you buy
contracts where each controls 100 shares. It all comes down to the width of the
imbalance; the market is irrelevant. You must measure the distance between your entry
and your protection and calculate the 1% risk based on the account balance at that
moment of placing the trade, without taking into consideration the unrealized profit
from existing trades.

We will use Coca Cola #KO example from a previous topic.

Coca Cola #KO weekly imbalance

Let's take a look at what would have happened on Coca Cola #KO had we drilled down
our entry to a smaller timeframe. See the chart below. It shows the kind of price action
and imbalances we could see on daily timeframe right within the weekly. There were
several options: let's enumerate them.

Option 1. Find a lower timeframe daily imbalance nested within the weekly imbalance

 There was a daily demand level at [1] nested at the weekly proximal line.
 The stop-loss would initially be at its distal line at [A], but since we need to add
25% of padding, the stop loss would have to be placed at $45.23 instead.
Option 2. Plan entry right at half of the weekly imbalance

 Price penetrated half of the weekly imbalance, of which proximal and distal lines
are drawn in blue dashed lines.
 The entry would have happened at [1], the stop loss protection should have been
placed 25% beyond the distal line of weekly demand level at [2] as explained in
previous examples.
There are a few options to plan the trade, let’s go over them:

 Take the full imbalance based on your entry timeframe, in this case. We would
plan the entry at weekly demand proximal line at $46.25, including the entry
padding.
 Use half the width of the original imbalance. The entry would be around
$45.15.
 Locate a lower timeframe imbalance inside the imbalance. In this case, it was
a daily demand at the proximal or distal line and it was used to drill the entry
down. Also, it would have been a daily demand level at $46.48, of which the
proximal line was slightly above the weekly proximal line.
 Use a lower timeframe imbalance located at the distal line of the bigger
timeframe imbalance. In #KO we used an imbalance situated at the proximal
line, there will be many cases where the imbalance is located right at the distal
line. When using such imbalances, make sure you use the stop padding you
would use for the bigger timeframe imbalance.

There are very important conclusions we can draw from these examples:

 The lower the timeframe, the smaller the dollar risk.

 The wider the imbalance, the bigger the dollar risk.
 The smaller the dollar risk, the more shares we can purchase.
  The bigger the timeframe, the bigger the dollar risk and the more the underlying
stock will have to move in our direction to make a profit.
 The smaller the timeframe, the higher the odds to miss the trade. Price could just
react to a bigger timeframe proximal line and take off without us.

 Set and Forget versus confirmation type of trades

Set and forget trading is as simple as its name implies, you just set the trade up and then forget
about it until the trade is triggered, either for a win or a loss. This way of trading has several
significant benefits:

1. It makes it far easier to remove your emotions from the equation. Emotions are our
worst enemy when trading.
2. It also allows you to enjoy your life as you usually would because you will not be
spending countless hours staring at your computer over-analyzing the markets.

News will be irrelevant to your trading. Fundamental analysis can very objective. Nobody knows
what can happen.
Unfortunately, traders become lost with the vast amount of data available over the internet and
TV. It is extremely easy to experience analysis paralysis while trying to trade Forex or any other
financial market. It can be overwhelming to try and make sense of all this information and create
a Forex trading plan based on this amount of information.

The belief that more is better can be a psychological trap that often keeps us from
consistently profiting in the market, and is the reason why many blow out their trading
accounts and eventually give up entirely on their dreams of becoming a trader. I've gone
through this process myself, as most of us, and I believe that all traders have and should go
through it, it's part as your evolution as a trader.

In a broad sense, we can divide the type of trades in two:

 Set and Forget trades. Trades that require no confirmation. The odds are with us, won't
care what the market decides to do or what happens upon arrival to our entry, as long as
the bigger picture is with us.
 Confirmation trades. These are trades that require confirmation for several reasons: the
level is wicky, tested or used-up, the trend is not with us, there is a critical obstacle
against the set and forget entry, OR you are neither sure nor comfortable about it, and
you just wait for a confirmation.

Quote
People that over-complicate their analysis are providing that predictability for the professionals
to take advantage of; the money flows from those who don't know what they are doing to those
who know what they are doing (professionals).
When to set and forget your trades

If the level scores high and the trend is with it, set and forget trades will be possible. Use only
fresh levels of supply of demand when the market is trending. The first pullback is the safest and
has the highest odds of working out. Non-fresh levels can also work, but rules do not allow us to
take them unless there is confirmation in lower timeframes.

