START WITH THE MONTHLY CHARTS
This gives us the macro level and highlights where we are in the grand scheme
of things.
1. Use the linear chart to get a perspective of how high the run has been.
2. Mark the Monthly levels for each cycle.
Note- We will stick to closes and open as levels. Hence the resistances and
support for various time frames will be the closes and the opens.
The 4 levels to be marked on each time frame are open close high low.
Example of Monthly Resistance below.
The monthly linear helps us to determine how big the move has been and if any
pull back occurs, it isn't anything extra ordinary considering the move up.
DRAWING MONTHLY HIGH LEVEL
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PREVIOUS MONTHLY LEVEL HIGH
To further illustrate how to draw the monthly levels, have a look at the previous
cycle.
I have marked the previous ATH close.
Notice how exactly after a year, a re-test of the same level happened followed
by a Breakout. Levels tend to get re-tested often, returning to a mean where
the buyers weren't able to enter previously.
To be noticed, after the Breakout of this level at end of 2020, the next candle
crossed below the level to claim liquidity.
For now, just notice the same movement after the Breakout candle BELOW the
Breakout level to claim liquidity.
We will learn claiming liquidity later on.
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POINTS TO LEARN
1. Please see how huge the run has been from the previous ATH. This should
prepare you to always understand that any amount of pull back is NOT
inorganic, manipulation, or dumping. If an asset price can climb so high, it
should and can come down to the same degree. A trader shouldn't assume it
to be the end of the asset or asset class.
Monthly linear levels should prepare you to anticipate all kinds of movements.
LABEL THE LINES
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2. Always label your lines to make it clear. This will avoid clutter and give you a
clear picture of what the level stands for.
This can be done by Right clicking on the Link and then go to text.
This is how I place my labels for the line. You can save this as template for
future use.
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THE MONTHLY CHART
Coming back to the monthly chart, these levels are what I would consider
important for my trading and to always be aware of how to tackle any
movement.
I have labelled the previous:
ATH level.
Previous ATH.
Year open for the current year.
Current monthly range.
ATH Monthly resistance.
Note:
1. Depicts the re-test in the previous cycle.
2. Notice how at number 2, we came back to re-test the yearly open.
During a Dump, placing small orders at these levels by assuming that at the
year open re-test, prices could see some demand wouldn't have been a bad
bet.
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So if I was trading or even holding, these are the Levels I would watch at the
Macro.
Bitcoin going to any of these levels shouldn't make you scared or surprise you.
The aim of recognising levels is to be ready to trade when they occur.
We will learn about trading levels later, and find better probability.
Please look at the chart and practice marking these levels on your own.
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THE WEEKLY
Now after we have seen how to mark monthly levels, let's move on to the
weekly.
My Previous weekly levels are shown, and notice how they are completely
different from the monthly.
To reiterate, when we talk about
the
levels, we are talking about the close and
open.
To keep the charts clean, I have only market the Levels of close and open. Later
we will also mark the high and the low.
If you see the level market above, you will see that we have essentially a range
where the market spent a lot of time, about a month... Once we zoom in, we
will get a better idea about how to trade it.
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Before we zoom in, let us quickly review
how to trade a range.
1. Look for shorts at highs and longs at lows of the range.
2. Don't assume a range will break until it does.
3. Repeating 1 and 2 will make you gains until you are wrong one and taking
one wrong trade after trading the range is positive.
I will leave links at the end to understand range better.
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THE WEEKLY RANGE
Let's take a look at the Weekly Range.
The range shown above is the same as we have earlier marked, but on a daily
graph for a zoomed in version. The range tutorial graph on
page 10 can be
used to trade this range easily
Notice how easy trading becomes when we knows the range.
The only problem you will face here is dealing with deviation and false Breakouts which we will deal in the price Action tutorials.
Again, assume that a range will continue to exist forever and just trade it, both
long and short, until it breaks.
I hope the weekly zoomed in levels have show how to utilise the range.
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Look at the number of trades we could have entered by just playing the range.
Of course
Ranges will not occur in a straight line and a straight point. This
is what we need to deal with in future by studying liquidity grabs.
Ranges tend to repeat. A classic example of this move is illustrated in the chart
below.
Notice how the current dump from the ATH came back to the same range as
we defined on the weekly.
It is common for Ranges to be tested again, and the price to completely come
back in the same range.
