The Realignment: The Sequence and Nested Zones

23rd March 2014, 10:55 AM

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
on each of them. In order to assess the trend we do have very specific rules laid out in the lesson on how
to identify a trend.

Each timeframe will have its own trend and imbalances, completely independent from other timeframes.
These concepts have already been introduced in the first lesson.

Let's go over them again...

THE SEQUENCE & THE REALIGNMENT

The Sequence and the Realignment are just a mechanical way of helping us decide exactly which zone and
timeframe you should be waiting at in order to plan a set and forget or confirmation trade. The main idea
is to have aligned as many timeframes as possible in the same direction

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

• Choose only 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 in order 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 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

Refer to the type of trader and timeframe combo lesson to choose your sequence

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.
Traders are often limited by the number of trading opportunities 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.
NESTED ZONES

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:

• A 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 a good 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: eg 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.

A nested zone will be only valid if the HTF zone at which it's nested is also a valid imbalance (2:1
imbalance, consolidation away, correct basing structure and formation, etc). If we have a D1 DZ nested
at a W DZ, then that D1 DZ will be validated for a set and forget D1 long if the W DZ is also a valid imbalance
(min 2:1 imbalance and consolidation away). ELSE: wait for a confirmation setup on the D1 (or H4). Read
more about zone validation in the validation lesson

Can a zone be nested if it's not contained completely within a bigger timeframe?
Yes. A nested zone can be contained entirely within the bigger TF. The nested zone will be valid if it's
touching or overlapping the HTF proximal line.

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

WHEN TO SET AND FORGET YOUR TRADES IN A SEQUENCE

The sequence will be used to locate the next possible set and forget trade. We want to trade with the
bigger picture's direction so that we have higher odds of success in our trades. The screenshots below
show a quick snapshot of what you should be looking for to locate and plan a trade based on the Sequence
and Realignment.

For example:

1. MN, WK and D1 are up, H4 is down. We won't set and forget long trades until we reach the D1
area of demand, if we have room and good short setups, we might try to counter-trend (lower
odds), but watch the last week/month lows/highs and make sure you have enough profit margin
for at least 3 or 4:1

2. MN and WK are up, D1 is down. We won't set and forget long trades until we reach a WK area of
demand, all longs will be based on confirmation and WoW trades (lower odds though). Why? The
WK demand will act as a "magnet" that will tend to attract price with a high probability, this going
long in "set and forget" mode is not very wise

3. MN is up, WK is down. Price must reach the MN demand before we set and forget our long trades,
price will tend to realign with the MN uptrend at a MN demand if WK is down. Any longs before
that happens are not high odds, high odds ones will be located within the MN demand zone

NOTE: remember that a nested zone will be only valid if the HTF zone within which it's nested is also
valid (2:1 imbalance, consolidation away, correct basing formation, etc)Read more about validation of a
zone in the validation lesson
WHAT TO DO WHEN PRICE HAS HIT OUR SEQUENCE'S ENTRY TIMEFRAME
There are a couple of things we can do when price hits our entry timeframe in a sequence. Let's use one
of the default sequences as an example:

• The Position Sequence (type 2): Monthly, Weekly and Daily. Daily is our entry timeframe. See
figure 1 at the top of this post, Position Type of trade 2

This is what normally happens when price is sequencing in this scenario:

• Monthly is trending UP. MN ascending trendline is being respected

• Weekly is trending UP, trendline is respected

• D1 is trending DOWN. D1 trendline is pointing down

As per the realignment rules described in this post, we should wait for price to reach a Weekly area of
demand before we start buying again with high probability. All longs taken should be based on
confirmation when a D1 demand zone is hit (use H4 WoW long trades as confirmation)

• Our entry timeframe will still be the Daily timeframe. You can use the H4 entry TF if your that's
your entry TF

• However, we must wait for price to reach a Weekly demand zone

Once price is within the Weekly demand zone, we can trade Set & Forget or Confirmation (new imbalance)

• Set & Forget entry

o We should look for fresh nested D1 demand zones within the Weekly demand to define
and fine tune our entry

o If no D1 demand zone is found, or the one we find is not-fresh, we must wait for
confirmation

• Confirmation (new imbalance)

o Draw a descending TL on your entry TF, in this case the D1 chart

o Wait for price to solidly break the descending TL and form a brand new well structured
D1 demand

o Follow the WoW trade rules and make sure you don't forget to take into account the
freshness of the HTF level, it's key to decide if we need an opposing D1 zone needs to be
taken out before we validate the new D1 demand imbalance
The WoW trade and how to trade a Trendline break at higher timeframes zones

16th May 2014, 01:41 PM

The WoW trade is one of the most important additions to Set and Forget's set of rules. You must understand
the Realignment lesson before adding it to your trading plan since nesting and realignment concepts go hand in
hand.

WoW is an acronym for the way this type of pattern looks. It's essentially a W or inverted W (a M shape) formed
once a Higher Timeframe has been hit, price is over-extended and/or a trendline has been solidly broken. I could
have named it WoM trade but it didn't sound as good as WoW

The WoW trade is the brand new imbalance created at the break of the trendline and/or at the origin of that
trendline break. It's one of the two methods we use to locate new imbalances on a price chart. The WoW trade has
to be supported by a bigger timeframe or a bigger timeframe confluence bigger than the timeframe where the
potential WoW trade has been located. The new imbalance can be a swing (valley/peak) or a CP, it can happen
before the TL is broken or at the TL confluence.
AUDCAD WoW TRADE
AUDCAD monthly chart shows a clear monthly WoW setup. The WoW trade is the imbalance created at the break
of a trendline at #1 and/or at the origin of the move that causes the break of the trendline at #2. M SZ at #3 is
created by breaking M DZ at #1
EURSGD D1 WoW LONG AT MONTHLY DEMAND
The WoW trade is the imbalance created at the break of a trendline or at the origin of that break. Both are valid
imbalances. The WoW trade has to be supported by a bigger timeframe imbalance or a bigger timeframe confluence
bigger than the WoW imbalance.

Both D1 demand zones at #2 and #3 are considered WoW trades as per the definition. Nested at a HTF Monthly
demand at #1 that took two opposing monthly supply zones at #4 and #5 out

The WoW trade is a high probability confirmation setup that if done correctly with the support of the bigger
picture trend, can yield great results. Be careful with this pattern though because when you start looking for them,
you will start seeing WoW trades "everywhere", pay attention to where the pattern occurs and follow the rules laid
out below, otherwise you will have unnecessary losses.

The WoW trade bar is perhaps the most powerful trade setup that has been introduced to the strategy. If I could
pick only one supply and demand pattern to trade with for the rest of my life, I would probably pick the WoW trade.
However, despite its simple structure, the WoW trade can be very tricky to trade if you don’t know how to
distinguish a good WoW from a bad one.

I see many traders making the same mistakes over and over with WoW trades; many trade every WoW they see,
they give no consideration to the market context the WoW formed within, they constantly try trading counter-
trend WoW trades and many other mistakes.

The fact of the matter, is that there are many subtleties to trading WoW trades that you must understand if you
ever hope to trade them successfully. So, without further ado, let’s start with the WoW trades.

