Which Zone Holds?

Four zones on the chart, one reaction. How to rank zones by what they did, rather than how they look. This free lesson covers: Four zones, one reaction, Pauses are not causes, Rank them, The rule, Valid, but too far, Wait for the tap, then confirm, Where is the entry?, Work it out, Will it always hold?, Put it together.

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Four zones, one reaction

After a strong rally it is easy to mark four or five demand zones on the way up. Price will not respect them all — most of them get run straight through on the pullback.

So the question is not "where are the zones?" but "which one mattered?". Rank them by the job each one did in the move.

Going deeper

More on which zone holds?

This lesson is the long form of the "Which zone will price react from?" Reel. The chart in the Reel is illustrative; the 1 : 2.6 reward-to-risk is recomputed from the stated entry, stop and target.

Ranking zones by the job they did — caused the break, paused after it, or sits too far away — is a way of applying the Top-Down Method's "zones, not lines" idea when there are too many candidates.

Common mistakes3

Treating every consolidation on the way up as equal demand.
Buying the first touch of a zone instead of waiting for the 1H to confirm.
Placing the stop at the zone's edge rather than beyond it, where ordinary noise takes it out.

From experience2

Label each zone on the chart as "cause", "pause" or "far". Labelling forces the ranking to be a decision rather than a feeling.
If the zone that caused the break is also where the daily bias points, that is confluence worth noting in the plan.

Questions people ask1

What if price blows straight through the best zone?

Then the stop does its job and the loss is 1R. A zone that fails after a clean break is useful information for the next read — the buyers who built the move did not defend it.