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These are the user uploaded subtitles that are being translated: 1 00:00:00,390 --> 00:00:05,220 OK, so we talked a little bit about how do I define that false breakup may or may not be occurring. 2 00:00:05,930 --> 00:00:11,790 So was there some strategies we can use to help us become better traders along that as well when we 3 00:00:11,790 --> 00:00:13,620 think of false breakup might be occurring? 4 00:00:13,650 --> 00:00:18,420 So that's what this lesson is about, is your strategic approach to these types of things, these false 5 00:00:18,630 --> 00:00:24,840 trend line breaks are potentially false trimline breaks and once again, hard fast rule. 6 00:00:24,840 --> 00:00:28,490 Once the trend line is broken, no matter how it's broken, you know, the trend is over. 7 00:00:28,500 --> 00:00:29,790 That is the hard, fast rule. 8 00:00:29,980 --> 00:00:33,540 Again, you're well, you're following that rule takes emotion, hope out of it, takes a lot of extra 9 00:00:33,540 --> 00:00:34,430 analysis out of it. 10 00:00:34,740 --> 00:00:35,970 So nothing wrong with that. 11 00:00:35,970 --> 00:00:39,300 As far as once that trend line is broken, the trend is over. 12 00:00:39,990 --> 00:00:43,620 However, false brakes do happen, frequently happen. 13 00:00:43,890 --> 00:00:48,660 So there might be ways that we can use a strategic approach to really kind of deal with them and help 14 00:00:48,660 --> 00:00:49,680 us be better traders. 15 00:00:50,040 --> 00:00:54,420 And we're going to talk about how we can use support and resistance lines in terms of our strategy, 16 00:00:54,570 --> 00:00:57,600 but also how to apply filters around this, too, in this lesson. 17 00:00:57,610 --> 00:01:03,830 So let's let's get to that how we be able to deal with these potential false breakouts in terms of strategy. 18 00:01:04,470 --> 00:01:05,850 So here's an old friend here. 19 00:01:05,850 --> 00:01:08,850 Let's say we saw this this happening, right? 20 00:01:08,850 --> 00:01:11,250 We saw this image here on the left there. 21 00:01:11,610 --> 00:01:16,560 As far as you've got this nice uptrend that you bought into this nice uptrend. 22 00:01:16,560 --> 00:01:20,820 And before you see the definite turnaround there, but let's say you're seeing this uptrend and you 23 00:01:21,000 --> 00:01:26,430 first see the support line is broken and you're thinking, you know what, the support line's broken, 24 00:01:26,430 --> 00:01:28,080 but maybe that's just temporary. 25 00:01:28,080 --> 00:01:31,890 Profit-taking you can see we had this nice long trend before that. 26 00:01:31,890 --> 00:01:34,980 And we bought in on the in this example, on the third touch. 27 00:01:35,220 --> 00:01:39,720 But let's say if you bottom sooner even and you'd have a nice long trend that you've been make a nice 28 00:01:39,720 --> 00:01:42,690 profit and maybe there's just some temporary profit taking. 29 00:01:42,690 --> 00:01:46,280 Maybe it's just going to go down or sideways a little bit and then resume that trend. 30 00:01:46,920 --> 00:01:51,900 So if the closes below the trend line, you're thinking, well, maybe it might be OK to hang in there 31 00:01:51,900 --> 00:01:53,910 a little bit, just hang in there a little bit more. 32 00:01:54,450 --> 00:01:59,730 So if you were to use this as a strategy around that, well, you could do is adjust your stop loss 33 00:01:59,730 --> 00:02:01,290 order to kind of lock in profits. 34 00:02:01,290 --> 00:02:01,470 Right. 35 00:02:01,470 --> 00:02:02,910 We saw when we bought you. 36 00:02:02,910 --> 00:02:07,140 Can you put a look at the lesson around stop loss orders and how to use these orders? 