Any price action setup is going to have a better chance of working out with the power and momentum of a market
trend behind it. There are numerous reasons why markets trend, but the exact reasons don’t really matter. All we
care about is that a market is or isn't trending and whether or not we can jump aboard that trend to take advantage
of its strength. To ignore the power and weight behind a trend and think that you will begin making money trading
WoW trades against the trend before you've learned to trade with the trend, is simply ignorant.

WHAT ESSENTIALLY HAPPENS WHEN A WOW TRADE OCCURS?

Watch this short video explaining WoW basics: https://vimeo.com/295602584/32ed4ef5f8

1. Price is over-extended on the bigger timeframes. Price starts to lose steam and act like a spring.
The more you pull from both ends, the bigger the snap back into place will be. Price tends to be
in equilibrium (balance), reversals and take profits occur at HTF imbalances (the footprint of
dinosaurs - professional traders and institutions), it is at this moment where waiting for a WoW
trade is high odds

2. More than 3 CP patterns will most likely have been formed. This goes hand in hand with price
over-extension. For instance, the lower the CP supply pattern is in the SD range (its altitude), the
lower its odds to hold price, the higher the odds to be removed once a HTF demand zone has
taken control

3. Big rallies and drops are not sustainable. At some moment, the market will revert to the mean
and traders/institutions will take profit. Where will this normally happen? At bigger timeframe
supply and demand zones

4. Price reacts to the bigger timeframe and creates a brand new imbalance

5. At the origin of these trendline breaks we'll probably see classic patterns like double and triple
tops and bottoms, 123, etc. We won't be trading these patterns, we will only be trading supply
and demand imbalances. By the time a double top is completed or the 123 neck line is tested, we
should have already been triggered short way higher after the TL break

6. Price needs to test 1 timeframe HIGHER than the one where the trendline break has occurred.
If we see a descending D1 TL solidly broken but no WK demand area, the WoW trade won't be a
valid setup

HIGH ODDS WoW TRADE SCENARIOS

Find below a list of scenarios where we will be looking for potential high odds WoW trades.

Scenarios ordered from higher to lower probability. The first 4 scenarios are the highest odds ones.

1. Momentum and location scenarios. WoW trades play out really well in momentum and location
scenarios, that is, with the bigger picture in a trend paired with the Sequence and
Realignment scenarios. For instance, MN and WK up, D1 loses momentum and retests a fresh WK
DZ --> Descending D1 TL is broken which provides a momentum and location D1 WoW
long. Watch this short video to learn more about Momentum and Location WoW trades
 2. A HTF zone is being tested,bigger picture is trending. WoW trades need support from a bigger
timeframe. For instance a D1 WoW long will be valid if at least a WK demand zone has gained
control. It will be even better if the WK and/or Monthly charts are trending (momentum and
location)

3. HTF Trendline confluence. There are no HTF zones to lean on but price starts to react at a MN or
WK TL. WoW trades can occur at TL confluences. Watch this short video to learn more about this
WoW setup

4. At HTF 20 EMA. High odds if there is bigger picture's trend. HTF 20 EMAs will only be used if the
TF we're analysing has got a clear trend. 20 EMAs work with trending markets, else they are
useless. Watch this video to learn more about this WOW setup. Read about this AUDUSD H4
WOW short, a clear example of using H4 WoW short as confirmation at a D1 20 EMA with a D1
downtrend and HTF SZ in control. Read a sub-lesson on HTF 20 EMA confluence lower, read it
here

5. HTF zone counter-trend. If the HTF is at a very extreme, it is high odds. Else it will be too
aggressive. For instance, MN and WK are up and we hit a MN SZ. The MN SZ is in the middle of
the charts not at an extreme and imbalance is not that great. That's not the best scenario to try
shorts

6. HTF has been overshot but no candle close. If a HTF imbalance is taken out, we should wait for
the opposing area to be taken out, a clear new imbalance with at least 2 ERC candles, ideally you
want to wait for a new D1 trend. I need to perform further tests on this scenario since there are
many times that it yields great results. This scenario is higher odds when the bigger picture is
trending

Most scenarios are covered in more detailed lower in sub-lessons.

LOWER ODDS WoW TRADE SCENARIOS

1. Lower TF WoW against bigger TF zone in control. For instance, taking D1 WoW longs against a
WK or HTF zone in control is not a good idea. The bigger TF normally wins over the lower TF. As a
rule of thumb, a big TF will win over a lower TF (not always but we're talking about odds here, we
must play high odds scenarios not the exceptions)

1. D1 WoW long against valid WK SZ --> WK normally wins over D1

2. D1 WoW long against opposing WK or MN TL and/or 20 EMA confluence (bigger picture

trend down)

3. D1 WoW long against valid WK SZ and WK downtrend. Maybe price is even bouncing
from MN DZ but we must respect the WK downtrend and WK SZ

4. The same applies if you swap the TFs by 1 level and /or change long for shorts, that is,
change D1 for H4 and WK for D1

2. At all time highs/lows. For better odds we should wait for an opposing zone to be taken out, not
just the TL break
 3. If entry TF has got a new opposing trend against the original WoW and opposing zone is in
control. If the WoW entry does not trigger soon we run the risk of having a new opposing HTF
trend against us and even a HTF opposing zone in control, when that happens, we need to wait
for further confirmation (new WoW). If we are holding an opposing trade against that WoW, hold
it since the WoW is lower odds. For example: Imagine you have a D1 WoW short as confirmation
of M SZ. Then before price retraces to D1 WoW there is an official D1 uptrend or even worst a W
uptrend, do you think that's high odds? No,it's not.

4. An opposing HTF takes control and WoW is nested within tested opposing zone. For instance,
price dropped from WK SZ, now WK SZ is considered tested. As it drops a D1 WoW short is created
but price keeps on dropping and tests a fresh WK DZ with a WK uptrend intact. When price rallies
into the D1 WoW short, we'll have a D1 WoW short with opposing fresh WK DZ in control and a
nested tested WK SZ. The whole confirmation process is needed again for a new short

The following attachment is a Coggle mind map created by Nathanael, it summarizes really well the WoW
trades odds.
THE BIGGER THE TIMEFRAME IN CONTROL, THE BIGGER THE TIMEFRAME WE SHOULD USE FOR A WOW SET-
UP

WoW set-ups are high odds if they are taken with the bigger picture trend and the bigger timeframes of your
sequence are aligned. If you choose to trade WoW set-ups without that condition, you are going to see many
fake-outs before price takes off of the level you are expecting.

The bigger the time frame in control we are using for our bigger picture, the bigger the time frame we should
use for WoW set up. With MN as your bigger picture, D1 WoW will have a greater probability than H4.

