Chart Analysis Lecture

Key Points

Chart Architecture

• Understanding levels: Need to recognize which levels to target (e.g., 4-hour level vs. 1-hour level).
  • Example: One hour level laddered a previous move.
• Time Frames: Start from the highest time frame and move downward to identify points.
  • Weekly -> Daily -> 4-hour
  • Position trading vs. scalping

Identifying Profit Caps and Trend Breaks

• Profit caps: Determines the point where a move is likely to stop and reverse.
  • Example: Profit cap at 15% move.
• Trend Breaks: Look for points where candles break previous ladders indicating potential moves.
  • Six ladders identified before base is formed.
  • A break over certain levels indicates the move is “gone”.

Laddering

• Definition: Laddering occurs when a move continues from one point to a higher/lower next point.
  • Observing past movements to see if it’s still laddering.
  • Larger time frames laddering might show continuous trends.
• Identifying Base of Move: Base is where the ladder breaks back.
  • Example: Base of move identified after six ladders.
  • Helpful to find major polarity moments.

Practical Example

• Marking Levels: Example of marking daily, 4-hour, and identifying if these levels will hold.
  • Identifying untested levels and their importance.
• Future Predictions: Given trends and ladders, predict possible movement scenarios.
  • Hourly -> Pullback and ladder -> Possible new base
  • Straight up to 4-hour -> Big pullback confirming long-term ladder
  • Go up through levels -> Daily -> Massive pullback

Strategy Considerations

• Trend and Time: The longer and higher a move without a pullback, the more likely a hard close is coming.
  • Fast raise -> Fast fall
  • Testing higher levels may indicate a significant trend shift (weekly level considerations).
• Short-Term vs. Long-Term: Balancing short-term trades and long-term position expectations.

Conclusion

• Recap: Understanding chart architecture and movement prediction is essential for effective trading strategies.
• Importance of time frames and trend analysis in making informed decisions.
• Awareness of potential moves and preparation for multiple scenarios.