When to wait for confirmation

There are times when the markets are not behaving ideally or the way we wanted them to, let
me be frank with you, most of the time markets are not doing what we want them to do,
resulting in us chasing the trades as if they were the only ones that will ever exist.

Quote

Confirmation is defined as a brand new imbalance created at a bigger timeframe imbalance or a

bigger timeframe confluence.

Let's have a look at an example of a confirmation type of trade.

DEUTSCHE TELEKOM STOCK MONTHLY WEEKLY SET AND FORGET LONG

Strong monthly demand with two powerful bullish ERC candles at [1]. Set and forget weekly
demand at [2], entry at [3], second retest at [4]. Clear monthly uptrend, longs at nested weekly
and daily demand zones. New weekly demand created at [5] after breaking bearish weekly
trendline last two impulses. #5 would be a confirmation type of trade.

Should I trade against the trend by taking counter-trend trades?

 It's highly advisable that you stick to trading with the trend and never against it. Alternatively,
you could use a different timeframe sequence. There are many counter-trend scenarios, but they
are not included in the core strategy rules for a very simple reason: they are lower probability.

Quote
Having success trading with the trend is almost impossible, going against it is impossible.

Do you want to have a chance trading the almost impossible or no chance at all with the
impossible?

Counter-trend and OOA (Out Of Alignment) trade scenarios will not be discussed in the forums.
Keep it simple. Choose your sequence and stick the bias provided by the top timeframe of your
sequence as dictated by the realignment rules.

Always ask yourself the $1 million dollar question before placing a trade

ou will place hundreds of trades in your trading career that will look great at first glance until
you see them go against you.

It's funny. As human beings, we love making the same mistakes over and over again. I use one
trick that works well and serves as a filter between very high probability trades and those that
look like them but are not.

Always ask yourself this question before placing a trade and putting any money at risk:

Quote
Would I risk one million dollars on this trade? In complex and tricky scenarios, a lot of decisions
will become easier.

Imagine losing $1 million in a single trade. If your answer to that question is no, then do not risk
a single dollar on it. As simple as that.

What to do if the top timeframe of my sequence is out of alignment?

If the top timeframe of your sequence is out of alignment, no set and forget trades will be
possible. What to do?

 Skip the asset and focus on others that are clearly trending
 Locate another sequence where there is s clear trend. Avoid lower timeframe sequences,
noise will end up blowing up your account.
Avoid trading against the trend or in out of alignment stages. Even the strongest levels in a
trending market are eliminated, guess what will usually happen to those imbalances created in
an out of alignment scenario.

Posting potential trades in OOA scenariios won't be discussed and it's not advisable. They won't
be supported or given any feedback

Building your own trading plan


 Do I really need need to create and follow and trading plan?


 Do I need to have a daily routine?


 Trading plan. Trading with the trend


 What are the trade setups that I can trade in a trending market?


 Where can I see examples of valid and invalid trades?


 Trading all-time lows, IPOs and ICOs.


Do I really need need to create and follow and trading plan?

Yes, you need to create your own trading plan and follow it.

You probably know that you should have a trading plan in place before entering a trade.
But what does that really mean? Here are a few ideas for creating your own trade plan,
along with some of the order types you can use to implement it.

A trading plan is designed to predetermine your exit strategy for any trade that you
initiate. Before you actually enter the trade. If you make your trade plan in advance, your
overall approach is less likely to be influenced by the market occurrences that can, and
probably will affect your thinking after the trade is placed. Not only that, but you are
also less likely to let your emotions gain control of your trade execution.
Managing your emotions

Are you emotionally and psychologically ready to battle in the markets? Emotions will
take control every time you analyze the market. You need to have a sound plan to
combat anger, fear, pain and greed. Because if you don't, your emotions will kill your
trading plan. You need to have control of your emotions in order to execute your
trading plan. Let your emotions take over, and you will blow up your trading account
over and over.

This is the most difficult aspect of trading. You can read dozens of books, be good at
spotting trading setups and pulling the trigger, but if you let your emotions control your
trades and your goals, you will not succeed at trading.

Do I need to have a daily routine?

Yes, you need to have a daily routine and follow it. Not only that, you also need weekly and
monthly routines.