As a rule of thumb:

The bigger the TF in control, the bigger the WoW TF you should use for high odds. Imagine MN DZ in control

For instance:

• MN DZ is in control, taking a H4 or lower timeframe WoW long is not a good idea, opposing D1
and WK supply zones hold quite well for a first retest so taking lower TF WoW longs with quality
lower TF's SZ in control is not a good idea

• Price doesn't usually take off from MN DZ until there is a WK WoW long, in the meantime, shorts
can still happen on D1 and WK SZs, even with the MN chart in an uptrend

• If H4 WoW longs are used as confirmation, we have WK out of alignment, and D1 downtrend,
odds are H4 WoW longs won't have much success, you will experience lots of fakeouts and stop
losses hit

Guidelines on what would be the minimum TF to wait for a high odds setup

• MN DZ in control and in an UP trend--> D1 WoW long minimum. If there is a valid WK SZ above

MN SZ, it usually holds well on a first retest, price usually takes off the MN DZ until there is a WK
WoW long. We''ll see nested D1 and H4 WoW longs when that happens. Check out this WK WoW
long at MN DZ on GBP/NZD to see a live example of this scenario

• WK DZ in control and bigger picture in an UP trend--> D1 WoW long minimum. H4 WoW longs
can work but make sure there is no D1 SZ, HTF TL or HTF 20 EMA in control

• D1 DZ in control and bigger picture in an UP trend--> H4 WoW long minimum. Rationale from
previous two scenarios apply here as well
COUNTER-TREND WoW SET-UPS
WoW setups can occur under many scenarios, they are best when they go with the bigger picture's trend or
bouncing off of a strong HTF SD zone, as detailed in the high odds scenarios above.

WoW setups will also happen on counter-trend like any other pattern, however we need to know when a valid
WoW counter-trend can be taken.

There are a couple of rules:

• It must hit and be supported by a HTF opposing zone. A D1 WoW short counter-trend will require
as minimum a WK SZ taking control

• It must take out and opposing zone with a candle close, if price is bouncing off of a WK SZ and
our entry TF is the D1, we need D1 DZ taken out with at least a D1 candle close

• Ideally what we want to see is tested levels to the left, over-extension and/or compression, read
about it on the counter-trend lesson. This gives price a path of least resistance to play through,
unobstructed.

HOW TO DEAL WITH THE FRESHNESS OF A LEVEL IN A WOW TRADE

It is very difficult to cover all possible WoW scenarios, there is no perfect recipe for a WoW trade. Try to apply
common sense and logic here as well. Don't try to outsmart the markets, play your odds and look for the next
high probability trade. Deal with each scenario as if it was the only one, think in probabilities. If you want to
tweak some of the rules or scenarios, make sure you have have mastered the basic setups first.

Follow the guidelines below to deal with the freshness of a HTF level:

Fresh HTF zone in control and bigger picture trend? No need to take out opposing zone. See EURZAR example

• Most of the time, the opposing zone will be removed anyway, you can always wait for it to be
removed and deal with it as a higher probability entry

• If the opposing zone we want to see removed is not well formed (too wicky, too much trading,
compressed, etc), we can be a little bit more aggressive and "expect"(not assume) the zone to be
removed

• Recommendation: wait for the opposing zone and/or obstacles to be taken out, we want to see
last impulse/imbalance and/or obstacles out of the way (you will not have to think when to wait
or not for the opposing zone to be taken out), and there should be a lot of room to the next
opposing zone.
TESTED HTF IN CONTROL?
Wait for a brand new imbalance to be created, one that takes out an opposing zone. If there is no zone to be
removed and there is a lot of profit margin to the closest opposing zone, then there will be no need to remove
any zone, it's advisable that bigger timeframes are with you. For instance a H4 demand zone nested within a
D1 demand zone, nested within a WK demand zone with the WK chart in an uptrend.

UK100 INDEX Example.

Weekly and daily uptrend. D1 demand #2 is tested, a WoW long at H4 requires a new H4 demand that takes
opposing supply out because the D1 level is tested. H4 WoW long at #1 and #5 took out SZ #4 that took out H4
DZ #3. My broker's candlestick formations were slightly different to Trading View's example, trade would have
been triggered already, see post here

USED-UP HTF ZONE? Do nothing since they are not high odds, ideally we want to wait for at least a new trend
in our entry timeframe clearly removing opposing zones the direction we want to trade, not just a CP or WoW
trade, but a confirmed trend connecting two clear valleys/peaks

COUNTER-TREND WoW? We must wait for the opposing zone to be taken out. Watch HTF 20 EMA, make sure
price action to the left is ideal for counter-trend trading (compression, over-extension, tested levels, etc)
HOW TO PLAN A WoW TRADE
When price starts reacting to the bigger timeframe, it usually creates a brand new imbalance. We must be
aware that many times there is more than one imbalance created:

1. A valley/peak at the extreme, right where the whole imbalance was originally created at the
origin of the move

2. A CP (Continuation Pattern) or valley/peak right at the area where the Trendline is solidly broken
(breakout spot) or just after the TL break

If both setups are valid. Which one should you take? The CP? The extreme? Both?
Both entries will be valid, however we have the core strategy rules to help us make that decision, trendline
breaks and freshness of a level.

1. Take the extreme if no valid CP pattern or if another valley/peak is formed above, take that. We
might have no CP formed, only valleys/peaks, so we will trade what we see

2. Take the CP at or near the retest of the trendline break if the CP has been validated as per the
core strategy rules

3. Once the TL is solidly broken on our entry timeframe (let's say H4 entry TF trading a WoW trade
at a D1 fresh Demand), we will wait for a bigger pullback right at the extreme valley/peak that
originally created the new imbalance on H4 within the D1 zone. This is part of the core strategy

AT WHICH TIMEFRAME SHOULD I WAIT FOR THE IMBALANCE?

• If the HTF which is being tested is a D1 level, then we will wait for minimum H4 WoW trade

• If WK is being tested, then we wait for a brand new D1 zone to be formed. H4 is also ok if there is
compression and over-extension to the left

• It's all related to the TF you specified as your entry TF on your trading plan and under which
circumstances you might drill down the WoW trade to a smaller TF

NESTED WoW TRADES

There are scenarios where we'll see several nested WoW trades. A nested zone is a zone which is located within
a bigger timeframe than the one where we have located the first zone.

The more nested WoW trades we find in any given scenario, the higher the odds. That does not mean you
should tweak or break the rules of imbalance/departure, quality of the levels, non-fresh and/or used-up zones
however

An example of this could be this scenario:

• D1 WoW long nested within a WK WoW long at a Monthly demand zone

• The Monthly demand is fresh and WK is over-extended to the down side

• The descending WK TL is solidly broken and provides a WK demand zone at the extreme or at the
retest of the TL break
 • When a new WK demand is formed, the descending D1 TL will most likely be solidly broken and
might have provided us with an earlier entry of the sort of a D1 WoW long trade, nested within
the WK demand zone where we are originally waiting for price to drop before we go long

• Remember that at a HTF zone like the WK or Monthly, price will take longer to move,
accumulation and distribution stages need more time at these bigger TFs, and price will probably
range for some time. So if you move your SL to breakeven too soon you will miss the big move
and might get kicked out early.

You need to practice and forward test these scenarios on your favourite testing software for quite some
time before you gain confidence in the rules for the WoW trade.

