The Nine Buying and Selling Tests and Trading Scenarios

The nine buying and selling tests are pretrade evidence checks within the Wyckoff five-step method. They bring together whether the prior trend is nearing a potential target, stopping action, price-volume changes, trend structure, relative strength, a horizontal base, and potential reward to risk in one procedure. Their value is in requiring analysts to explain the evidence for each item and expose unresolved contradictions. They are not a forecasting model, and the nine tests are not nine independent votes. The number satisfied is neither a probability of success nor a position-sizing rule.

This chapter follows the order of the tests as paraphrased from Wyckoff Analytics. Buying and selling have their own historical sequences; items on opposite sides are not exact row-by-row mirrors. Teaching versions may differ slightly in wording and order, especially the fifth selling test, often described as a break of the uptrend line, demand line, or support line. Fix the version used in practice and do not change item meanings after seeing price action.

27.1 The Nine Tests Within the Five-Step Method

The five-step method first assesses the overall market's position and likely direction, then seeks instruments aligned with that direction and displaying suitable relative performance. It next estimates whether the cause already formed supports potential targets, checks readiness to act, and finally times participation with overall market changes. The nine tests verify individually whether target room, price-volume changes, trend, and relative strength support the existing structural assessment. The number of satisfied items cannot alone determine long or short direction. Even if many hold, a specific entry trigger and risk calculation are still required.

Each assessment must specify the instrument, timeframe, whether the buying or selling set is used, and the information cutoff date. Long studies of bottom accumulation or reaccumulation use the buying set; short studies of top distribution or redistribution use the selling set. If the range's character remains unclear, keep both conditional records and observe which side's evidence develops. Do not combine favorable items from both sets into a hybrid checklist.

The items overlap in information. Higher lows and higher highs often come from the same swings; a trend-line break is another expression of their structural change; climax, secondary test, and base formation belong to the same stopping process. Relative strength is derived from instrument and benchmark price series. Identify these shared sources so one price sequence is not repeatedly counted as independent confirmation.

After assessment, state which conditions hold, which are missing, and what opposing price action would invalidate the current trade. Even if every item has support, entry still requires an observable trigger, structural invalidation, a protective stop, actual costs, and position quantity. An item that cannot yet be assessed does not mean the structure must be invalid; it means that item cannot currently support the trade and further waiting is needed. The tests determine whether to prepare for a trade and what remains to be observed, rather than count checkmarks.

27.2 The Nine Buying Tests Explained

Buying Test 1: The Previous P&F Downside Price Objective Has Been Reached

Examine the distribution or redistribution structure preceding the current bottom and the downside candidate zone from its horizontal count. Check P&F box size, reversal count, counting range, projection anchor, and current price to determine whether the old decline has entered its previously estimated potential distance. If software supplies a converted target, do not multiply again by box size and reversal count.

Reaching the previously estimated downside target zone means the expected decline associated with the old trading range has occurred, placing the market at a location worth reassessing. It does not establish that selling pressure has disappeared or a final low has formed. If price continues expanding downward, rebounds weakly, and makes new lows after entering the zone, buying conditions remain immature. The practical connection is to reduce the risk of buying against an old decline with substantial target room remaining and to focus on whether price stops falling and subsequently tests.

First return to the original range that produced the downside count and verify that its count row belongs to that distribution or redistribution, without adding columns formed only later. Then use the fixed box-size, reversal, and projection rules in Chapter 26 to derive the candidate zone, and check whether the current lowest traded area has touched it, rather than looking only at candlestick closes. A broad target zone can be divided into minimum, standard, and more distant projections, but reaching one does not guarantee the others. If a slight change in box size or count boundary reverses the conclusion, this test lacks robustness. It answers only whether price has reached a previously estimated downside target zone and cannot be combined with a stopping event as two independent reversal signals.

Buying Test 2: Preliminary Support, Selling Climax, and Secondary Test Have Appeared

Preliminary Support (PS) examines the first notable buying support and spread change during a decline; Selling Climax (SC) examines whether concentrated selling can continue extending the decline; Secondary Test (ST) compares whether sellers can produce a similar decline on a later return to the lows. Assess all three in a continuous sequence, not as three idealized candlesticks. Volume, spread, closing location, the subsequent automatic rally, and test depth jointly determine interpretation.