37 00:02:07,140 --> 00:02:12,630 But basically, you're going to set a stop loss at a certain point in this case would be moving above 38 00:02:12,630 --> 00:02:13,470 what you bought it at. 39 00:02:13,480 --> 00:02:18,930 So if it if you're wrong and it's not a false breakout and it keeps going down, you'll be able to automatically 40 00:02:18,930 --> 00:02:23,190 sell because of the order you placed in lock and lock in some profits there. 41 00:02:24,040 --> 00:02:29,160 The other thing you can do, like in this example, is adjust the total amount of the money committed 42 00:02:29,160 --> 00:02:29,970 to the trade. 43 00:02:30,000 --> 00:02:30,320 Right. 44 00:02:30,330 --> 00:02:35,910 So let's say we bought in here at a certain amount and we could say, OK, we're seeing some bearish 45 00:02:35,910 --> 00:02:39,210 signs, we're seeing support line breaks instead of selling everything. 46 00:02:39,390 --> 00:02:45,270 Maybe we do as we sell some, but not all of it to reduce the risk and lock in some profit. 47 00:02:45,660 --> 00:02:50,400 And then we can sell all of it later on if we get a more definite sell signal as it starts to make that 48 00:02:50,400 --> 00:02:50,840 turn. 49 00:02:51,150 --> 00:02:54,480 So the idea is I've made a profit, I'm going to lock in some of those profits. 50 00:02:54,480 --> 00:02:58,020 I think I might have a false breakout, maybe some temporary profit taking. 51 00:02:58,230 --> 00:03:02,370 I'm going to hang in there a little bit, but with a smaller position, a smaller amount committed because 52 00:03:02,370 --> 00:03:03,630 I've already taken some of it out. 53 00:03:03,810 --> 00:03:08,160 And if it looks like it, go south and it's really just it is a definite breakage and it's keeps going 54 00:03:08,160 --> 00:03:09,600 down in this example. 55 00:03:09,600 --> 00:03:10,110 It does. 56 00:03:10,410 --> 00:03:12,060 Well, then I'll I'll sell at that. 57 00:03:12,630 --> 00:03:18,300 I'll sell and still make a profit, but I'll sell, I'll get out of it completely at that point and 58 00:03:18,300 --> 00:03:21,480 then I'll sell it all later on and say that more definite sell signal. 59 00:03:21,810 --> 00:03:26,340 So you see in this example here where we have buy and then you can see where cross that line. 60 00:03:26,460 --> 00:03:30,120 Maybe you're saying I might sell here, but I might not really hang in there. 61 00:03:30,120 --> 00:03:34,590 And then it starts to see where we're definitely having a closed all the way below the brake line. 62 00:03:34,830 --> 00:03:36,960 Now we're really selling at that point. 63 00:03:37,680 --> 00:03:40,260 And maybe we already took out some profits of sell maybe. 64 00:03:40,440 --> 00:03:41,940 And then we took the rest out of the cell. 65 00:03:41,940 --> 00:03:42,450 Definitely. 66 00:03:42,450 --> 00:03:46,290 But if I turn and go in the other direction, then we still have some money in that we could keep writing 67 00:03:46,290 --> 00:03:46,800 that trend. 68 00:03:47,040 --> 00:03:49,170 And again, with all this, you don't have to be perfect, right? 69 00:03:49,440 --> 00:03:51,480 You want to start using strategies to help. 70 00:03:51,660 --> 00:03:55,200 You'll lock in profits and things so you don't have to be perfect on all this. 71 00:03:55,500 --> 00:03:57,600 You just have to be, you know, kind of smart about it. 72 00:03:58,230 --> 00:04:01,680 Another way of things could happen is let's say a resistant line breaks, right? 73 00:04:01,680 --> 00:04:05,010 So the buyers or the bulls have broken through there. 74 00:04:05,370 --> 00:04:09,060 We're on a deep downward trend and has been broken through. 75 00:04:09,060 --> 00:04:10,560 The trend is well established. 76 00:04:10,560 --> 00:04:13,230 You can see the downtrend here on this image has established. 77 00:04:13,500 --> 00:04:16,500 You could have you know, you could see that on the second touch of the third touch. 78 00:04:16,500 --> 00:04:19,680 That is definitely a downturn established with the fourth touch. 