Transcript for:
Butterfly Effect L67: Level Setting 2

in in this region here like what do you have here in just 16k it's not bad it's not enough though not not if it's going to uh not if it's going to reject this move it's it's just not enough unless it loses some trend and then you have a massive move down afterwards but this is the things the chart architecture is going to tell you in the moment when you're looking at these two levels and you're saying okay well which is it going to go after is it going to go after the four-hour profit cap right or is it going to go after the one-hour level and and a lot of the move well it's it's likely going after the four hour because it's the next biggest time frame down however in the past year it was the one hour that laddered this move like you can see it right here it was the one hour right here that laddered this move so you you can ladder off a one hour as to where the four hour in this moment would have been all the way up here good hundred dollar difference almost eighty three dollars yeah we've got to get a hundred dollars here as well so so which level are you going to go after this is you can only tell in the moment that this is not something we can see right now and say oh we're going after this level right so presumably we're going after the four hour but if the one hour is going to stop it it's it's going to be off of that if this was just a 15-minute candle in a 15-minute level i wouldn't even look twice at it you probably have those in here so just mark this one for example you know what we mark this one for example here's an untested 15 minute level these are great for scalps and all that but like you know there's nothing even there it just moves right through it it probably stops for maybe like a one minute candle and moves right through it yeah it doesn't even really stop just moves right through it and yeah again you're you're working from the wrong side of the chart right so so when you're defining kind of this important moment like this right and uh you know draw your okay we of course we don't have it here because it's uh finance and they don't they don't have the information and but when you're looking at this you have to work from the highest time frame down and see where these ladder points exist right like even here the weekly back here you know we recreate those right we create the weekly go to the daily recreate the daily and and this is not how we scalp this is not how we strengthen swing trade this is more position trading we're trying to find the bigger piece of the move right trying to find the more notable spots where this is going to take a large move down you know 10 or more because it's coming close to that we obviously see it on the xbt chart and and we simply have nothing here so so we have to level set by going down in time frames and and then we have we're left with this here and we can pretty much delete everything else on the chart like this is already tested this is a weekly range you'd possibly be here but you know very doubtful if you've kind of already uh created this it could be a 12 hour maybe yeah you've already laddered off that you've already laddered here you've already got it there and that's like a big key to it right like you've already you've already laddered off these levels to create this let's go back to xbt where we had our levels here take a look at this why is this unlocked we want to go do this on the right top right okay there we go again nothing on the four hour up to here so this is the profit cap of the move right now this this is where it's it's most likely to have the biggest pullback but you can't rule out a level higher just just due to the fact that we are at a monthly trend right now and when you come up on these monthly trends and you know these larger weekly trends and monthly trends you're not necessarily going to stop by that trend as you can see here rather you're going to use the trend to ladder like if you were if you were to think these are one minute candles right i think you think of these as a one-minute candle we'll go find an example this is exactly what it looks like except we're on the largest time frame here so there is no more there is no more oh fall through and adapt this trend there is none of that that that's that's simply not there at that point you're you're moving up in in the range or down but if these were one-minute candles that's that's the process you do is you would wait for it to break down and then you'd adapt trend like that to this point here and so forth and so forth but you're not like that's a huge move right now that that's you know if you're going to adapt to the next point it's 15 percent so this is you know an ended up an adaptation point here where it's possibly swinging or making a new hard close that's a big difference right now so but but this is exactly what it would do right like it would just use this and it ladders here to here to here to here to here so you're here three four five six ladders so so you have to kind of see this as the base of the move is is the final of the move right like that that's it's already laddered to this point this is six ladders going back or if you you know the first the second the third the fourth the fifth it's already laddered six times and that's that's the base of the move it's already done that six times louder if you break over this level you like the move is gone right so you have to be mindful of that that the the ladder has to exist somewhere so you can you even take this out it has to exist from from this point down so it has to exist from here down so we can do is we can mark this and then you know we can flip our chart back uh it's that level there and and we can start going to see where the ladder is developed obviously nothing on the weekly okay we do have the daily so let's delete everything else let's now just go through this and delete everything that we haven't done yet right here here you delete all the stuff we don't we don't we can we can use this as the base of the move on the bottom side that's fine so we actually do have the daily now which is here so we're just for this example going to turn this red as we always would do with the daily level we use red no that's the text we don't want the text we want the actual candle uh yeah that's good you have no more level setting to do right here it doesn't exist there is no more level setting to be done you have to move down in time frame right here that's it you're right there and if this four hour is going to be attacked guess what it has to do first let's go after this level do like a peach color for that one like we always do right so when you're setting these levels and again this is this is relevant right now to this move because of the events leading up to it because of the fact that it's a very big trend so we have to kind of consider all moving parts of this move right like you're you're having to build up the entire piece of this move to say okay is this thing breaking up or down right and so you really only left it with two levels and and if you go go back to your first question do you think it's still laddering okay well let's go to the weekly and take a look at this for a second why wouldn't it be laddering is is what i would first ask right like if you're gonna you know flip this thing again and like why would you assume it's not laddering anymore that's that's the first thing i would say like what makes you think it's not laddering because i don't see any points in this chart where i where i could say oh it's not watering anymore look at the shark it's no more it's not laddering it has never broken a candle from the past one time except when it created the base of the move which is here which is fine that's still holding the base of the move and and this is why the base of the move is the base of the move because the first point that tries to break the ladder back right so you have the base of the move have it hit here which is a ladder off of this which is a ladder off of this and that's fine so one two you