If we want to lose 10 kg but refuse to eat well, exercise, and change the habits that created the
extra weight in the first place, affirmations by themselves probably won't work. The same applies
to our finance and trading, if we want to become financially successful but don't set goals, have
plans and act upon them in meaningful ways, we can visualize all we want, and we're probably
going to remain where we are. Maybe in some other parallel universe we have yet to experience,
we only need to hope and think about something, and it will happen automatically, but here in
this world we live in, the action is required. If this analogy was not good enough for you think
about why can't people give up smoking or why is it so difficult to break up a relationship with
your girl-boyfriend.

Quote

No matter how many books on self-help, self-esteem or law of attraction you read, reading
them will not help you achieve your goals. A plan of action is required to attract the
circumstances that will make it happen

To be successful, you have to do more than just think about success; you must act in
meaningful ways, attracting the circumstances that make it happen. If we want a healthy body, a
promotion in our full-time job, a million dollars, success in trading, or any other goal we have
envisioned for ourselves, we need to do more than thinking we can do it and then sit back
hoping for the best.

Quote

It's through daily repetition that the conscious mind imprints patterns into the subconscious.

his is why I am always emphasizing the importance of daily routine and practice. Sacrifice is
needed, it sounds unpleasant, but it is not. We sacrifice watching TV so we can work out at the
gym or going out for dinner with our friends. We must not be ignorant about what is required
to become successful in trading or life. We have to be willing to make whatever is necessary to
achieve our goals.

Daily routines

Without a daily trading routine, you won’t make it.

Top athletes perform well because they have rituals and routines for everything single thing they
do in life. I think we can all agree that habits are what determine our success or failure in any
endeavour or challenge in our lives. Trading is not an exception. How do we develop the type of
habits that will lead us to become profitable traders? The answer is straightforward: Routine.

Proper trading habits do not just magically appear out of thin air. These habits can sometimes
take years to form. Not everything is loss luckily for you because you have the power to come
up with a plan and put it into motion, a plan that will bring forth the proper trading habits. The
development of positive habits, the ones that lead to success in any field, is something you can
make a conscious effort to achieve simply by implementing consistent daily routines.

When you think about your daily trading routine, what do you think about? Do you even have
one? Are you aware that professionals, not only professional traders but lawyers, doctors, have
strict routines whether they realize it or not? They follow these plans and routines like clock-
work, everything from diet, exercise, sleep and meditation. One thing that any successful
professional has in common is that they have gone from daily routines to ingrain those habits
that virtually guarantee consistent and on-going success in their field.

I am not talking about just having a trading plan either. I’m talking about what you do from the
time you wake up to the time you sleep, this is all part of your daily trading routine. Professional
traders have developed a daily routine that maximizes their ability to trade successfully.

This routine can take you about 1-2 hours every day, some days it can make you less, about 30
to 60 minutes maximum. It will depend on how many instruments and which entry timeframe
you are trading, as well as how experienced you are.
Since I am on GMT +1 by living in Spain, I can trade the best two markets, the London Open and
NY Open. If I were to trade Forex, I would chose to trade the London market since it's the
biggest market and it is in my time zone. However, it doesn't really matter which market you
choose since we are focusing on swing and position trading. You can trade at nights after work
or from work when you have some spare time. SD levels have no waking time; they just exist.

Quote

The beauty of supply and demand swing trading and having a strict plan is that you don't have
to be in front of the computer all day long

Check your emotional temperature. What the heck is this?

 If you feel anxious, sad, low or precisely the opposite, don't trade, you will not be making
the right decisions. Take your day off.
 Being in control of your feelings and emotions is essential for trading, you need to have
a clear mind. If you feel emotional, auto-sabotage will probably occur.
 Ask yourself how you are feeling, take your emotional temperature and make an
objective decision.

Check what the US Dollar Index #DXY is doing, or what the major US Indexes are doing if
you are trading Stocks.

 Forex is all about trading currencies and speculating on other countries' economies.
 The US Dollar is one of the strongest ones if not the strongest. The dollar index is a
major index and key to Forex traders.
 Check the S&P500 and Nasdaq indexes if trading US Stocks. If the major US indexes are
bullish, only take long positions on stocks.
 If the dollar index has hit a fresh and original HTF supply, the euro and the major will
probably start bouncing off if they are also close to an opposing HTF demand area.
Similar to the major indexes.