79 00:04:19,680 --> 00:04:21,870 You could say, well, it's still part of a downtrend. 80 00:04:22,350 --> 00:04:25,740 And the question is, will it become a new uptrend once it's broken through? 81 00:04:25,740 --> 00:04:25,950 Right. 82 00:04:25,950 --> 00:04:28,500 We're looking at is this a false signal? 83 00:04:28,500 --> 00:04:29,490 It's already broken through. 84 00:04:29,490 --> 00:04:31,050 This whole idea is it's broken through. 85 00:04:31,440 --> 00:04:36,060 So the strategy around this and a resistance line break, you know, it's been in a downtrend. 86 00:04:36,210 --> 00:04:37,290 It's broken through. 87 00:04:37,530 --> 00:04:39,000 Will this become a new uptrend? 88 00:04:39,120 --> 00:04:43,230 So the strategy wait for the second or third touch to buy into the new uptrend. 89 00:04:43,230 --> 00:04:44,610 That's our orange line there. 90 00:04:44,610 --> 00:04:49,500 You could see we got a second touch there, especially since we're coming out of a real steep downtrend 91 00:04:49,500 --> 00:04:50,760 in this particular example. 92 00:04:51,000 --> 00:04:57,180 This might be a case where it might be safer to wait for a third confirming real establishing a third 93 00:04:57,480 --> 00:04:59,370 touch, just to be sure, just because it just. 94 00:04:59,640 --> 00:05:05,400 Out of a big downtrend in this example, if, for example, and that's the orange line there, other 95 00:05:05,400 --> 00:05:11,040 thing to do is called selling short and basically you're buying the price will continue to go down at 96 00:05:11,040 --> 00:05:15,420 number two or number three toucher of the resistance line, sir, back in the blue numbers there. 97 00:05:15,660 --> 00:05:21,630 And you're you're seeing you could be selling short at those periods and then you close your short position 98 00:05:21,840 --> 00:05:24,890 once it breaks through in that a resistance line breakout you. 99 00:05:24,900 --> 00:05:26,760 So you're booking your profits at that point. 100 00:05:26,760 --> 00:05:31,970 So you're you're kind of betting this in terms of that way or investing it that way when we get the 101 00:05:31,980 --> 00:05:36,810 order taking about how to sell short and how to cover your shorts, you know, though, we'll get into 102 00:05:36,810 --> 00:05:37,470 that how it works. 103 00:05:37,470 --> 00:05:39,360 But the idea is you think it's going to go down. 104 00:05:39,690 --> 00:05:43,050 You're investing in a way that you're betting on it to go down. 105 00:05:43,200 --> 00:05:44,070 It does go down. 106 00:05:44,070 --> 00:05:45,820 And then once it breaks that line, you're getting out. 107 00:05:45,840 --> 00:05:48,480 So, again, you don't have to be perfect with any of this. 108 00:05:48,690 --> 00:05:53,160 And really, for most people who aren't selling short, they're really doing that first strategy of 109 00:05:53,160 --> 00:05:58,190 like I see us breaking through, I'm waiting for the second or third touch to buy a new truck turn. 110 00:05:58,200 --> 00:06:00,390 And if that doesn't form, then I'm still staying out. 111 00:06:00,390 --> 00:06:01,590 I'm still staying on the sidelines. 112 00:06:01,590 --> 00:06:02,730 That's what I'm watching for. 113 00:06:02,880 --> 00:06:07,650 New trends or new indicators do confirmations to come along with a resistance line break. 114 00:06:08,460 --> 00:06:13,050 There's also some interesting rules out there or different ways you can approach it to beyond this. 115 00:06:13,050 --> 00:06:14,070 That's the core part. 116 00:06:14,280 --> 00:06:18,990 One interesting one is the one, two, three rule as created by trader Vic, now famous trader, trader 117 00:06:18,990 --> 00:06:20,640 Vic author as well. 118 00:06:21,060 --> 00:06:25,080 And in the whole part of this and all of this is the goal is to manage the big challenge or at least 119 00:06:25,080 --> 00:06:28,500 temporary pullbacks in this case of an established uptrend. 