These events suggest the prior downtrend may be shifting from one-way progress to horizontal testing. A secondary test with reduced activity or downward distance and less ability to make new lows supports diminishing supply. A high-volume test that breaks through and gains acceptance outside the range is closer to trend continuation. If PS, SC, and ST cannot be identified, honestly record this item as not satisfied or not yet assessable. Nonclassic structures such as gradual stopping can support other participation explanations, but their rules must be listed separately and cannot alter this item's classic conditions. The trading connection is to establish range boundaries and invalidation references, not to enter solely on event names.

Bottom assessment begins with the stopping of a downtrend. PS is the first clear interruption of the decline's rhythm by buying support. SC requires strong selling pressure followed by an inability to maintain the prior rate of decline. The automatic rally shows that price has left the lows; ST returns to check remaining selling pressure. A long lower wick without an automatic rally cannot confirm that the decline has stopped; a rally without a return to test the lows cannot establish an ST. Low volume on a test is usually favorable, but high volume with limited downward progress can also indicate absorption of selling. If the test clearly breaks the low and remains below it, this item no longer holds and the bottom-entry plan should be canceled.

Buying Test 3: Volume Tends to Increase on Rallies and Decrease on Reactions

Compare adjacent upward and pullback swings rather than mechanically comparing one up candle with one down candle. Increasing activity on advances accompanied by greater price gains shows that buyers can move price. Progressively smaller volume, spread, or downward distance on pullbacks shows declining seller effectiveness. A tendency is a continuing relationship that allows individual bars to deviate.

Assess effort together with result. A high-volume pullback that cannot move lower may show substantial supply being absorbed; a low-volume advance that easily clears resistance may show little overhead supply. These are supplementary explanations and cannot replace this item's requirement that volume tend to increase on advances and decrease on pullbacks. If the classic condition is absent, record not satisfied or not yet assessable and list any nonclassic price-volume participation rules separately. The test checks whether control within the range is shifting toward demand and supplies price-volume context for a breakout or LPS.

First define complete advances and pullbacks, recording each swing's total volume, duration, net price change, maximum span, and result on reaching the boundary. With unequal durations, total volume alone favors longer swings; also examine activity per unit time and net progress per unit volume. Rising volume with shortening upward progress may mean overhead supply absorbs demand; increasing pullback volume with shortening downward distance may mean buying absorbs supply. Both warn against treating candle-color volume as buying versus selling volume. This item is high quality only when several comparable swings show demand achieving better results and supply struggling to progress. Align data before assessing if sessions or contract construction have changed.

Buying Test 4: The Downtrend Line or Supply Line Has Been Broken

Draw a downtrend or supply line through declining highs on the same timeframe, then assess whether price clearly crosses it and closes above or continues higher. The break indicates disruption of the prior downward stride; the old declining channel no longer fully contains the market. Then observe how long price remains above the line and whether trading continues there. A retest that holds the line and turns upward further strengthens the evidence.

A wick briefly crossing before the close returns below, or a break quickly followed by the old declining rhythm, offers weak evidence or a failed breakout. If the line can be moved arbitrarily afterward, the test is not reproducible. Save the highs, lows, and timeframe used to draw it. This item shares some price information with changes in swing highs and lows and generally confirms only that the decline has been disrupted. Actual participation still awaits a subsequent test, retest, or clear demand bar.

Fix at least two declining swing highs and the timeframe before drawing, then save the anchors once the line is used in live decisions. The distance through the line, close, and subsequent time above it distinguish meaningful disruption from a brief penetration. Volume describes activity but cannot alone establish validity. A steep supply line often breaks early and shows only that the fastest rate of decline has slowed, not that the main downtrend has reversed. Breaking a longer-term supply line carries more weight but may also leave a greater entry distance. If a later retest falls below the line and restores lower highs and lower lows, preserve the historical crossing but withdraw its support for the current long scenario. A trend-line break differs from a horizontal resistance break; if they coincide, explain each without counting the same crossing twice.

Buying Test 5: Higher Lows

A higher low means a pullback stops before reaching the previous low, so supply fails to achieve the same downward result. Compare swing lows on the same structural scale; a tiny intraday turn cannot prove a larger daily structure. Subsequent upward movement is needed to confirm the low; in real time, before that occurs, it is only a potential swing low.

