Pedigree Analyst
Blog 9 · Beginner

The Workflow That Changed My Thinking

Ramesh RamaswamyBy Ramesh Ramaswamy · Edited by Meenakshi Ramesh · · 2 min read

In Blog 8, my most reliable indicator went silent, and I learnt that the market does not ask which is your favourite indicator. It asks which environment you are trading in.

Instead of starting with indicators, I now think in layers.

1EnvironmentGaussian, transitional, expanding or panicked?2ForceParticipation, efficiency, momentum, volatility3LandscapeAVWAPs, volume profile, value area, key levels4StructureHH, HL, LH, LL: the footprint left behind5StrategyChosen by the environment, not by habit6QualificationProbability, expected move, risk, expected value7ExecutionEntry, exit, position size, risk allocationRisk management runs through every layer
Figure 1. The seven layers, read from top to bottom. Each layer is answered before the next one is looked at, and risk management is part of every layer rather than a step of its own.

1. Environment

First ask: is the market

  • Gaussian?
  • Transitional?
  • Expanding?
  • Panicked?

Without this answer, everything else is guesswork.

2. Force

Is meaningful directional energy present? Measure:

  • Participation
  • Efficiency
  • Momentum
  • Volatility expansion

A strong environment with no force often leads to waiting.

3. Landscape

Now examine the terrain. Where is price relative to:

  • AVWAPs (anchored VWAPs)
  • The volume profile
  • The POC (point of control)
  • The value area
  • Higher-timeframe levels

Importantly, these are contextual observations, not predictions.

4. Structure

Only now does structure become meaningful: higher highs (HH), higher lows (HL), lower highs (LH) and lower lows (LL), the Market 4 from Blog 7.

Structure is not the cause. Structure is the footprint left behind by the interaction between environment, force and market participants.

5. Strategy

The environment determines the strategy.

Table 1. Regime and the strategy that fits it
EnvironmentStrategy
GaussianMean reversion
ExpansionTrend following
TransitionalBreakout preparation

Not every strategy belongs in every regime.

6. Trade qualification

Now evaluate:

  • Probability
  • Expected move
  • Risk
  • Expected value

Does this setup deserve capital?

7. Execution

Only now do we decide:

Risk management is not a separate step. It is embedded throughout the entire workflow.

Frequently asked questions

What are the seven layers of the trading workflow?

Environment, force, landscape, structure, strategy, trade qualification and execution, in that order. Risk management is not a separate step; it runs through every layer.

What is force in trading?

Force is meaningful directional energy behind price. Measure it through participation, efficiency, momentum and volatility expansion. A strong environment with no force often leads to waiting.

Which strategy suits which regime?

A Gaussian market suits mean reversion, an expanding market suits trend following, and a transitional market is a time to prepare for a breakout. Not every strategy belongs in every regime.

Is market structure the cause of price moves?

No. Higher highs, higher lows, lower highs and lower lows are the footprint left behind by the interaction between the environment, the force behind price and the market participants. That is why structure is read only after the environment, force and landscape.

Where does risk management fit in the workflow?

Risk management is not a separate step. It is embedded throughout the entire workflow, not only at execution, where entry, exit, position size and risk allocation are decided.

Keep learning

Sources and further reading: Volume profile · VWAP · Mean reversion · Expected value · Position sizing · SEBI investor education portal

Discussion

Your response and feedback decide what we write next.

Be the first to comment.

Your email is never shown. We use it only to manage comments. Your first comment appears after a quick review. Privacy

← Back to Pitfalls · Beginner