1. Trade only D1 WoW at the beginning so you can get the feeling and confidence. H4 WoW trades
happen more often, buy taking D1 WoW trades is advisable in the beginning

2. Take any pair and start at any year, use the D1, WK and MN charts

3. Use the D1 as the TF where you will be looking for the TL break

4. Use the WK and MN SD zones as areas where price will most likely react, it will lose steam and
cause the D1 TL to be broken

5. Be aware of the TL breaks on WK and MN as well, they are even more powerful and those trades
will most likely become a longer term trade

In the beginning, if you decide to take WoW trades, it's advisable that you to concentrate on WoW trades
that go with the HTF trend. Trade the super clearest setups, don't take counter-trend ones or you will see
WoW trades everywhere. That is, a D1 TL Buy WoW trade that goes with the WK and MN uptrend, the D1 drop
would be realigning with the WK/MN uptrend, those are the ones to start with, and then with practice the
counter-trend ones and the other scenarios listed above.

The bigger the timeframe, the bigger the WoW TF entry you should look at for having high odds setups. For
instance, looking for a H4 WoW at a WK Demand area will probably generate some fakeouts, price normally
takes some days to take off from a WK or MN area so it will generate several entry areas normally. If you wait
for a D1 imbalance instead of a H4 or H1 you will probably have more success. That does not mean that H4
WoW trades won't work but look at the charts and observe the WoW trades on WK and MN areas of demand,
price hits them and a couple of WK or MN candles bouncing off it is the normal thing, that means days of
accumulation/distribution, providing several H4 longs. After 1-3 CPs on the D1 price will most likely take off.
By 3 CPs I don't mean over-extension, I mean a CP is created, then price retests it, it goes back again to the
origin of the imbalance, then rallies again and another CP with higher lows... after the 2nd or the 3rd price will
most likely take off.

WATCH NESTED WOW VIDEO

The Sequence and the Realignment sheet: mechanical decision-making table

16th August 2014, 07:27 PM

This lesson on the Sequence and the Realignment can be considered an addendum to the original Sequence lesson. I
decided it was a good idea to keep it separated and added after that lesson and the WoW trade one because we need
to understand those in order to fully comprehend the meaning of this table.

The tables below show the power of the Realignment and The Sequence. They are mechanical decision making processes
we need to imprint in our minds, in the beginning this table should be consulted but once you get some experience
trading the Sequence, it should be second nature to you.

CONSERVATIVE TRADER: UPTREND

• The tables below show the rules and scenarios we need to wait for and pay attention to if we are conservative
traders. An aggressive trader could be looking for other trade setups and scenarios. The table below applies to
an uptrend but if the arrows and scenarios are reversed then the downtrend scenarios would apply

• In these examples the opposing zone will always be a supply zone, price can hit 3 bigger timeframe zones, D1,
WK and MN. I've decided to add only one row for the MN supply zone, once it's hit going long is lower odds.

• The Sequence used is MN / WK / D1, but you can add H4 to the sequence if H4 is your entry TF. I stopped at the
D1 for the sake of simplicity

• You can use other sequences as explained in the sequence lesson, you can start on the D1 or the WK, any TF
combination is fine as long you respect the sequence and do not skip any intermediate TF

• I've also added an ODDS column with these meanings: + = HIGH + + = VERY HIGH + + + = SUPER HIGH - = LOW

D1 WoW longs can always be used as confirmation as a conservative trader instead of setting and forgetting your
trades, it's a personal decision you have to made and add to your trading plan. But please, do ALWAYS the same,
don't think about it, either set and forget or wait for confirmation, don't base your decision subjectively or based in
your mood or a streak of consecutive losses.
MN/WK UPTREND, D1 OUT OF ALIGNMENT
ACTION = WAIT FOR WEEKLY DEMAND ZONE TO BE HIT.

Note: opposing zone means the opposing zone in control. If trend is up, then opposing zone stands for supply, and vice
versa
MN UPTREND, WK and D1 OUT OF ALIGNMENT
ACTION = WAIT FOR MONTHLY DEMAND ZONE TO BE HIT
MN BULLISH CONSOLIDATION, WK and D1 OUT OF ALIGNMENT
ACTION = shorts bias when high in the SD range. Shorts are allowed if price was compressed on the way up. Shorts can
happen on the way down to fresh and/or original HTF levels of demand. Refer to the counter-trend lesson to learn
exactly what we are looking for
Set and Forget versus Confirmation Trades

27th September 2013, 06:16 PM

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 major 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 normally would, because you will not be spending countless hours
staring at of your computer over-analysing the markets.

3. News will be irrelevant to your trading. Fundamental analysis can very objective, nobody knows what can
happen.

Unfortunately, traders become lost with the huge amount of data that 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 off this amount of information.

Once you do a certain amount of analysis on any instrument, any further time spent analysing this data is likely to have
a negative effect on your trading, the outcome is usually the same, it causes you to lose money.

The belief that more is better can be psychological trap that often keeps us from consistently profiting in the Forex
market, and is the reason why many blow out their trading accounts and eventually give up completely 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 an important obstacle (flip zone, HTF 20 EMA, HTF TL or opposing
imbalance) against the set and forget entry, OR you are neither sure or comfortable about it and you just wait
for confirmation

Less is more: Set it and Forget it

How can we achieve consistent profitability trading Forex if it looks like we have been coded to make things more
complex than they are? The very first step in this process is accepting the fact that you cannot control the markets, you
don't need to feed your ego. The markets do not care what you have done in your life before; it has no emotion and it
is not a living entity. The Forex market It is an arena where human beings express their beliefs about the exchange rate
of a certain currency pair.

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).

An ironic fact about trading Forex is that spending less time analyzing the markets, trying to find the perfect trade will
actually cause you to make more money faster because you will be more relaxed, less emotional, and thus less likely
to over-trade or over-leverage your trading account. This is why swing trading using an using timeframe like the H4 and
D1 will help you improve your results and enjoy your life much more.
When to Set & Forget?

Price has to lose steam in order trade imbalances your sequence will tell you where. You are unsure about it? Don't
set and forget, do nothing or wait for confirmation.

• They go with the bigger picture trend. • The imbalances are nested at HTF imbalances in a trending market.
• They follow the Realignment rules, that is, a nested zone at a HTF imbalance which is clearly trending in one direction.
• They are momentum or momentum+location type of trades.

• 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

• Use original AND fresh levels if you want to go counter-trend. Make sure your trade has a proper
location. Location is key, that is, your trade should be located very high in the SD range for selling and very low
in the SD range for buying

• LOCATION IS KEY. Knowing how high or low in your SD range timeframe is paramount to allow you to set &
forget or wait for clues of willing buyers or sellers to enter based on confirmation

WHEN NOT TO SET AND FORGET

Knowing when not to set & forget is even more important than knowing when to do it. It will prevent you from having
unnecessary losses that will increase your account's drawdown.

• When price is too high/low in the SD Range, or right at your SD range timeframe imbalance

• If your SD range timeframe is not fresh. Wait for a confirmation trade

• If your SD range timeframe is used-up, that is, it's had more than 2 retracements

• At continuation patterns (CP) very high/low in SD Range. Set and forget works better at the extremes on V and
inverted V imbalances.

• When the imbalance is a mess or has a lot of trading

• Continuation patterns (CP) against the entry timeframe trend. Do not set & forget on these areas if they are
against the trend, they are lower odds entries

WHEN TO PLAN A CONFIRMATION TRADE INSTEAD OF A SETTING AND FORGETTING

There is not such a thing like a confirmation trade really. There is no way that you will have 100% certainty or
confirmation that your trade is going to work well, the confirmation trade just adds some more odds to your side, that's
all. Trading is about statistics, you just have to play the games number.

Maybe you are not comfortable with setting and forgetting your trades or you haven't gained the confidence to do so
yet. Don't worry, waiting for confirmation before you place your trade is fine as well, it's just another way of trading
supply and demand imbalances. You just need to find your style and stick to it if it works for you, that's key to becoming
successful at anything in life, not to say trading the Forex markets.

What is a confirmation trade?

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 is us chasing the trades as if they were the
only ones that will ever exist.
Markets do not present text book scenarios every time, it actually ranges most of the time. Trading is like going out
fishing with your father, you throw the fishing line and just wait for the fish to swallow the bait, et voilà, you've got your
dinner. Likewise, trading is like fishing in many ways, we must patiently wait for the text book patterns to show up, once
they appear we should be ready to blindly pull the trigger.

There are several text book trades in the strategy as presented in the realignment rules and the trend trading plan.
When the markets are not providing clear setups, they are ranging or the candlestick formations are not clear, we must
wait for confirmation. There is no such thing as confirmation in trading since it's all based on probabilities, but that's the
word we are using so everybody understands that we must wait for something to happen that will show us there is new
demand or supply at the price area we're looking to trade.

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

What is a brand-new imbalance? As defined in the lesson on how imbalances are created, a new imbalance is created
once an opposing imbalance is eliminated or a trendline is broken with a full OCHL candle. Refer to this lesson to learn
the differences between set and forget and confirmation type of trades

In confirmation we must take a closer X-Ray snapshot at price action and imbalances. For instance, a trader who would
normally use a daily chart for his entry would need to drill down to a lower time frame (H4) in order to take a
confirmation entry or just wait for an opposing imbalance to be taken out in his entry timeframe.

If you are NOT sure about your entry or you are not confident enough with the set and forget type of trades, you can
wait for new imbalances to happen at your entry level.

Many ask what is a confirmation trade? How many types of confirmation type of trades are there? The answer to these
questions is very simple, let me answer these questions with another question.

Read this question carefully and try to answer before you continue reading. The answer to this question should give the
exact scenarios you should be waiting for when you are waiting for confirmation to go long/short.

• Which are the two scenarios where a new imbalance is created?

There are two scenarios you can wait for in order to take a confirmation type of trade, the same scenarios that confirm
there is a new imbalance. When waiting for confirmation at a specific zone, we must wait for a brand new imbalance to
be created and we know that a new imbalance is created only when:

1. An opposing zone has been taken out

o There are times when price reaches an area to wait for confirmation but the trendline slope is not too
steep. What does that mean? It means that the WoW (TL break) won't happen. But then we look left
and we see an imbalance. When that imbalance is taken out, rules say there will be a new opposing
imbalance created which can be used as confirmation

2. A trendline is broken with a full OHCL candle. Also known as the WoW trade

o If thew new imbalance breaks the TL and also removes the opposing zone, the new level created will be
more powerful than a level that only breaks the TL

Hence if you want to wait for confirmation you must wait for 1) an opposing zone to be taken out or 2) a brand new
imbalance that takes the opposing imbalance out
WHAT ARE THE SCENARIOS WHEN CONFIRMATION ENTRIES ARE NEEDED?

The scenarios below require a top down analysis and taking into consideration the context where those scenarios
appear. These are general scenarios, each of them should be put into context.

1. With higher timeframe supply and demand areas in control. If waiting to short on a D1 supply area, you have
to wait for the D1 supply proximal line to be hit, do not try to go short before the zone is reached, you would be
entering too soon, be patient. If it doesn't make it to the D1 supply and price starts dropping, what for previous
demand to be taken out on your entry timeframe.

2. At tested HTF timeframe supply and demand areas. If the HTF is not fresh you can wait for brand SD new levels
on your LTF level to trade that market. The confirmation trade is the brand new LTF level when price hits the
HTF SD zone.

3. When the HTF imbalance has not create a 2:1 RR. We want a clear reaction to a non 2:1 imbalance removing
opposing zone on our entry timeframe, if the HTF foundations are not good in the first place, confirmation
without an opposing zone taken out is lower odds.

4. At continuation patterns (CP) located near or within a higher timeframe supply and demand area. Since set &
forget is not higher odds at CP against the trend, we should wait for brand new levels being formed off a CP at
a higher timeframe supply and demand area.

5. Level on top of level. When your entry timeframe has several levels stacked on top of each other, you can wait
for brand new lower timeframe areas (H4) to be formed. Sometimes it's difficult to decide which level to take,
if that is the case, use confirmation to filter out the levels and concentrate on the brand new one created at
present time at those stacked areas. Either that or choose the level further away since price will reach the area
"exhausted" and your trade will have higher odds.

6. When higher timeframe area has already been retested. If for instance the D1 supply is not fresh (retested),
don't only wait for a brand new area of supply to be formed on your entry timeframe, but also wait for previous
opposing entry timeframe demand to be absorbed. You don't want to trade a retested D1 supply area without
that confirmation. You can do it but it's not higher odds, remember the first retest has always the higher odds
of working out.

7. On counter-trend and non 2:1 imbalances. We also want the opposing zone out, we if we are going to take a
long in a downtrend, we want HTF confluences and WoW longs removing opposing supply zones and/or
obstacles and confluences. Same for non 2:1 imbalances.

8. When the imbalance does not have the minimum R/R required, poor structure at the base or didn't
consolidate away. You must score the level, if not a good score then confirmation would be needed.

9. The HTF of your sequence neither consolidated away, nor made 2:1 imbalance or it's used-up. Wait for a a
confirmation type of trade which takes out the opposing zone. A LTF imbalance nested at a non yet valid HTF
imbalance requires confirmation

10. With over-extension and emotional non-structured rallies.

11. With opposing HTF pin candles, engulfs, shooting star/hammer.

12. With a structured non-emotional arrival

HOW TO DEAL WITH THE FRESHNESS OF A LEVEL IN A WOW TRADE

Freshness of the HTF imbalance in control is key to confirmation. The scenarios below are the same found in the WoW
lesson. The WoW trade is actually a confirmation type of trade.

Follow the guidelines below to deal with the freshness of a HTF level:

FRESH HTF ZONE, HTF IMBALANCE IN CONTROL WITH BIGGER PICTURE UPTREND
No need to take out opposing zone. See EURZAR example

• Most of the time, the opposing zone will be removed anyway, you can always wait for it to be removed and deal
with it as a higher probability entry

• If the opposing zone we want to see removed is not well formed (too wicky, too much trading, compressed, etc),
we can be a little bit more aggressive and "expect" the zone to be removed

• Recommendation: always wait for the opposing zone to be taken out (you will not have to think when to wait
or not for the opposing zone to be taken out), or at least there should be a lot of room to the next opposing
zone.

