Understanding Polarity in Trading Strategy

Key Concepts

Polarity Levels

• Polarity refers to key trading levels that influence long and short positions.
• Essential to identify whether to take a long or short position at these levels.

Trade Decision Points

• Key Idea: Only two points for decision-making: the level itself or none at all.
• Short/Long Execution:
  • Short if at resistance level (upper side of polarity).
  • Long if at support level (lower side of polarity).
• Avoid taking positions between these key levels to minimize risk.

Entry and Exit Strategy

• Level Testing: Ensure a level has been fully tested before making a trade.
• Breakout/Breakdown: Entry points should consider whether the price has broken above or below a given polarity level.
• Only trade when a clear signal indicates a breakout above or below the polarity level.

Time Frame Analysis

Daily and 12-Hour Analysis

• Mark polarity levels starting from daily and 12-hour charts.
• Use these higher time frames to pinpoint significant trading levels (

Smaller Time Frames

• Refine entry points using smaller time frames (1-hour, 15-minute, 1-minute).
• Smaller time frames reveal micro trends but should not dictate primary trading decisions unless polarity is clear.

Laddering in Trading

• Laddering: Series of highs and lows correlating to longer-term price movements.
• Ladder from larger events to pinpoint smaller, local levels.
• Example: Ladder 1 -> Ladder 2 -> Ladder 3.

Greediest Points

• Focus on greedily untested points for robust trading decisions.
• Avoid taking middle or less significant levels.
• Key Rule: Greediest points generally indicate profitable trading levels due to high likelihood of reaction.

Backside/Frontside Combinations

• Identify these combinations in the chart to make targeted decisions.
• Typically associated with short-term adjustments and corrections.

Practical Application

Step-by-Step Approach

1. Identify Key Polarity Levels: Mark polarity on larger time frames (daily, 12-hour).
2. Move Down Time Frames: Gradually shift to smaller time frames to fine-tune the entry/exit strategy.
3. Mark Key Testing Zones: Identify areas where price tested the same region several times.
4. Execute on Greediest Points: Focus on trades at the greediest, untested points to maximize return.
5. Use Replayer Tool: Utilize this for historical analysis to better understand how polarity plays out over time.

Handling Trades

• Always exit if trade violates initially identified polarity levels.
• Re-enter trades only when new signals indicate revised points of polarity.

Advanced Considerations

• Larger global trends can impact local trades; understand the broader market context.
• Instance within Instance: Concept of trading in micro trends within larger trends.
• Post Analytics: Use historical data and post analytics for the best learning experiences.

Summary

• Polarity is Key: Ensure to identify and respect polarity levels in trading.
• Follow Greediest Points: Target these for higher likelihood of profitable trades.
• Larger and smaller time frame analysis is crucial for leveraging polarity.

Rule of Thumb: Only take trades at the most untested, greediest levels for maximum efficacy. Use higher timeframe analysis to set polarity and fine-tune with smaller time frames.