A bottom can also contain a Spring or a lower low followed by rapid recovery, so the absence of a higher low does not automatically disqualify every buying scenario. The key is whether the new low gains acceptance and whether the subsequent test shows exhausted supply. A higher low can become an LPS candidate and part of the risk structure. Protection should correspond to the local or event boundary that invalidates this entry rationale; it need not wait for the entire larger structure to fail and should not sit below an arbitrary local low.

Confirming a higher low requires at least an upward departure from the candidate low that forms a recognizable swing. While a pullback continues, one can only say price has not yet broken the prior low. The comparison low must belong to the same structural level; higher lows on a larger timeframe and ongoing decline on a smaller one are not interchangeable. Location also matters: a retest stopping above former resistance after a breakout usually shows controlled supply more clearly than a random midrange turn. Conversely, a slightly higher low followed by exhausted rally activity and renewed pressure is weak evidence. An entry may use a higher low to shorten protection distance, but the stop must not be artificially tightened to improve 3:1.

Buying Test 6: Higher Highs

A higher high means demand has exceeded the previous supply swing and achieved a visible structural result. The first higher high may occur in the automatic rally, an SOS inside the range, or departure from the base. Meaning depends on location: a small internal new high may merely widen the range, whereas a break above major resistance that holds there more strongly supports a shift from stopping to advancing.

If the breakout is fully retraced, price returns to the range, and selling subsequently pushes it lower, this evidence weakens. Higher highs combine with higher lows to form an advancing swing sequence, and the two are often not independent. A higher high demonstrates buyers' ability to raise price; the subsequent retest or higher low usually provides a clearer trigger and shorter structural risk.

First determine whether the previous high is an ordinary internal swing, the range ceiling, or major structural resistance. Exceeding an ordinary swing shows only local demand improvement; exceeding the ceiling and developing acceptance above it may signal departure from the base. A wick making a new high followed by closes and trading back in the old range is a possible failed Upthrust and cannot earn a checkmark on the high alone. Smooth progress on modest breakout activity can indicate scarce overhead supply; high volume with little progress warns of supply absorption. The classic test concerns whether highs rise; these price-volume details then qualify its quality. Easy low-volume progress cannot substitute for a missing higher high.

Buying Test 7: Relative Strength Against the Overall Market

Compare the instrument with a predetermined broad or suitable benchmark over the same window. Look for greater progress when the market rises and shallower declines, earlier stopping, or faster recovery when it pulls back. The RS ratio, instrument price divided by benchmark price, can also indicate the relative trend. Use consistent adjustments, quotation currency, trading sessions, and information cutoffs. RS is not RSI.

Relative strength gives an instrument higher priority among same-direction candidates but does not prove its own downtrend is over. If the ratio rises only because the benchmark plunges while the instrument also breaks key support, its long-entry location remains unsuitable. Its trading role is ranking: when market direction permits longs and structural conditions are similar, prioritize stronger relative performers while awaiting their own price triggers.

The RS numerator is the instrument's price and the denominator the preselected benchmark's price. Both must be positive and use comparable adjusted series. A rising ratio can result from a faster advance, a slower decline, or both falling with the instrument falling less, so inspect both original price paths. A single gap in a short window can distort the ratio, while an overly narrow industry benchmark can hide industry-wide weakness. Assess the complete window and key swings appropriate to the structure, rather than changing the starting point to make the line rise. Poor liquidity or mismatched trading sessions can distort relative results; record them as not reliably assessable.

Buying Test 8: A Base Is Forming

A base is a horizontal structure in which price repeatedly tests supply and demand between recognizable boundaries after a decline stops. Examine boundaries, internal swings, tests, acceptance or rejection after false breakouts, and accumulated horizontal P&F columns. Is forming emphasizes a conditional real-time assessment, without prematurely declaring accumulation complete. The range may continue to expand or ultimately prove to be redistribution.

Duration without structural evidence is insufficient; a longer sideways period does not guarantee an upward outcome. P&F displays horizontal activity and prepares the count; candlesticks and volume assess internal supply-and-demand changes. The base provides a common framework for target estimates, breakout boundaries, and invalidation conditions. If price exits downward and gains acceptance, the bottom interpretation weakens and associated trade plans should be canceled.