TESTED HTF IN CONTROL

Wait for a brand new imbalance to be created, one that takes out an opposing zone, not just a trendline break (or WoW).
If there is no zone to be removed and there is a lot of profit margin to the closest opposing zone, then there will be no
need to remove any zone, it's advisable that bigger timeframes are with you. For instance a H4 demand zone nested
within a D1 demand zone, nested within a WK demand zone with the WK chart in an uptrend.

USED UP HTF IMBALANCE

Do nothing since they are not high odds, ideally we want to wait for at least a new trend in our entry timeframe clearly
removing opposing zones the direction we want to trade, not just a CP or WoW trade, but a confirmed trend connecting
two clear valleys/peaks

UNSURE WHAT TO DO? --> WAIT or DO NOTHING. OBVERSE and LEARN from the scenario.

As a rule of thumb for confirmation, follow these simple rules (this applies to the WoW trade rules as well):

1. Fresh HTF zone? You don't need the opposing zone to be removed

2. Non-fresh HTF zone? Wait for a brand new level that takes out opposing zone

3. Used-up HTF zone? Do nothing or do the same thing at step 2 for a more aggressive buying if you are that
aggressive

When to wait for confirmation

• In the middle of the SD Range. No diddle in the middle. Wait for confirmation when you are at a higher
timeframe supply and demand zone. Look at the charts, price almost always makes it to those areas, why would
you want to outsmart the markets? Hold back your ego

• At a used-up higher timeframe zone. An used-up area (retested several times) is not high probability, neither
plan a confirmation trade nor a set & forget on these areas, or you will know what blowing up an account is.
 • In order to trade off an used-up higher timeframe area, we'll need a new direction confirmed with the possibility
of drawing a valid trendline connecting two peaks of valleys, or an important support/resistance and/or
supply/demand taken out in a very clear and obvious way

USDMXN, EXAMPLE OF SET AND FORGET AND CONFIRMATION AT THE SAME TIME
The example below shows a text book scenario to set and forget on the Daily chart based on a MWD sequence. It explains
what the set and forget daily long would have been and the confirmation type of trade if you had waited for a new D1
demand level to be formed. This trade was planned and executed live by a few members, read the analysis and
rationale in this link. There were members who took set and forget long on the D1 demand, others that waited for new
Daily demand to be formed, and one that even took three trades, set and forget D1 long, new daily demand zone and
H4 demand zone.

SET AND FORGET ON MWD SEQUENCE

• Monthly in an uptrend, long bias. Realignment rules state that we can take set and forget longs at Daily demand
zones nested at Monthly demand zones if weekly is out of alignment (it actually was)

• Set and Forget D1 long at D1 DZ #3 nested at Weekly demand #2 and monthly Demand #1.

CONFIRMATION ON MWD SEQUENCE

• USDMXN weekly demand #1 in control. Monthly is also in an uptrend and Monthly demand in control.

• We can set and forget a D1 demand level or wait for confirmation for new levels, D1 demand zone created after
breaking bearish D1 trendline at #2

• This trade was taken by one of the members as well, read the whole process from here
APOLLO HOSPITALS INDIAN STOCK, MONTHLY AND WEEKLY CHARTS
If a bigger timeframe than your entry timeframe is tested, we must wait for new imbalances that take out opposing
zones. In this case, we play the MWD sequence. Tested Monthly demand at #1, confirmation is needed to take longs.
Confirmation happens with new weekly and daily demand zones.

D1 DZ #4 took out D1 SZ #6, retracement at #5 making a brand new D1 DZ. Price fell short of retracing at D1 DZ #5 and
tested the W entry at W DZ at #3 proximal line.
SOYBEAN CONFIRMATION AT WEEKLY IMPULSES
This is a more complex and advanced scenario since we'll be waiting for new levels at weekly engulfing patterns and
impulses. New weekly demand formed at [1], price never retraced to it. Price continues to rally and created new W
impulses at [2] and [3] without removing any opposing zone since there are none to the left around 10.60 at [4]

Price drops to last impulse at [2] around 10 price area and created new daily areas of demand at [5] [6] and [7] as
confirmation of the W impulse at [2]. Valid W supply created at [8], therefore W imbalance [3] must be a valid demand
now.
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 TL last two impulses.
Top down analysis and level scoring in a nutshell

15th November 2016, 10:03 AM

This lesson is a live example of a complete top down analysis of NZDUSD, from the monthly chart down to the daily
chart, including one higher timeframe sequence (3 months) when monthly is out of alignment. I want this lesson to be
a step by step process on what you need and have to do every single time you analyze an instrument.

I want to focus on the top down analysis and level scoring, what rationale is behind every single decision you make on a
price chart and why. This lesson does not deal with new concepts, if you have read the previous lessons most of these
concepts should ring a bell, if they don't, do not worry because they will once you read the lessons a couple of times.

This lesson focuses mostly on:

• When is a level is created

• How to draw trendlines

• How far back in time we need to look to locate an imbalance

• When to take a peek at one TF higher of your chosen sequence? 3 months when using MWD sequence, or M
when using WD4 sequence

• Scoring a level

• Statuses of an imbalance and its tradability

STATUSES OF AN IMBALANCE

We must bear in mind that the fact that a trendline is broken or an opposing zone is eliminated does not necessarily
mean that we have a valid level to trade. An imbalance will always have a potential status until we process it through
the rest of the rules necessary to confirm the level and assess its tradability. These are the 3 statuses we have for a level.

• Potential. Once a trendline is broken, a potential level is created. It will be confirmed as a level once we score
the level by its features. See confirmed status

• Confirmed. We score the level: consolidation away (compulsory), freshness, time at the base, strength of
departure, risk reward (minimum 2:1).

• Tradeable or not tradeable. Now that we have confirmed the level by its features, we need to assess if it's
tradable or not. Is it too high or low in the SD range? Is price over-extended? Is the trend with us? Is there any
odds limited against the level? This will give us an answer and tell us if the level is tradable or not. Most of the
time the answer will be no, the third and most important decision... No trade, sit on your hands and patiently
wait for the odds to be clearly stacked on your favor.

Potential and confirmed imbalances are NOT tradeable imbalances. We need the right status for an imbalance to be
taken. Do not mix up these terms.
LEVEL SCORING

The scoring of a level is not a simple process, it's not just the structure of the level that we need to evaluate. We need
to learn a few more things about it, like what it has accomplished, its location and context, if there are any odds stacked
against it and if the level is formed in a trending market. It's a 5 steps process which is detailed below.

Doing a top down analysis is not enough to make a trading decision at an imbalance. The imbalances needs to be
scored. If everything is telling us to go short but the resulting imbalance doesn't score well, the trade should be
negated.

• Level scoring. We score the level by its features: consolidation away (compulsory), freshness, time at the base,
strength of departure, risk reward (minimum 2:1).

• Accomplishments. What the imbalance has accomplished. Has it broken a TL? Has it taken out one opposing
zone? Two opposing zones? One HTF opposing zone?

• Location and context. Where is the level located? Is it high or low in the M, W or D1 range? Is it right in the
middle of nowhere? Is it diddling in the middle? Is it nested at a HTF imbalance? Nested in 2 HTF imbalances? Is
it nested at a HTF that has not yet been confirmed as an imbalance?