1. The above should make it clear that the Dump was not of a surprise or
anything to be scared of.
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2. The Dump was simple price Action taking place and rotation of price to the
mean.
Knowing the above, the ranged marked and the probability of Ranges to come
back to their levels should prepare you for all kinds of movements, without fear.
Level lost? Prepare for the next level.
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THE WEEKLY RANGE
Let's see how we draw the Levels in the daily time frame.
I have marked the price from which the Levels have been drawn.
Close and open have been used to establish the Levels.
Notice how these levels have existed for so long and worked even after the
Dump.
Count the number of touches.
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Moving forward, let's mark the high and the low at the same place to see how
the future range reacts to it.
Notice how in future, after the Dump from ATH, the wick respected the previous
range highs and lows almost perfectly.
Note:
1. Mark the Levels in the daily and establish a range.
2. Play it and be ready for buys/sells at the touches in the future.
3. The Levels are mostly respected until they are not, as shown in the chart
above which respects the same level even after months.
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CONFLUENCE
After we have seen how to draw the Levels, let's look at how the confluence of
levels work.
Confluence means a point where multiple reasons for entry/exit exist.
If a certain point in the chart is having levels based in different Time frames, it
can be said that it has a level of confluence.
Notice in the graphs, there is a confluence from 2 different time frames:
weekly and daily at a similar price range.
This is an area of confluence. This could be termed as an area of high
confluence for a trade.
Note- Whilst trading, look for confluence of levels, Fibs, EMA and Volume
Profile.
These levels are respected and a confluence of the same works as a good
point for entry.
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Here is a graph showing all the important levels I would have on a graph.
The Levels would act as the Ranges that I would be looking at for opportunities
and changes in market structure.
These are Macro structures for the longer term, which means I should be
looking at these in the long term.
If prices comes to any of these levels, it shouldn't be a surprise. This is what
being prepared means.
I have labelled all the Levels for your convenience. Also, look at the yearly and
monthly opens as an area of high probability re-test.
These levels make your view of seeing the price easier.
You are prepared in advanced and
NOTHING is a surprise.
Instead of wondering where the price will drop, your view changes to 'This is
where it could drop.'
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Tip:
If you are trading a time frame which doesn't need the higher time frame
levels, you can hide those levels. However, there's a better way to manage your
charts and make them look cleaner.
THE OBJECT TREE OPTION IN TRADINGVIEW
Click on the Object View tab and it will show you all the Drawing and
indicators available on your chart.
You can choose to hide or unhide the lines and objects you need/don't need.
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To make it more organised, you can click on create folder and put all the
objects in a similar category in that folder.
Eg. I have put everything of the monthly level under one folder and hide/unhide
it if need be.
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Learning the Object Tree feature will help you keep the charts organised and
help in analysis, so you don't have to delete and rearrange things again.
Take the time over the weekend to learn about it.
I will share the link to the tutorial of it, as shared by TradingView.
Make objects and play around with this feature.
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DEVIATION
A brief talk about Deviation.
Market always tries to stop out the retail, this is how it has always been.
This is called as liquidity tap or liquidity grab.
The market tries to knock out trades and orders that are places at obvious
levels and hence this is why the majority is always wrong.
Example of liquidity grab below.
Look at the Price structure above. A
falling wedge, conventionally breaks to
the upside. Maybe retail traders would take an entry at the lower support and
expect a Breakout.
As you can see, the Breakout perfectly happened here. But notice a dip below
the support of the falling wedge.
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Why does the market do this?
Many retail traders would have placed their stop loss below the support. This
would have led to many traders getting stopped out EVEN THOUGH their
prediction of a Breakout was right.
This is an act of stopping out the retailers and it can happen often. This is a
liquidity grab event and stop loss placed provides liquidity for the buyers to
buy at a lower price (Stop Loss placed is a sell order).
We have discussed the ways to prevent such losses in PA threads.
However we will talk in detail about it later.
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RECLAIM
I will briefly describe what a
reclaim of a level is.
Price Action traders look for this action while deciding if the range has been
broken and if they should take a trade for the higher levels.
A reclaim happens when the price moves past a certain level and pulls back to
reclaim and test the level.
The price Action would look as denoted in the charts below.
This is when according to Price Action, an entry can be taken.
This is applicable both for longs and shorts.
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