could even say three four five six right there six and and the base of the move right so identifying the base of a movement and part of how you can identify the base of movement where's that point where it breaks its own ladder back so that that's one dead giveaway for bases of moves that's a pretty good tip for you guys is when you see you know a ladder ladder ladder ladder ladder ladder all of a sudden it goes and breaks that and it says oh we're no longer laddering okay that creates the base of a move right where you start to back test that level and actually go below the ladder point but but this is just a longer term ladder anyways but that creates the base of the move so that's polarity right so base of the move and then we can add a little bit of text to this base of the move plus polarity so so base of the move plus polarity so we can add a little bit of context to this level and and how you can uh we're just going to go right side and how you can see where the base of the move exists right because that's like a major moment in polarity right you so you could do the same thing on this side of the chart and you know see the larger timeframes down we haven't created a base yet on this move we're probably if we could do it we could do it off of this level by going above it a little bit and then creating that as the base of a move right or well you don't have one created here that pulls back off of this that pulls back off of the you actually haven't you have it's just not on this chart you have to go x be x bt or bxbt whatever it is the xbt [Music] 39. uh yeah because bitmex froze so it's actually not even xbt usd no that's not gonna show it is it oh it actually does okay perfect it doesn't actually show it to uh the right level yeah it does it it actually does show to the right level it's actually perfect right you go to the top of the move range you could actually create a base here i don't think you've created one anywhere else actually haven't looked but no you haven't but you you could go and create this base here um ladder off of something here to eventually go a little bit here and then create the base of the move here against that 10k so you could you know what's something that can happen in the future sure you could be stuck in between that range of two bases of the move which is just a larger pandora's box but anyways getting back to xbt here that's how you would identify the base of the move right we just really wanted to see if this was tested on on bitmex which which it was it just you have to use the right chart to see it on bit max there are futures contracts or whatever one that creates a base of the move there is no reason to think this thing is still louder it is no longer laddering down right like there's nothing here it's still laddering larger time frame one two three four five six and and now it's laddering off of this range here so now you're in this moment here and you're looking for that inner polarity right like okay so let's keep this upside down for a moment and we're gonna start breaking down time frames okay daily is hit we have no daily here there's there is no daily here so if if we were to actually put a daily there we can for momentarily just to say okay it's probably here on a different time frame something much smaller go here take a look at this ah voila oh all right we have a four-hour level it's so perfect it's actually hidden so yeah this this is where the move can go and and in order for it to get there it has to test this to see if this can pull it back and uh see if this can hold the move so you know maximum profit cap if if this breaks you're you're likely going to uh go off to the base of them i guess you do have one more stop right here you could stop right here but you wouldn't assume it would be stopping there this is more the level of player to hear because at that point it's already breaking the move broken the move and you'd either be developing a base or you would be um you'd either be developing the base of a move on an already tested level so possibly this love daily here you you could go here and make that a base to test that untested level and and so you have all your stops right like all your shorts all your all your shorts and longs right like you have 95 20 96 23 97 78 possibly a future base that's what you could say possibly a future based question mark you could say this would uh possibly be a future base if you break over top of this level and this level right but but those are your important moments and how you set your levels properly so this is you know when you're looking at chart architecture and trying to pick the right levels between these things this is called level setting right and uh how you find the base of a move is uh when when a ladder back breaks and it goes after that same hole well it's going to go after that same hole but a ladder back breaks that you know whole level holds that's like that's how you see it happening right yeah i think of really just a really really solid top down lesson on what could possibly be happening not only today but in the in the near future here for bitcoin the uh the one thing as as to why i would say because immediately seeing this like if this wasn't here if that if that wasn't there i would immediately assume that this is going to create another base of the move here at 9 700. because we have such a massive trend here i don't see how you can go after this base unless you fall straight down like possible scenarios go to the hourly pull back and it ladders good scenario i think there's a good short to be had there now whether you should hold that short or not i think that's made in the decision has made in a moment another scenario here is you you hit that hourly you kind of do something pull back go up straight to the four hour and then have a big pull back confirming the long term ladder down confirming the rejection of this trend another scenario is you you kind of go straight up through these levels hit the daily and have a much bigger pullback this this being the uh the massive pullback that would happen almost the same thing that happens here right like just just a huge huge huge pullback right um maybe not that big i don't think it would be that big i think you're you're more looking to go after you know maybe to this level i don't i don't i don't think you're gonna go here and you know fall straight down i think obviously you've got some stops on the way down here but that's another scenario here that could happen and i think that's it i don't think you have anything else i think once you start going after these higher levels you've already broken this base you've closed the weekly i think too too long on this side of the trend is not good for shorts right too long on this side of the trend means that oh if you the higher the level you're going after the quicker it has to move down otherwise it's just going to over time hard close over this trend which as as you can see it hasn't done that at all like ever on this chart not even a single day maybe like half a day maybe maybe there's like a 12 hour counter there's no there's no single one daily candle so there's kind of a disparity here between levels so the faster this thing raises the faster it's going to fall and if it holds wow you're going to be the first time breaking over this uh legacy trend on a daily hard close right so so then you have to kind of see is it going to continue to hold and does that set up the weekly next week right that's do we do we hold that level throughout sunday and then so sunday you've got a candle that could possibly in another seven days open open a new a new level there right so so that's that's pretty important to realize that you know it can only go so far before it has to have a big pullback right and and without the higher it goes without a massive pullback the less likely it is it's going to move down right so yeah i mean that's a pretty good viewing of what's happening long term here and kind of what to think so i will stop right there and hope you guys enjoyed that one