When there is a clear ‘if…. we stay below/above here… then…’ scenario then you can build a trade around that idea, to test it out. If the scenario doesn’t play out you lose and if it does you make a multiple R win as long as it is structured in the correct way.

In this example, I knew the location of the TL that needed to be broken for the corrective bullish action to be over and for the down-trend to resume (and resume it did …). 

The TL broke in ON action and the market opened below it on 5th Dec. So knowing how critical this TL was, and how many points are likely to be on offer if this is true break of it,  I could have sold as close to the TL as I could get and waited to see if my scenario panned out. A conservative stop would be above 309 and a more flamboyant one would have  been above the TL.

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