A forming base requires recognizable upper and lower boundaries after the decline stops and more than one back-and-forth test between them. More time in the range does not automatically mean more cause: sparse data, suspension, or a lack of trades do not give horizontal columns the same meaning. P&F columns also depend on box size and reversal count, so sideways candlestick days cannot directly become counted columns. Improving advances, shortening pullbacks, and rejection at the lower boundary strengthen the bottom interpretation. Weakening rallies, repeated pressure on the lower boundary, and acceptance below it strengthen redistribution. Seek definable risk near boundaries or breakout retests; the range center usually lacks a price advantage.

Buying Test 9: Estimated Upside Profit Potential Is at Least Three Times Initial Stop Risk

Use a conservative P&F target or nearer actual resistance as the potential exit area, calculating after-cost potential net profit from the planned entry. Then calculate the initial after-cost net loss from entry to the structural protective stop. Use identical commissions, slippage, contract multipliers, exchange-rate sources, and conversion times in both calculations. The ratio must be at least 3:1 to satisfy this classic filter.

This ratio is planned potential reward to risk, not realized profit, win rate, or a performance guarantee. A higher ratio does not justify increasing size by a multiple. Overly distant theoretical targets and excessively tight stops without structural meaning inflate it. If it fails the threshold, wait for a better entry, reassess only where a nearer risk boundary is justified, or abandon the opportunity. Do not alter facts to pass the test.

For the numerator, choose an exit the plan can realistically execute and deduct entry and exit fees, spread, and reasonable slippage. If P&F offers several projections, use the conservative target consistent with current structure and resistance ahead. The denominator is the expected net loss from entry to actual protective exit, including tick size, multiplier, exchange rates, and fees, not just the chart's price difference. Recalculate after changes to entry, stop rounding for minimum ticks, costs, or exchange rates. The 3:1 filter excludes plans lacking room; it cannot derive win rate, expectancy, or position size, nor treat unallocated distant targets in a partial-exit plan as certain profit.

27.3 The Nine Selling Tests Explained

Selling Test 1: The Previous P&F Upside Price Objective Has Been Reached

Check the upward count from the prior accumulation or reaccumulation and whether current price has entered its original target zone. Reaching it means the potential result of the old upward cause has been substantially expressed; both continued holding and new shorts require fresh examination of demand and supply. The target zone is not itself a short trigger, and a strong trend can advance beyond it.

After price reaches the zone, examine whether advances shorten, volume increases without further upward progress, and rejection or horizontal stopping appears overhead. If buyers continue lifting price with coordinated price-volume behavior, this item only identifies a long-position management location and does not justify a short. This avoids premature shorting while substantial original upside room remains and connects target arrival with actual stopping behavior.

Return to the accumulation or reaccumulation that generated the upward count and retain the count line, range, box size, reversal count, and anchor fixed at the time. A current high entering the candidate zone establishes a touch; the close need not land exactly on a line. Parameters or boundaries selected only after seeing the top give this test no forward-looking validity. Reaching a small structure's target only suggests that segment may be complete; it does not remove the larger structure's remaining room. If price continues advancing strongly through the target, with shallow pullbacks and persistent buyer progress, target arrival is no license to short. It calls for managing longs and observing whether a top actually forms.

Selling Test 2: Volume Tends to Decrease on Rallies and Increase on Reactions

Compare rebounds and reactions by swing. Progressively shrinking activity, magnitude, or net advance on upward swings indicates less buyer effectiveness; increasing activity and greater declines on reactions indicate sellers can depress price more readily. This is the second item in the selling-test version used in this course.

A smooth low-volume decline may show little demand below; a high-volume upward thrust that cannot hold may show supply absorbing buying. Assess the relationship between activity and actual price progress rather than relying solely on lower volume up and higher volume down. The trading value is identifying deteriorating advance quality and providing context for a UT, LPSY, or post-breakdown short trigger.

