Rejection as a Target and Inverse Levels
Key Concepts
Inverse Levels as Targets
- The concept of using inverse levels (created levels) as targets in trading.
- Inverse Level Creation: When a level is created (e.g., a four-hour level), it can serve as both a polarity and a target in subsequent trading.
- Famous quote: "Create the four hour and let it dump."
Polarity as a Target
- Polarity: Represents moments when a trend or level creates a specific target or holds a position.
- Micro Polarity: Polarity in the short-term movements; can serve as immediate targets.
- Classic Polarity: Refers to longer timeframes; a trend unable to go deeper before creating something new.
Practical Application
Random Spot Analysis
- Selecting a random spot on the chart to demonstrate inverse levels and polarity.
- Using candles to identify potential targets and levels.
- Example: Creating a range trend and combination levels off an inverse level.
Levels and Timeframes
- Four-Hour Levels: Major targets in trades once created and held.
- One-Hour Levels: Serve as shorter-term targets or re-entry points.
- 15-Minute & 5-Minute Levels: Used for finer precision in entries and exits.
Steps in Trade Analysis
- Identify Potential Levels: Use candles to mark possible four-hour, one-hour, and lower time frame levels.
- Monitor Hard Closures: Watch for hard closures under these levels to initiate trades.
- Color Coding Levels: Helps in visual differentiation between time frame levels.
- Track Movement: Observe how price action interacts with identified levels.
Examples & Exercises
- Micro Polarity Example: Example of a four-hour level creation acting as a target and entry point.
- Range Trends: Identifying and playing within range trends created by inverse levels.
- Holding Levels: Watching for maintenance or breaking of levels to sustain or exit trades.
Practical Scenarios
- Re-entry and Positioning: Entering trades based on micro polarity points identified through smaller time frames (e.g., 5-minute levels).
- Inverse Levels as Future Targets: How levels created by previous moves act as future targets for new trades.
Summary
- Inversion as a Target: Inverse levels can serve as targets guiding trading decisions both short and long term.
- Polarity and Micro Polarity: Critical in understanding market structure and identifying key entry/exit points.
- Application Across Timeframes: Effective trading involves recognizing how longer and shorter-term levels interact.
Butterfly Effect 2 explores these advanced concepts, helping traders pinpoint entries with precision.