PRE-PLAN all of your trades

 Decide what direction you can take on the setups you located and place your limit
orders.
 Decide which conditions would prevent you from taking the trade or make you cancel
them (TL break, HTF too close, etc.)
 ALWAYS pre-plan all of your trades, do not use market execution orders because your
emotions will drive those orders. You will see that you missed a setup, trade is already
playing out, you want to be in... but you know what? You missed that train, skip it!

Allocate some time to practice the rules daily

You've been a good boy/girl by finishing your daily job quite fast, and you have spare time.
What to do? Add more instrument and trade more? No way.

 Use the remaining time to practice on Forex Tester, stay away from the live charts (you
are not allowed). Allow for at least three sessions (1 hour each) a week of forward testing
with Forex Tester. Recommended 5 hours a week, organize your time as you like
 Speak to yourself, by talking out loud you will be more objective and listen to your
thoughts. You will black out the noise

Walk away and turn off your computer

This one task overrides all previous tasks. If you don't stay away from your computer and leave
your trades alone, you will be wasting your time and your money since you will be changing
them depending on your emotional status at the time

Rituals are important. Manage your energy and fatigue

 Managing your energy is a decisive factor for your trading routine or any other routine
that you have in your life.
 Rituals are important. It's preferred that do the same thing at the same time and the
same way. By doing so, a new habit will be created, and it will be second nature for your
mind, no further thinking will be needed to execute a routine or a habit

CREATE A HABIT AND ENJOY LIFE!

Once your daily trading routine is over, enjoy your spare time, your family and friends. Let the
market do whatever it has to do, you are not in control. No matter how much you look at the
charts, you are not going to cause the movement of a single pip

Trading plan. Trading with the trend

Now that we know what we need for a trading plan, it's time to write your own. There are a
series of variables we will need to consider. Flexibility is allowed, but how flexible, where and
why needs to be covered in the plan in a lot of detail. Otherwise, subjectivity and emotions will
take control over your trading and will produce unnecessary losses.
A trading plan is directly related to the type of trader you are and the timeframe sequence
you've chosen to trade. You first need to decide which timeframe sequence you want to trade,
one that suits your personality, job and needs. Do not fall in the trap of setting unrealistic goals
like 20 or 30% monthly return that will just not happen. It just can't be consistent.

The following trading plan is just one of many different plans you can create and follow. This
plan is entirely focused on trading with the trend, counter-trend scenarios can be added to it,
but this trading plan is exclusively a trend trading plan. Remember that counter-trend trades will
most of the time, be the trades that diminish your capital and take away the hard-earned money
in clear trend trades. Hopefully, you will learn that over the months and years in your trading
career.

The following trading plan takes for granted that you've done your homework:

 Back-tested Set and Forget's supply and demand strategy for a minimum of 6-9 months
on a backtesting software and been profitable in your tests
 Achieved 50% win/loss ratio or bigger on your paper trading
 Paper traded the strategy for 6-9 months and been profitable for at least six consecutive
months with an average of 5% monthly return. Alternatively, you can test the strategy on
a live account using a small amount of money. You will learn better if every loss hurts.
 You have not started to trade live without having to go through those stages with
success.
 Use the trading plan below as a wireframe to build yours on top of it.

Trading Plan Example. Trading with the Trend

Type of Plan. Trend trading using the Monthly sequence, that is, using monthly, weekly
and daily imbalances. You can adapt the entries to be used with other sequences like
the weekly or the daily. Revise every 3-6 months.

Daily Routine

This routine will change depending on the part of the world you live in and the type of markets
that you trade. As a Forex trader, you will have more flexibility to trade since Forex is a 24 hours
market. If you trade US stocks, you will have to wait for the US market to open and resume your
daily and weekly analyses routine according to your timezone and based on the US market
open.

 I usually wake up, have breakfast, lunch and dinner every day at the same time. Why
shouldn't you treat trading the same way?
 I wake up at 6:00-6:30 am.
 My analysis and trading should be done by 7:00 am. I am not allowed to look at the live
charts until the next trading day. I am not allowed to modify any of my existing orders
once I'm done for the day. My office is closed; I have no keys. I am not allowed in.
  I focus only on assets that are clearly trending.
 I am only allowed to trade for 1 hour a day.
 Update the trading community and reply to emails from 7:00 am to 8:30 am.
 Switch to mobile mode. Keep on replying to urgent posts from my mobile after 8:30 am.
 Since I am only trading stocks, I will be available when the US market opens IF, and only
if, I need to plan or manage a trade.
 Enjoy the rest of the day doing the things I like.
 Allocate some time for backtesting the rules.
 I'm allowed to do all -ing activities except trad-ing.
 I'm not allowed to install any application on my mobile to keep track of my trades.