Define completed advances and pullbacks at the same scale, then compare total volume, duration, net displacement, spread, and closing result. Lower rally volume may merely reflect shorter duration; greater pullback volume may reflect longer trading time. Also examine activity per unit time and progress achieved for trading effort. High-volume advances failing to make new highs often reveal overhead supply more clearly than low volume alone, but this effort-versus-result anomaly cannot replace the classic tendency of lower volume on rallies and higher volume on reactions. If a high-volume decline is rapidly recovered, supply is being absorbed and this item's quality falls. Do not combine incomparable swings when sessions, continuous-contract rules, or volume sources change.

Selling Test 3: Preliminary Supply and Buying Climax Have Appeared

Preliminary Supply (PSY) is the first significant obstruction during an advance; Buying Climax (BC) shows substantial upward effort with a price result that cannot persist. A subsequent automatic reaction helps establish the lower boundary, and the secondary test checks whether demand can restore the old advance. A high-volume rise near a top may initially be a healthy breakout; later failure, decline, and testing make the climax interpretation more credible.

Assess location, spread, close, volume, and subsequent acceptance together rather than labeling a top from one high-volume up candle. If price quickly gains acceptance above the highs and continues rising, this item does not hold or the original label must be withdrawn. These events identify a possible shift from an advance to horizontal testing and provide range boundaries; they do not by themselves justify shorting the climax bar.

PSY should occur within an established advance and produce its first clear change in efficiency. A BC candidate shows intense buying, a wide spread, or a rapid upward thrust. The following automatic reaction and ST test whether the highs fail to gain sustained acceptance and demand weakens, increasing or decreasing the quality of the PSY/BC stopping interpretation. They are not extra classic mandatory conditions beyond this item's title. If price exceeds BC and stays above it, the top interpretation weakens substantially. Without PSY or BC, record not satisfied or not yet assessable. Other top patterns can have separate rules but cannot redefine this test.

Selling Test 4: Relative Weakness Against the Overall Market

Over the same window, assess whether the instrument recovers poorly during market advances, breaks down first during market pullbacks, or shows declining highs and lows in its RS ratio. The benchmark must be suitable and fixed beforehand. Assess price direction separately from ratio direction. An instrument can be relatively weak while still rising if it lags the market; a falling instrument is not necessarily relatively weak if the market falls more.

Relative weakness supports short-candidate ranking but cannot replace the instrument's own supply structure. If it still holds major demand and maintains rising swings, this only indicates that it is not the first long choice. When market conditions permit shorts and top structures are comparable, prioritize instruments with poorer recovery and greater downside sensitivity.

The RS ratio still uses instrument price in the numerator and benchmark price in the denominator. A falling ratio may mean the instrument declines more or still rises but lags a rapidly rising benchmark. The former is usually more directly relevant to shorts; the latter is merely weakness in opportunity-cost terms. Cover the top's formation period and examine whether key rallies weaken together rather than choosing a high afterward as the starting point. If the industry and broad market move oppositely, retain both comparisons rather than choosing only the one most favorable to the short argument. When the instrument itself maintains strong breakouts, relative weakness only lowers its long ranking and is insufficient for a standalone short.

Selling Test 5: The Uptrend Line or Demand Line (Support Line) Has Been Broken

Draw an uptrend or demand line through rising swing lows and assess whether price crosses downward and disrupts the old upward stride. Versions calling this a support-line break refer to the same substance: the dynamic structure that supported pullbacks no longer holds. Evidence strengthens if a rebound cannot regain the line and supply continues producing downward results.

A single wick penetration followed by rapid recovery, or a line requiring frequent retrospective adjustments, cannot provide a stable conclusion. A trend line is an aid for representing movement speed and structure, not a real wall of orders. The trading connection usually appears in a weak rebound, LPSY, or failed retest after the break. The breakdown bar itself may still offer unacceptable risk if too far from invalidation.

Use at least two rising swing lows at the same scale and save the anchors and information cutoff. Breaking a steep demand line may only mean slowing upside speed; breaking a shallower major demand line is more likely to reflect structural change. Assess net displacement, close, time below, and retest after the break rather than imposing one percentage on every market. If price quickly regains the line and forms another higher low, retain the historical break but withdraw its support for the current short scenario. Dynamic trend lines and horizontal demand zones are different objects. Even if one candle breaks both, acknowledge their common price evidence rather than treating one structural break as several independent confirmations.