120 00:06:28,500 --> 00:06:35,520 So the one, two, three one rule is regarded related to definite established uptrends and trying to 121 00:06:35,910 --> 00:06:37,730 sell out of a temporary pullback. 122 00:06:37,740 --> 00:06:39,300 You want to try to run that. 123 00:06:39,300 --> 00:06:42,690 You want to keep running with that trend helps you to not get out too early. 124 00:06:43,020 --> 00:06:48,000 So if you were bought early in the trend, you had this nice run up, then it pulls back. 125 00:06:48,000 --> 00:06:53,810 It's the idea of the one, two, three rules that you're not selling till the pullback you have across 126 00:06:53,820 --> 00:06:55,260 a trend line that's selling during the pullback. 127 00:06:55,260 --> 00:07:01,170 You're trying to work through this temporary challenge as far as a pull, a temporary pullback so you 128 00:07:01,170 --> 00:07:04,230 can keep your money on and let that profit keep running. 129 00:07:04,240 --> 00:07:05,490 So how's one, two or three rule? 130 00:07:05,510 --> 00:07:07,410 Look, let's let's take a look at that. 131 00:07:07,500 --> 00:07:08,790 So let's walk through this in steps. 132 00:07:08,790 --> 00:07:13,710 So first off, let's say on this particular one here, you can see we have a nice uptrend. 133 00:07:13,980 --> 00:07:17,880 We bought on the second touch on this example, could have been on the third touch, but we bought in 134 00:07:17,910 --> 00:07:18,240 there. 135 00:07:18,570 --> 00:07:22,020 And you can see we have a nice price run up, nice profit up there. 136 00:07:22,260 --> 00:07:25,230 And then we see across the trend line, that's our sell signal. 137 00:07:25,440 --> 00:07:28,210 And so that's the first time we tell us, oh, we got to sell it. 138 00:07:28,230 --> 00:07:29,580 Susan breaks that line we're selling. 139 00:07:29,580 --> 00:07:33,930 Or if you want to wait till fully it's a full close across, you could sell them to. 140 00:07:34,410 --> 00:07:37,200 So but you're looking at this line. 141 00:07:37,200 --> 00:07:39,180 You're saying, I don't know if I really want to sell. 142 00:07:39,480 --> 00:07:44,700 And there might be some really good logistical reasons behind this are tactical reasons, not hoping 143 00:07:44,700 --> 00:07:47,580 and praying, but really some things that happen. 144 00:07:47,850 --> 00:07:53,640 If you look right before that sell, you know, going back from the sell thing, you see there's a a 145 00:07:53,640 --> 00:07:54,690 gap up, right? 146 00:07:54,690 --> 00:07:59,730 There's a big there's a jump between the two two white candlesticks where there's where the prices don't 147 00:07:59,730 --> 00:08:02,130 overlap or the price range doesn't overlap. 148 00:08:02,340 --> 00:08:06,750 A gap is always a good, you know, bullish sign. 149 00:08:06,750 --> 00:08:07,020 Right. 150 00:08:07,020 --> 00:08:09,030 It doesn't mean it's literally going to happen that way. 151 00:08:09,030 --> 00:08:13,110 They'll keep going up, but it definitely is a good sign that something good is happening. 152 00:08:13,110 --> 00:08:14,130 So you had a gap up. 153 00:08:14,940 --> 00:08:21,130 And then also you see there we have all these higher highs and we have these high closes all row, you 154 00:08:21,150 --> 00:08:24,900 know, seven of them since you brought one, two, three, four, five, six, seven, since you bought 155 00:08:24,900 --> 00:08:27,120 it, kept going up seven straight times. 156 00:08:27,480 --> 00:08:28,590 So that's good, too. 157 00:08:28,680 --> 00:08:32,850 But then now there's this temporary pullback or maybe it's a temporary pullback. 