When travelling or on holidays, I must be flexible and trade whenever I have access to a decent
DSL connection. I must accept that I will miss some trading opportunities when I am on holiday
or travelling. Consider not to trade at all for a more relaxed and peaceful mind.

Entry and Exit

 Once a trading opportunity has been identified, plan the trade in your trading platform.
Don't think twice.
 Order placement using levels for protection and set alerts.
 Place orders and let the trade breathe. Do not watch it closely, instead set alerts to take
action if certain price levels have been reached above or below the entry.
 Exit at a fixed target of 3:1, three times the width of the imbalance including the padding.

Plan your exit strategy

There’s no one-size-fits-all trade plan, but at the very least, consider planning your exit
points based on a certain profit target or specific loss tolerance.

For example, suppose you bought stock #XYZ trading at $30 and risked $150 on it. You
may want to set exits based on a percentage gain or loss of the trade. Using
percentages instead of dollar amounts allows you to treat your trades equally. For
example, some traders will exit the trade at a 50% loss or a 200% gain. So that’s their
basic plan, at least on paper.

Exiting with a profit of 100% would mean selling #XYZ at $36 for a $150 profit since
that's what you initially risked. Exiting the trade with a 50% loss would mean selling the
stock if it drops to $75, which is half of the initial dollar risk of $150.
Money Management and Trade Management

 Risk per trade: 1% or less

 Risk a maximum of 1% of my account per trade and 5% total at any time. Or risk
0.5% and take twice the trades with half the risk. You might want to trade four correlated
instruments, instead of taking 2 x 1% risk trades, you would take four trades at 0.50%
risk, risking a total of 2% in all the trades. This is just an example, and there are multiple
ways of doing this. Keep it as simple as possible, though.
 Total risk exposure: 5% risk exposure at any time. No more than 5 trades if risking 1%,
or 10 trades is risking 0.5%. By risking less, I can diversify my portfolio with 10 assets at
0.5% instead of 5 at 1%.
 Reward/Risk for each trade: 3 to 1, that is, exit once a profit of three times the risk has
been reached, for instance, once profit reaches $300 if $100 has been invested.
 Monthly goal: 3-5%. If the goal is reached, stop trading for that month.
 Monthly drawdown (loss): 5%. If the maximum drawdown is reached, stop trading for
that month and go back to testing for at least 1 month.
 Maximum trades open at the same time: 5 trades. Risking a maximum of 5% of my
trading account.
 A new trade can only be opened if I protect one of the existing trades or one of them
has hit its target.
 Max of 2 losses in the same asset. If I have 2 losses in the same asset, I will stop trading
it for at least a month. Market dynamics might be changing if 2 valid high odds
imbalances have been eliminated.
 Max of 2 correlated instruments at any one time.

When to keep on trading if my goal has been reached

 Once my monthly goal has been reached, I will be allowed to risk one more trade under
very specific scenarios.
 Take a trade only if it's a nested imbalance, that is, Daily imbalances within Weekly and
Monthly zones.
 No more than one trade at a time.
 If the trade is a winner, I will be allowed to take a new one until I get a loss. A loss will
force me to stop trading.

What to do when last month was a loss

 If last month has been a loss, next month's goal will be focused on recovering from the
loss. Be more conservative and avoid having a second losing month in a row.
 What to do when there are two consecutive losing months (-10% drawdown):
 Stop trading for at least 3 months.
 Analyze the losses in detail and adjust the trading plan. Learn what went wrong and fix
the problem.
  Start a period of heavy backtesting for at least 3 months until I gain the confidence to
trade again.
 What to do if the price fell shy of reaching take profit, and I see strong past obstacles or
new ones being formed?
 Close the trade before the fixed 3:1 target is reached and wait for a new trading
opportunity.
 It's better to lock in profits rather than giving it all away. A bigger retracement might
happen. Evaluate opposing price action to make a decision.

When to move the stop-loss to breakeven?

Do not move the stop loss to breakeven. It's either a win or a loss. If price has been doing
nothing for a long time and started to range, closing the trade with less than the initial 3%
target could be an option.

What to do if the top timeframe of your sequence is out of alignment?