Selling Test 6: Lower Highs

A lower high means a rally cannot regain the prior swing high and demand achieves less upward progress. Compare at the same structural scale and await confirmation that the rally has ended. A tiny lower high near the range center describes only local movement and is not automatically an LPSY. A lower high near the upper boundary, with fading demand and emerging supply, carries more weight.

If price later exceeds that high and gains acceptance above it, this item invalidates. Lower highs define rally failure and potential risk locations; together with lower lows they form a declining swing sequence and a structural basis for awaiting a retest to short.

A candidate high becomes a confirmed swing only after price departs downward. While a rally continues, record only that it has not yet exceeded the prior high. Both highs must belong to the same structural level; a tiny intrabar turn cannot prove a larger daily top. A lower high on a retest of broken support with shortening upward progress usually matters more than random midrange movement. If price subsequently breaks and gains acceptance above it, the short-entry rationale invalidates. A protective stop may reference this rally-failure boundary, but must allow normal fluctuations, and risk must be recalculated from the actual trigger price.

A common mistake is labeling the current high of an unfinished rally a lower high and repeatedly moving the definition as price rises. Wait for price to depart downward and form a swing, then determine the timeframe to which it applies. A lower high says only that buyers failed to regain the prior high; it does not mean sellers have broken support below. It can therefore define a candidate LPSY and protective area, while actual shorting still awaits a downward trigger, such as breaking local support and remaining at lower levels.

Selling Test 7: Lower Lows

A lower low means supply has crossed the previous demand swing and achieved a downward result. Observe breakdown magnitude, closing location, volume, and time outside the range. Continued acceptance below and a blocked retest support weakness continuing; a rapid return inside may be a failed breakdown or Spring-like action, weakening the short scenario instead.

This item, the trend-line break, and lower highs usually share the same swings and cannot represent three independent probabilities. It demonstrates supply's ability to progress and provides directional confirmation for execution on a breakdown retest or after LPSY.

Distinguish an intraday penetration from acceptance outside the range. Fix the prior demand swing low, then examine the new low's magnitude, close, subsequent trading, and whether a retest can regain the old boundary. Expanded activity with substantial downward progress provides stronger supply evidence. A high-volume break immediately recovered may show selling absorbed; a rapid low-volume break may show scarce demand below. Regardless of interpretation, the classic item is satisfied only when same-scale lows actually decline. If the fall comes solely from uncorrected corporate-action or contract adjustments, it cannot be assessed.

If a lower low is immediately recovered strongly, the historical new low remains but gives little support to continued weakness. A rebound stopping at the old lower boundary and falling again strengthens support. Correct comparisons for corporate actions, contract rolls, and quotation changes. Do not wait for a distant decline before retrospectively declaring an earlier tiny penetration valid; preserve the original assessment time and later updates separately.

Selling Test 8: A Horizontal Top Structure Is Forming

A horizontal top is a price area where supply and demand repeatedly test between boundaries after an advance stops. Observe PSY, a climax candidate, automatic reaction, tests, UT or UTAD candidates, LPSY, and accumulating horizontal P&F columns. Is forming means the top hypothesis is being updated, not that distribution has been proven.

The horizontal structure can also be reaccumulation, particularly with consistently declining pullback volume and acceptance above the range after a breakout. Retain counterevidence conditions for upward continuation. The structure supplies a downside counting range, resistance boundary, and failure location. Even a relatively strong top interpretation may lack a controlled entry while price remains in the middle.

A top requires recognizable boundaries after the advance stops and repeated internal tests. Horizontal P&F columns show the scale of sideways activity but cannot prove distribution; the same range may absorb supply and rise again. Compare whether upper tests make progressively less progress, downward swings expand, the lower boundary faces repeated pressure, and false upward breakouts are rejected. A successful upward departure, holding retest, and continued advance weaken or cancel the top hypothesis. Expand the count only as real-time structure develops, not by selecting the widest range after a decline to exaggerate the target.

Both top and bottom bases can look like horizontal back-and-forth movement. Their differences come from the entering trend and internal supply-and-demand results. Repeated rejection near the top, improving downward swings, and pressure on the lower boundary support distribution; a successful retest after an upside breakout supports reaccumulation. While the range forms, P&F column counts continue changing, so targets must use the currently frozen range. Even a valid top interpretation often offers a poor short in the center because stops are far away and target room limited.