158 00:08:32,850 --> 00:08:33,330 You don't know. 159 00:08:33,330 --> 00:08:39,210 But you reach that peak and then you start seeing that the prices now start going red and the cattle 160 00:08:39,480 --> 00:08:42,600 go red is starting to go down and it crosses that trend line. 161 00:08:42,930 --> 00:08:48,870 So with that good stuff, all those high close to zero and the gap up, do I do I really sell because 162 00:08:48,870 --> 00:08:53,520 across that trend line or people just taking some profits and they're just doing that, what how do 163 00:08:53,520 --> 00:08:56,100 I apply my one, two, three rule to this is the idea. 164 00:08:56,400 --> 00:08:57,270 So there's how you do it. 165 00:08:57,270 --> 00:08:58,680 So let's put on some lines on this. 166 00:08:58,680 --> 00:09:00,840 And this is how the one, two, three wheel works. 167 00:09:01,260 --> 00:09:05,850 So first thing you do is in order for the one, two, three rule to be activated, you have to have 168 00:09:05,850 --> 00:09:07,080 the support line broken. 169 00:09:07,110 --> 00:09:07,410 Right. 170 00:09:07,410 --> 00:09:08,220 That's the whole idea. 171 00:09:08,430 --> 00:09:10,320 You're trying to see if this is a false signal. 172 00:09:10,320 --> 00:09:12,510 So first step, it's got to be broken. 173 00:09:12,510 --> 00:09:12,870 Right. 174 00:09:12,960 --> 00:09:14,190 And you can sell right there. 175 00:09:14,220 --> 00:09:15,720 You know, it's always the established rule. 176 00:09:15,720 --> 00:09:16,440 You can just sell there. 177 00:09:16,440 --> 00:09:23,100 But if you want to try one, two, three to see if it's more of a false type of false type of breakage, 178 00:09:23,820 --> 00:09:29,310 then the second step you would do after the sparling's broken is you're watching for it to test of higher 179 00:09:29,310 --> 00:09:29,850 highs. 180 00:09:30,150 --> 00:09:33,990 You might go down a little bit more, might go sideways, but you're then you're looking for a turnaround 181 00:09:33,990 --> 00:09:36,450 and for it to go back up and test the higher highs. 182 00:09:36,780 --> 00:09:37,230 That's that. 183 00:09:37,230 --> 00:09:39,180 Number two, they're drawn a line. 184 00:09:39,420 --> 00:09:43,290 Whatever was the highest point of that trend before it was broken. 185 00:09:43,740 --> 00:09:47,610 That's where I'm going to draw my line for my number two of the one, two, three rule. 186 00:09:47,820 --> 00:09:50,040 And you can see it was actually a red candlestick. 187 00:09:50,040 --> 00:09:51,000 It was a down day. 188 00:09:51,210 --> 00:09:54,570 But the the bulls, the buyers tried to push that price higher. 189 00:09:54,570 --> 00:09:58,440 They tried to keep going with that uptrend, tried to turn that into an update. 190 00:09:58,440 --> 00:09:59,070 But the. 191 00:09:59,410 --> 00:10:03,490 The bears, the sellers won out on that day and then pushed it down and then kept pushing it down past 192 00:10:03,490 --> 00:10:06,730 the trend line, but that's where we look at that highest high end number two. 193 00:10:07,240 --> 00:10:12,070 And then number three is where you look at where the previous significant low was. 194 00:10:12,070 --> 00:10:15,070 And this could have been higher up in the trend line, but not in this example. 195 00:10:15,370 --> 00:10:21,340 The previous significant low that approach the the trend line is where you draw a line straight across 196 00:10:21,340 --> 00:10:22,360 that year, number three. 197 00:10:22,690 --> 00:10:29,680 And once that's broken, then you have real definite confirmation that this is not just a not just a 198 00:10:29,690 --> 00:10:30,430 temporary thing. 199 00:10:30,430 --> 00:10:32,740 It's a definite thing as far as a turnaround. 200 00:10:33,370 --> 00:10:38,130 So if we look at the one, two, three in this in this example, you can see, of course, the support 201 00:10:38,140 --> 00:10:43,600 line was broken and the highs they had lost, they had a little pullback, had a little turnaround, 202 00:10:44,230 --> 00:10:46,240 but it never really tested that higher. 