Basics of Manipulation Point Selection: Part 2

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Generally, we only focus on how far the market runs away from the level to establish its validity. In this scenario, however, we need to decide between multiple levels as they’re closer than 20% of the ADR (minimum separation required between levels). So, we need to establish a factor that helps us separate between these levels.

In the previous article, we discussed that you should go to the deeper level as a good rule of thumb when you have two valid levels under the 20% of the ADR separation we require.

However, suppose the shallower level is much larger. In that case, the shallower level could be the better option. 

The question then becomes, “how do I measure the stronger level based on the size”?

I use the run into a level as well as our standard run away from the level.

In this case, I would measure the run into the level and the run away from the level. If the earlier level is visibly larger than the deeper level then I would likely adjust to this point.



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