Selling Test 9: Estimated Downside Profit Potential Is at Least Three Times Initial Stop Risk

Use a conservative downside target or nearer actual demand area to calculate after-cost potential profit from planned entry, and entry-to-structural-protective-stop distance to calculate initial risk. Shorts also require consideration of borrow fees, borrow availability, contract multiplier, gaps, and market rules. Higher-timeframe support below may reduce usable room below the theoretical P&F target.

At least 3:1 remains the classic potential reward-to-risk threshold, not a short-trade win rate or profit promise. Stops pressed against ordinary fluctuations and omitted cover slippage embellish the ratio. Failure means the entry-price/structural-boundary combination is unattractive; wait, choose another candidate, or cancel rather than compensate with the other eight tests.

Calculate the numerator from planned short-sale execution to a conservative cover zone, deducting commissions, borrow or financing costs, spread, slippage, and currency-conversion effects. Calculate the denominator as expected net loss from entry to the protective exit above. Borrow recalls, squeezes, limit-up conditions, or gaps can produce risk far beyond chart stop distance, so 3:1 describes only normal execution. A major demand zone before the distant P&F target should cap potential profit at the nearer executable objective. Do not tighten stops against normal rebounds to improve the ratio or automatically increase size with it; quantity still comes from a fixed positive risk budget and unit risk.

For staged covering, weight planned net profit by each portion's quantity rather than multiplying the whole position by the most distant target. Estimate initial risk on the entire position reaching the actual protective exit, adding adverse borrow, financing, and currency scenarios. An improved paper ratio after price falls further does not repair a failure to meet 3:1 at the original entry. Rule statistics must use the ratio saved at decision time.

27.4 Charts and Information Required for Each Test

Tests 1 and 9 require P&F charts with explicit parameters, plus candlesticks to verify the counted structure and actual obstacles ahead. Buying Test 2 and Selling Test 3 require continuous candlesticks, volume, and subsequent tests for stopping events. Buying Test 3 and Selling Test 2 require paired swings and volume with identical coverage, sessions, and granularity. Buying Test 4 and Selling Test 5 use same-scale trend-line charts; Buying Tests 5–6 and Selling Tests 6–7 use swing-high and swing-low sequences. Buying Test 7 and Selling Test 4 require synchronized instrument and broad-market or suitable benchmark prices and the RS ratio. Test 8 requires the full range sequence: candlesticks explain event development and P&F explains horizontal composition. Volume market coverage, trading sessions, and contract-continuation methods must be consistent.

Each item must reference specific swings, dates, or chart areas. Statements such as volume supports it or the trend is broken cannot be reproduced under the conditions known then. Record trend-line anchors; P&F box size, reversal count, count row, and boundaries; and relative-strength benchmark, window, adjustments, currency, and sessions. Data after the assessment time cannot be added to the original test, only to an updated version.

If a market lacks credible volume, record price-volume items as unassessable; quotation tick counts cannot masquerade as actual traded volume. Without an appropriate broad benchmark, relative strength can be marked not applicable with reasons. Data gaps do not automatically strengthen other items; they call for greater caution in the overall conclusion.

Charts must also align in time. P&F boundaries, candlestick swings, volume, and RS ratios must all stop at the same decision point. If the benchmark has not closed, its eventual final close cannot be used in an intraday test. Futures rolls, corporate actions, and session changes can affect several items simultaneously; correct original series first. Saving anchors and counting ranges lets another person repeat the judgment from the same data rather than merely see a checkmark. If necessary data inherently do not exist, keep the item unassessable rather than substitute a similar appearance on another chart.

27.5 Recording Satisfied, Not Satisfied, and Not Yet Assessable

Satisfied means identifiable current facts agree with the item's meaning. A valid trend-line break followed by a holding retest supports the item; merely approaching the line requires waiting. Not satisfied means contrary facts exist: for example, higher lows are expected but a same-scale new low has gained acceptance outside the range. Not yet assessable means a required event remains incomplete or data are insufficient, such as an ongoing pullback with no confirmed swing low or unclear volume coverage and sessions.

For each item, record what price action satisfies it, what is missing, and what opposing change would remove its support. Status changes with price: an unassessable item may become satisfied after the next test; a satisfied item confronted by a failed breakout or broken structure retains its historical event but loses support for the present judgment. Keep dates and prior records on every update rather than overwriting them and making hindsight appear to have been known at the time.

Distinguish not applicable from not yet assessable. Not applicable means the market lacks a reasonable calculation or comparison basis, such as a benchmark representing the overall market. Not yet assessable means the item applies in principle but data are missing or the relevant movement is unfinished. Neither counts as satisfied. Do not reduce the checklist to a simple score. Explain which price facts directly oppose the trade and which conditions merely have not appeared.

For example, a trend line that was truly broken and a high that truly rose remain historical facts even if price subsequently fails; change their support for the current long interpretation rather than delete them. Conversely, a missing ST cannot be retroactively recognized because price later rose. One advance can cross a trend line, raise a swing high, and break a horizontal boundary. Record all three tests faithfully, but do not treat the same price change as three unrelated sources of evidence.

Rules for Recording Test Status

Figure 27-1 Rules for Recording Test Status (from Section 27.5 of this course)

27.6 Classic Tests and This Course's Trading Conditions

The classic tests assess whether trading conditions have matured. This course also requires supportive market context, clear structural location, an observable entry trigger, a meaningful invalidation boundary, executable orders, and acceptable risk budget and portfolio capacity. Targets, relative strength, and price-volume behavior within the nine tests form only part of those conditions. Even after all nine pass, entry, protection, size, and exit plans must be defined before sending an order.

Item importance varies by scenario, but subjective weights cannot conceal critical flaws. An unmet old target means the prior trend may have room remaining; failure of Test 9 means the plan falls short of the classic 3:1 threshold; clearly opposing market direction or distorted data weakens the entire assessment. Address these issues directly rather than offset them with the number of remaining satisfied items.

The 3:1 ratio describes only the current entry, stop, conservative target, and estimated costs. It is neither method performance nor trade-success probability and cannot determine size after passing nine tests. Calculate size using unit risk, consistent risk budget, costs, liquidity, and correlated portfolio exposure. Because several tests may use the same price sequence, increasing size by checkmark count creates false certainty.

Missing classic items must remain not satisfied or not yet assessable. Replacing them with modern indicators, order flow, or similar events cannot justify claiming the classic tests have passed. This course may define broader trading conditions, such as nonclassic stopping structures or execution-level order-flow triggers, but they require separate names and statistics. The nine cannot be equally weighted scores: target arrival, stopping, and swing changes often share one continuous price sequence, while 3:1 filters only the planned ratio at the current price. Orders still require feasible execution, protection, risk budget, and portfolio capacity, so all nine satisfied does not mean automatic entry.

27.7 Organizing Results into Primary and Alternative Scenarios and Waiting Conditions

The primary scenario organizes supporting evidence into a testable account with restrained causal claims. A bottom scenario might state: the old downside objective has entered its candidate zone; price has stopped declining one-way and formed a base; advances progressively improve relative to pullbacks; the downward stride has broken; and the instrument retains relative market strength. If the next retest holds the specified structure and price subsequently exceeds the local high within the pullback and resumes rising, prepare to assess a long trigger. Every statement corresponds to a test and chart fact.

The alternative scenario explains other possible developments from the same facts. A potential bottom may be redistribution; a potential top may be reaccumulation. List evidence that would strengthen the alternative, such as accepted departure below a base or a holding retest above a supposed top, rather than vaguely saying price could reverse. Both scenarios share one information cutoff, and new price facts determine which gains support.

Waiting conditions specify the next missing observable fact, such as completion of an ST, a retest after a trend-line break, stabilization of a worsening relative ratio, or restoration of target-to-risk eligibility. Cancellation conditions specify facts that end the study, such as a valid breach of a key boundary, proof that the original P&F structure was incorrectly selected, a reversal in market context, or costs and liquidity preventing planned execution.

Only after organizing scenarios does the checklist enter a trading process. The primary scenario sets observation priorities, the alternative prevents every new fact being forced into the original view, waiting conditions prevent premature action, and cancellation conditions allow facts to disprove the hypothesis. Wait without a trigger and do not execute without acceptable risk. This does not mean the tests are unfinished; it means their evidence has not yet formed an acceptable trade.