Back to the Basics - Market Structure & Risk Management10-Year T-Note Futures (Sep 2026)CBOT:ZNU2026PrinciplesofmathprobThis is perhaps the most basic structure that the trading community in general considers tradable. It is not the only one that exists, but it certainly repeats quite often and is extremely profitable. There are two points that need to be understood for effective trading: market structure and risk management. I placed a series of numbers from 1 to 6 on the chart to explain each mechanical step that markets take. 1) In order to generate a high, the market has to come from somewhere. That implies that there are participants with committed capital/interest. It is unlikely that any fund or trader has infinite capital or risk. That move up is important and its magnitude and type (vertical or with pullbacks) must be taken into account because they contribute to context and quality. Some structures are more fragile than others. A vertical move up generally ends in a trend change at some point, while a more sustainable move can last for a very long time. 2) The market makes a first bearish move, leaving a high behind that will later be cleaned to the upside. These two movements, this part of the structure, are where ranges are generally generated. Sometimes there is real indecision or an important change in outlook, which is what ends up forming contraction ranges. It may also be that the market has entered a period of low volume and in that environment ranges are more likely to form. Why it happened is not as important as what it produces; an effect is more important than an interpretation. 3) The market eventually moves up and cleans the high that was formed during that first down move. That is when everyone who had accumulated short positions is forced to buy and the limit orders of large traders are filled. Obviously, this is the first opportunity to sell. But that type of trade is the most advanced. For this post I am explaining the next most advanced one. 4) A low is broken for the first time. This is the signal of a Change in Behavior, the Reversal is confirmed. 5) Wait for price to move close to the high before shorting, placing a stop above the high, giving other traders a chance to fill the limit orders they place at highs and lows. If that time or price margin is not given, then the inherent protection that can be achieved and is necessary is not being utilized. The trade must have asymmetric risk/reward. If someone does not want this, then they are completely wasting their time, because if the goal is to trade without that asymmetry, then it is better to trade other setups that inherently have better probabilities or frequency. 6) Up to this point, the easy part, entering the market. Now comes trade management, which is really where traders make the difference. There is no single universal plan. Sometimes it is simply better to apply a hit and run approach, meaning enter, reach a nearby TP, get out, and that's it. Other times the move that can be captured is much larger and the trade needs to be managed properly for that. That is the case I am going to explain. The structural logic is the same: a high is confirmed when a new low is made; a low is confirmed when a new high is made. Once we confirm that extreme point in the market, we use those pullbacks to trail the stop. The stop is placed in the same way as on the entry, seeking to take advantage of the limits that the rest of the participants leave behind.