• The trend. Is the imbalance formed in a trending momentum market? Is it formed in a counter trend? Is the
bigger picture consolidating?

• Odds enhancers and limiters. Are there any HTF odds enhancers that strengthen and improve the tradability of
the level? Or do we have on the contrary odds limiters that might prevent price from continuing in the path of
least resistance dictated by the bigger picture trend? There are many obstacles that can hinder the progress of
price action, HTF 20 EMA and HTF TL confluences and HTF engulfing patterns are just a couple of them.

I am working on a more detailed scoring system for the levels, it's not an easy task, it's actually a very complex task, a
huge challenge because there are many variables we need to take into consideration, each of them has a weight but not
all weights are the same.

The 40 minutes long video below is a detailed top down analysis and level scoring of NZDUSD currency pair. We need to
process each timeframe as an independent entity, each timeframe in your 3 timeframes sequence is totally independent
and unrelated to the other two. It is only when the top down analysis is done for the three timeframes in your sequence
has been completed that we will connect and relate with each other each of the three timeframes. Once this relationship
has been established, the charts will give us an answer, an outcome that will follow the rationale used through the
scoring of the levels.

There are only three possible outcomes for a top down analysis:

1. Buy

2. Sell

3. Do nothing. Wait. Sit on your hands

The third decision, doing nothing, will be the most common one, contrary to your expectations. You will probably feel
the urge to buy or sell even if doing nothing is the result. You must control your emotions and have the guts to say no
when rules say you can't trade, but you must also have the guts to pull the trigger every single time the rules say you
can take a trade.
When scoring a level, its location and accomplishments we need to ask these questions:

• Is the imbalance confirmed as level? That is, took out an opposing zone, broke a TL, or both?

• Is the scored high? If the level has a poor score, it will not be tradable and we'll have to pass on it

• Is the level part of a trending market or counter trend?

• Is it located too high or too low in one of the SD ranges (top 2 timeframes of your sequence)?

• Is there room and profit margin to the opposing imbalance?

• Is the level nested in one or more HTF imbalance?

• Are there any HTF confluences that support the level?

• Are there any HTF confluences that negate and hinder the level?

EURNOK MULTIPLE TIMEFRAME SCORING

• No 2:1 weekly supply zone at #5, confirmation needed. We can use D1 and H4 as confirmation, depending on
our sequence

• Neither H4 WoW short base nor departure (only 1 ERC candle) at #6 were any good. H4 DZ at #7 was taken out
by SZ at #6 but it no close. We want a nicely score area of supply, good base and good departure.

• We want D1 bullish engulfing pattern at #8 to be taken out for shorts now, new D1 demand zones at #3 and #4
at potential W WoW long at #9.

• If you wanted to take the risk on a non 2:1 W SZ, the entry would have been D1 SZ at #2, it would not have been
a loss yet. Arrival into the level is not good with D1 bullish engulfing at #8

This scenario was described live in this post and following comments. This trade was not in that week's weekly shopping
list because of the reasons explained above.
Nested zones, the power of nested imbalances

2nd February 2017, 07:18 PM

We should have a very clear understanding of how zones and/or imbalances are created, how to score them and how
to validate them. As powerful and strong an imbalance may seem at first glance it does not necessarily mean that it's a
tradable zone. Imbalances have to be located on each timeframe, at least three as per the realignment rules. Each
imbalance is completely independent from other imbalances on different timeframes.

However, if an imbalance is created within a bigger timeframe imbalance we will say call it a nested imbalance.

A nested imbalance is a lower timeframe imbalance nested at a bigger timeframe imbalance.

For instance, a D1 demand zone nested at weekly or monthly demand zone. These nested imbalances are key to
understanding the fractality of price. The more nested imbalances we have the higher the odds. A D1 demand level
nested at a weekly demand which is also nested at a monthly demand, gives that original D1 demand level much more
odds. If we apply the realignment rules and the sequence is in an uptrend, we'd consider that D1 and W demand levels
set and forget levels in a monthly trending market.

IMPORTANT TIP:

• Scoring the levels: bear in mind that having nested levels does not necessarily mean it is a higher odds level.
Don't forget you need to score all the levels, both the bigger timeframe imbalance and the nested levels. You
can't ignore the quality of an imbalance, if the bigger timeframe imbalance obtains a low score, all lower
timeframe nested imbalances will be negated and confirmation will be needed.

• Drilling down our entries and missing a trade: the lower the nested timeframe level we use to plan our entries
the higher the odds to miss our trades. Drilling down our entries to H4 or H1 on a Weekly demand level will
result many times in a miss trade. If you have the capital to do it, choose D1 or even weekly imbalances, if you
can't, do not lose any sleep over the fact of missing a trade because you will be missing thousands of trades in
your trading career, it's just part of the game. Losing and missing trades are part of the game.

Let's see a few examples so you can see the power of nested imbalances. Supply and demand works on any market and
timeframe, so I've included examples for a Forex currency pair, a couple of Stocks and a commodity.

NZDUSD WEEKLY / DAILY NESTED LEVELS

• Strong D1 SZ at #1 nested at W SZ #2 created after taken used up W DZ #3.

• W SZ #2 has a single high wave doji candle at the base, these are usually lower odds, but this example shows
what a nested level is.
APPLE WEEKLY / DAILY NESTED LEVELS

• Weekly uptrend, W DZ formed at #1 after breaking W SZ at #2

• Strong D1 DZ nested at W DZ at #3, entry at the first retracement at #4

• D1 DZ is nested at # W bullish engulfing pattern a #5

FACEBOOK MONTHLY / WEEKLY NESTED LEVELS

• Weekly DZ #2 nested at Monthly DZ #1 in a Monthly uptrend. Set and forget long

PLATINUM MONTHLY / WEEKLY / DAILY NESTED LEVELS

• An example of multiple timeframes nested demand levels. The more the better and the merrier

• D1 demand level at #1 nested at weekly demand #3 and monthly demand #2

• Weekly demand at #3 is nested at monthly demand #3.

A lower timeframe Trendline is ignored when a higher TF imbalance gains control

18th April 2017, 06:38 PM

Realignment rules are very specific regarding which timeframe and imbalance we need to plan our trades by using a
combination of a three timeframes sequence and the use of trendlines.

A lower timeframe trendline should be ignored if a higher timeframe imbalance bigger than the timeframe where the
TL has been broken gains control.

Trendlines, as explained in the lesson on how to draw trendlines are used to connect the latest two bullish or bearish
impulses (swings, valleys or peaks). As per the realignment rules we want to know as soon as possible when a given
timeframe is losing momentum and creating opposing impulses against the last previous two or more impulses. When
that happens, realignment rules state that we no longer can plan trades at the timeframe that loses momentum with
new opposing impulses.

What does it usually happen when new opposing impulses are created?