If the top timeframe of your sequence is out of alignment, no set and forget trades will be
possible. What to do?

1. Skip the asset and focus on others that are clearly trending.

2. Locate another sequence where there is s clear trend. Avoid lower timeframe sequences, noise
will end up blowing up your account.

Avoid trading against the trend or in out of alignment stages. Even the strongest levels in a
trending market are eliminated, guess what will usually happen to those imbalances created in
an out of alignment scenario.

Posting potential trades in OOA scenariios won't be discussed and it's not advisable. They won't
be supported or given any feedback.

What are the trade setups that I can trade in a trending market?

This trading plan only accounts for trades that follow a clear trend by applying the
realignment rules—all the trade scenarios listed below account only for long trades in
an uptrend. The same setups will be available in a downtrend. All the scenarios must
follow the realignment rules and the three timeframes of my sequence, where the top
timeframe will dictate the bias and direction of all my trades.

 Start with the monthly sequence using the Monthly as directional bias
and D1 and W demand levels as entry timeframes.
 This is Set and Forget trading. You will set and forget your entries if the market is
trending and the realignment rules still apply. Else you will need to wait for new
imbalances and use more advanced techniques.

Find below the the four bullish trading scenarios that you are allowed to trade in this
trading plan.

Top Middle Lower

Action
timeframe timeframe timeframe

Long at lower timeframe demand levels.

Uptrend Uptrend Uptrend
For example: M, W and D1 up --> Longs at D1 DZ.
Long at lower demand levels located inside middle
Out of timeframe demand level.
Uptrend Uptrend
alignment
For example: M and W trending up, D1 OOA -->
Longs at D1 DZ nested at W demand.
Long at lower timeframe demand levels located inside
Out of Out of top timeframe demand level.
Uptrend
alignment alignment
For example: M uptrend, W and D1 OOA --> Longs
at D1 demand zones nested at M demand level.
Long at the middle timeframe demand level located
Out of Out of inside top timeframe demand level.
Uptrend
alignment alignment
For example: M uptrend, W and D1 OOA --> Longs
at W demand zones nested at M demand level.

Find below the four bearish trading scenarios that you are allowed to trade in this
trading plan:

Top Middle Lower

Action
timeframe timeframe timeframe
 Short at lower timeframe supply levels.
Downtrend Downtrend Downtrend
For example: M, W and D1 down --> Shorts at D1 SZ.
Short at lower supply levels located inside middle
Out of timeframe supply level.
Downtrend Downtrend
alignment
For example: M and W trending down, D1 OOA -->
Shorts at D1 SZ nested at W supply.
Short at lower timeframe supply levels located inside
Out of Out of top timeframe supply level.
Downtrend
alignment alignment
For example: M downtrend, W and D1 OOA -->
Shorts at D1 supply zones nested at M supply level.
Short at the middle timeframe supply level located
Out of Out of inside top timeframe supply level.
Downtrend
alignment alignment
For example: M downtrend, W and D1 OOA -->
Shorts at W supply zones nested at M supply level.

If in doubt, do nothing or wait for new imbalances to be created.

Where can I see examples of valid and invalid trades?

Two channels have been created where we will post valid and invalid trades. These channels will
be updated from time to time. The new website has recently been launched, so these channels
have be to populated with older trades and new ones.

 Good trades examples

 Bad trades examples

The live channels have many more examples of valid and invalid scenarios that follow the rules.
Make sure you read them.
Trading all-time lows, IPOs and ICOs.

There are many times when there is a new stock (IPO) or a new crypto (IPO). These scenarios are
great opportunities to buy new stocks and cryptos. However, there are no bigger timeframes to
support the trade or an uptrend on the M or W timeframes.

There are three things that can be done in this scenario:

 Buy the whole imbalance or half of it.

 Wait for new smaller timeframe demand zones to trade off the bigger
timeframe demand zones.
 Do nothing, and wait for a more mature W and M uptrend. This is the wisest and
smartest approach.

There is nothing else that can be done. If you are unsure, focus on clearer setups that have more
historical data.

Take a look at a couple of examples.

The first one belongs to Li Auto #LI stock IPO. You can only buy at M demand zone #1. You can
use the full level or half of it.

The second example is a crypto: CKB USDT (Nervos).

There is a very strong W imbalance at #1. That's all the history available for this crypto ICO. You
can buy the full W demand level at #1, half of it, or wait for new D1 and H4 demand zones to be
created.