203 00:10:46,240 --> 00:10:46,720 Hi. 204 00:10:46,990 --> 00:10:52,930 See how the highest point after the support line, after the trend line never got up to number two, 205 00:10:52,940 --> 00:10:53,830 never broke through. 206 00:10:53,830 --> 00:10:54,160 No. 207 00:10:54,160 --> 00:10:56,170 Two is really where we're looking for. 208 00:10:56,170 --> 00:10:58,990 We're looking forward to for this to have worked in this case, it didn't. 209 00:10:59,230 --> 00:10:59,800 It should have. 210 00:10:59,890 --> 00:11:05,650 If we if it worked, it would have been breaking through a number two at this point and then establishing 211 00:11:05,650 --> 00:11:09,730 or re-establishing that strong ten trend after a temporary pullback. 212 00:11:09,730 --> 00:11:13,480 That's what we would look for, is that breakthrough of the number two of the higher highs. 213 00:11:13,480 --> 00:11:13,920 And it didn't. 214 00:11:14,170 --> 00:11:19,780 Instead, it went down and maybe this went down a couple more days, a couple more red bars. 215 00:11:19,780 --> 00:11:23,140 And we're seeing well, maybe we're just seeing a little pullback, a little narrow trading range that's 216 00:11:23,140 --> 00:11:26,990 going to go back on trend, going to try to come back to that number two and go higher high. 217 00:11:27,010 --> 00:11:27,790 But it never did. 218 00:11:28,000 --> 00:11:33,670 In this particular example, it went down to the number three line, the test of the previous significant 219 00:11:33,670 --> 00:11:35,410 low, and then broke right through it. 220 00:11:35,410 --> 00:11:35,670 Right. 221 00:11:35,680 --> 00:11:36,430 It broke through. 222 00:11:36,430 --> 00:11:37,480 And that's your confirmation. 223 00:11:37,480 --> 00:11:41,770 As soon as it breaks through, that's enough confirmation and you're selling at that point, you know, 224 00:11:41,800 --> 00:11:43,330 to get out once it breaks through that. 225 00:11:43,750 --> 00:11:49,000 So as you can see on this example, I would have made more profit in this example if I would have sold 226 00:11:49,000 --> 00:11:53,560 at number one, if I were to follow the rule not, you know, tried to test for a pullback. 227 00:11:53,980 --> 00:11:57,220 You know, if it would have broke through a number two, then I would have been rewarded on that. 228 00:11:57,220 --> 00:11:57,490 Right. 229 00:11:57,500 --> 00:12:00,250 So the idea is you're looking at other confirming factors. 230 00:12:00,250 --> 00:12:04,900 You're looking at things to see how temporary this pullback is or if it really is a reversal like in 231 00:12:04,900 --> 00:12:05,530 this case. 232 00:12:05,890 --> 00:12:12,280 But even by setting my three out, the previous significant low between when I bought in that previous 233 00:12:12,280 --> 00:12:14,110 significant low, I made profit. 234 00:12:14,440 --> 00:12:19,450 I did not make as much profit as I would do from the Green Arrow up to the number one where I sold in 235 00:12:19,450 --> 00:12:20,200 this example. 236 00:12:20,470 --> 00:12:25,690 But I would have still made some profit and tested out the the pullback there. 237 00:12:25,810 --> 00:12:31,450 So this isn't a case where it didn't fully work out as far as it worked out in terms of still getting 238 00:12:31,450 --> 00:12:36,090 profits but didn't work out as far as hanging in there through a pullback and then breaking through 239 00:12:36,100 --> 00:12:36,670 number two. 240 00:12:36,670 --> 00:12:38,380 And that's the idea of the one, two, three rule. 241 00:12:38,650 --> 00:12:41,770 You're looking for it to break through a number two and then your downside. 242 00:12:41,770 --> 00:12:46,720 You're protecting yourself with the number three as far as your significant low confirmation. 24233

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