Price action / WORKSHOP
Market structure: where a buying idea stops making sense
Three rising candles do not settle whether to buy. First find the level below which the continuation idea fails.
How it works
Compare pairs of confirmed highs and lows at one consistent scale. Both rising supports an upward structure; one large candle does not establish it.
Structure helps define a direction to investigate and the price event that invalidates it. Entry, costs and position size remain separate decisions. Keep unsuccessful markings when reviewing historical charts.
What to check
- Compare the last two confirmed highs.
- Compare the last two confirmed lows: do they support the same interpretation?
- Identify the closest level whose breach invalidates this particular idea.
A hypothetical example
Example: after highs of 100 and 105, a pullback holds above 98. The exercise permits considering a buy only after a close above the pullback high of 102. Entry at 102.2 and protection at 97.8 imply a risk distance of 4.4. The old high of 105 is only 2.8 away. A plan requiring at least 2R before an obstacle would reject the trade. This is a planning example, not a complete strategy.
When to skip
Skip if highs rise while lows fall, or if the room to the nearest obstacle is insufficient under your predefined rule.
Moving the reference low downward as a loss grows removes the original invalidation rule. It creates a different trade.
Try it yourself
Choose one timeframe, remove indicators and mark the latest two completed advances and pullbacks before revealing the next candle.
Highs move from 100 to 105, lows from 94 to 98. The next candle closes at 97. What needs reassessment?
Show explanation
A buy based on holding 98 has lost its condition. A close at 97 alone does not establish a lasting downtrend.
A useful chart marking identifies the price at which you admit the idea is wrong.
Sources and definitions
Fidelity: Support and resistance ↗TradingView Pine Script: Repainting ↗Scenarios and exercises are educational FINBORS examples, not a verified trading strategy.