• Previous trendline connecting last two peaks or valleys and/or 3 or more consecutive CPs is broken

• New imbalances are created once the TL is broken, created a potential tradable imbalance, a floor or ceiling that
price needs to break before we resume trading in the previous direction

• HTF engulfing patterns are created, these candlestick patterns will establish classic support/resistance (nothing
to do with supply or demand imbalances). Once HTF engulfing patterns happen, price establishes a support area
that signals a likely bigger retracement into HTF imbalances

• Once there is a TL break on TF X and a new engulfing pattern is printed, don't go against it, expect bigger
retracements and set and forget much further away from that engulfing pattern, you don't want to trade against
these patterns and new opposing impulses. These new impulses can be used to take counter-trend scenarios if
the middle timeframe of our sequence is out of alignment or trending in the new established direction and
momentum as explained in this lesson

Rules state that a lower timeframe trendline should be ignored if a higher timeframe imbalance bigger than the
timeframe where the TL has been broken gains control. Why? Because once a lower timeframe TL is broken, we expect
a bigger retracement into a HTF imbalance. Once that HTF imbalance gains control, the lower TF trendlines are ignored
if the HTF is clearly trending in the opposing direction.

These rules and concepts can be applied to any timeframe and sequence because price is fractal.

#AAL STOCK 6 MONTHS AND 3 MONTHS CHART

• In this scenario, #AAL has a clear downtrend on the 6M chart. Price reaches 6M SZ at #1 and by doing doing the
3M bearish TL is broken by several OHCL 3M candles creating a new 3M DZ at #3

• The 3M SZ at #2 is a valid set and forget short with a clear 6M downtrend, the 3M bearish TL is ignored since a
HTF 6M SZ has gained control at #1

• The bearish 3M TL (lower timeframe) is ignored since a HTF 6M SZ gains control and 6M is in a clear downtrend
The Three Questions you need to ask a level every single time

16th November 2016, 09:45 AM

It's very important to have a strict rules set we can lean on for every trading decision that we make. Since we're supply
and demand traders we need to have a series of rules that will allow us to locate potential imbalances in a consistent
and methodically way. If you haven't read the lesson on top down analysis, you should do it before proceeding to reading
this lesson and watching the video below. It's very important that you know how a top down analysis is made and what
are the statuses of an imbalance (potential, confirmed and tradable).

The Set and Forget methodology has a series of rules that helps us locate potential imbalances on any price chart and
timeframe with laser beam accuracy. These rules can be read on Block I's lesson explaining when a imbalance is
created, read the lesson here.

Let's sum up that lesson in a few words... A potential imbalance is created when:

• An opposing imbalance is taken out. That is, a demand zone takes out the closest opposing supply zone and
vice versa
• A Trendline is broken with at least one full OCHL candle. Bearish TL broken = potential demand. Bullish TL
broken = potential supply
• IMPORTANT: consolidation away is mandatory. Potential imbalances needs to consolidate way, that is, it needs
to create one or more candles that stay away from the potential base. Read the consolidate away lesson here

Derived from these rules are the three questions we need to ask every single level on each timeframe of our selected
sequence. By asking these three questions you will learn where those potential imbalances and reversals are located.

1. Has the level eliminated an opposing zone?

2. Has it broken a trendline?
3. Has it consolidated away? (mandatory)

The first two are accomplishments. The whole methodology is based on locating impulses that are strong enough to
accomplish something. Impulses that do not accomplish anything at all are just that, a simple impulse. What does an
impulse have to accomplish in order to become an imbalance? It just either break a TL with at least one OCHL candle or
remove an opposing imbalance. The opposing imbalance also has to be a valid imbalance made of an impulse that
accomplished the exact same thing.

We need to ask these three questions over and over. The charts will answer the questions and you'll have the level you
were looking for. That level will be a potential imbalance, you will need to score the level, see where it's located, learn
if it has any confluences against it, high or low in the SD range, etc. The three questions are the first step you need to
make.

Be methodical, do always the same thing.

• Connect the latest 2 obvious valleys/peaks

• If valleys/peaks are not clear, then they are considered as CP.
• Every time there is a TL break there is a potential imbalance being created. Read about the statuses of level
here.
• Look as far back in time as you need to in order to draw a TL and locate a level. You must go back weeks, months,
years, decades, it does not really matter... As far as you need to
Putting rules together

14th September 2018, 01:29 PM

In this lesson, we will try to put together as many rules as possible. It's just impossible to cover all the rules and nuances
in a single lesson, there are just too many scenarios that can only be learnt and absorbed through screen time and a lot
of practice. This lesson will be rendered useless if you just watch the video attached and do not practice the rules, not
hundreds, but thousands of times. Rules can be overwhelming but each and every one of them is there for a reason. I
wish things were easier but I am afraid that they are not.

The whole methodology is based on locating impulses that are strong enough to accomplish something. Impulses that
do not accomplish anything at all are just that, a simple impulse. What does an impulse have to accomplish in order to
become an imbalance? It just either break a TL with at least one OCHL candle or remove an opposing imbalance. The
opposing imbalance also has to be a valid imbalance made of an impulse that accomplished the exact same thing.

The fact that an imbalance is super strong does not mean that it's indestructible, you will see very powerful imbalances
eliminated, sometimes price will go through them without hesitation. Sometimes these imbalances will be valid entries,
in other occasions rules will prevent us from having a loss. Remember we must have rules and these rules are there
mostly to prevent us from having losses. How hard you work and test each of the scenarios and rules will define your
profit/loss ratio. Feel glad and happy if you have a 50/50 win/loss ratio with 2:1 or 3:1 exits. You can't avoid the losses,
they will always happen, they are part of trading and any sound trading plan.

It's very important for your to remember and carve in fire the following quote:

Not all impulses become imbalances but all imbalances are made of impulses

What topics have been dealt with in the attached video?

Fractality of price

New imbalances created at ATH/ATL

CPs versus valleys/peaks

Fresh, tested and used-up imbalances

Impulses that do not become imbalance

The Sequence

No consolidation away negates lower timeframe imbalances

Over-extension after three or more consecutive continuation patterns

Not all impulses become imbalances but all imbalances are made of impulses

Strength of the impulse

The WoW imbalance

A trend is also formed when two imbalances are removed

After a very strong move (2 or 3 ERC candles), a bigger retracement is expected

The SD Range, high and low in the range

Tested levels, bigger penetration expected. It doesn't always happens

Tested on departure, we usually see bigger penetration

Demand eliminated, supply created... and viceversa

Connecting last two valleys/peaks to draw a trendline and locate new imbalances and turning points

The Chain

Overshot levels, look for confirmation

Engulfing lights and engulfing patterns

Trading is all about sitting on your hands and doing nothing 99.9% of the time

In the video attached, you won't know which timeframe is being analyzed or which asset it is, it could be anything, it
doesn't really matter, does it? Why? Because price is fractal. Whichever patterns you see on timeframe X will also be
possible on timeframe Y and Z. You must choose your timeframe sequence and stick to it. Repeat the same processes
on all the three timeframes of your sequence and you will come up with a trading decision, most the time this decision
will be to sit on your hands and do nothing.

If you want to really take advantage of this video and lesson where all these rules are put together, you must do your
homework. You must do the exact same thing thousands of times until it becomes second nature. It's all about drawing
rectangles and trendlines connecting the latest two impulses.

WATCH VIDEO:
The end result of the analysis: