The blue leg is the leg we are retracing, that's the leg we look to to identify levels for the current move up.
"If price is going down" How do we know price is starting a new leg down? Maybe it is just bouncing off support and continuing upwards (yellow line)?
Here's the thing, we can never really "know" when it comes to trading. There is no certainty. What we can do as traders is estimate the probabilities of moves and play the probabilities.
As you get better at identifying levels, accum/distr, and momentum progression, you will be able to estimate the probabilities with greater clarity.
Here is some further reading on legs specifically:
Im very interested in hearing about your thoughts on kewltech. however im not understanding what you mean by the blue leg down is what you are retracing as price falls ?
The following user says Thank You to tobym333 for this post:
Yes, I believe so. Always start with bigger timeframe to see which leg we are tracing and then zoom on hourly timeframes. To Loool for the leg segment to the left. Hope that helped. Please ask if you need clarification
The following user says Thank You to Mudshark for this post:
I understand how to locate and trade the first touches as they have very high probability, but is there a way to know how big the Pop/drop would be? Whe it pops/drops because of a news event it often disregards all of the levels, how does one know how far the Pop/drop move will take us?
The following 2 users say Thank You to Mudshark for this post:
Perfect explanation! I always start with bigger timeframes to get a general idea and then zoom in. It is worth noting that there are always legs within legs that have levels as well.
The following user says Thank You to Mudshark for this post:
