Learning the Ropes: Shortening of Thrust (SOT)

30 sept 2023

Hello, traders! Today we're going to discuss an important technical analysis technique that can help you spot potential trend reversals - the Shortening of Thrust (SOT). This method can be a game changer for new and experienced traders alike. Let's dive in!

🔎 What is Shortening of Thrust (SOT)?

• Shortening of Thrust (SOT) is a technique used to identify potential reversals in a trend, this technique is a part of Wyckoff and VSA theory.
  
• It is based on the observation that the strength of a trend tends to weaken as it approaches a reversal point.
  
• This weakening is often evidenced by a shortening of the thrusts, or strong price moves, that characterize the trend.
  

How to Spot SOT
To spot SOT shortening of thrust, you can follow these steps:

1. Identify the current trend. This can be done by looking at the overall direction of the price action. For example, if the price is making higher highs and higher lows, then the trend is up.
   
2. Identify the previous swing high
   
3. Calculate the thrust of the current move. This is done by subtracting the previous swing high from the current swing high or low. For example, if the current swing high is 100 and the previous swing high is 80, then the thrust of the current move is 20.
   
4. Compare the thrust of the current move to the thrust of previous moves in the same direction. If the thrust of the current move is shorter than the thrust of previous moves, then this is a sign of SOT shortening of thrust
   

For example, let's say that the price is in an uptrend and you identify the following swing highs and lows:

Swing high: 100
Previous swing high: 80
2nd last Previous swing high : 60
The thrust of the current move is 100 - 80 = 20. The thrust of the previous move is 80 - 60 = 20. Since the thrust of the current move is the same as the thrust of the previous move, there is no sign of SOT shortening of thrust.

However, if the next swing high is only 110, then the thrust of the current move would be 110 - 100 = 10. This is shorter than the thrust of the previous move, which was 20. This would be a sign of SOT shortening of thrust.

distance between the current swing low and previous swing low in a downtrend can be used to measure thrust. To do this, simply subtract the previous swing low from the current swing low. The result is the thrust of the current move.


Spotting SOT in Higher Time Frames

• In an uptrend, if the distance between the high of the previous candle and the high of the current candle decreases, it might signal an upcoming SOT.
  
• Conversely, in a downtrend, if the distance between the low of the previous candle and the low of the current candle decreases, we may be witnessing an SOT.
  

To illustrate, consider this example:

In this chart, we see an uptrend with each high of the candles getting progressively closer to the next, indicating an up thrust. This signals an SOT and a subsequent reversal of the trend.

📊 Using SOT in Trading

• SOT can be used to identify entry points for trades against the trend.
  
• Traders can use SOT to identify entry points for trades against the trend. For example, a trader might identify a SOT in an Downtrend and enter a long position in anticipation of a reversal.
  
• It's crucial to use SOT in conjunction with other technical analysis tools and confirmation signals before making any trading decisions.
  

Here are some additional tips for spotting SOT:

• Look for SOT in areas where there is other evidence of trend weakness, such as overbought or oversold conditions or divergences between price and momentum indicators.
  
• Use SOT in conjunction with other technical analysis tools and confirmation signals before making any trading decisions.
  
• Be aware that SOT can sometimes be false signals, so it is important to have a trading plan in place to manage your risk.
  

Conclusion
Shortening of Thrust (SOT) is a potent tool in a trader's arsenal, helping to identify potential reversals in a trend. However, remember that it's not a perfect indicator and should be used in conjunction with other technical analysis tools and confirmation signals before making any trading decisions.

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