Welcome to Butterfly Effect 2, Lesson 4, Combination Levels. This is the first part of Butterfly Effect 2, where I'm going to give you a new type of level to work with. The first three lessons were heavy in theory, and now today we get into what's called a Combination Level. A combination level is simple.
The idea is great and it's very straightforward. You have a four hour candle or a daily candle or something smaller, one hour, really the time frame doesn't matter. And inside of that candle, which in this case we'll say four hour because it is yellow that we have on our screen just by chance.
And inside of this four hour level, you would have a one hour level. And inside that one hour level, you would have a 15 minute level and a five minute and so forth. So you could in one way. test multiple levels at the same time.
If you had a one hour level here, a 15 minute level here, and then a five minute level here, you could in theory test not only this four hour candle, but also the one hour, the 15 and the five minute all at the same time. By having one massive crazy wick that goes all the way like this, comes back above and you see it all the time where you have the body of a candle supposed to act as a whole level. It ends up holding the move over time, but not before deep diving into the move even further. Well this is what we call a combination level.
It's when a series of levels gets hit. So we can just go straight into the charts and look for combination levels. We're on the 4 hour time frame so why not start here. Let's kind of just expand our chart here.
So this is how you would look for a combination level. You have a choice between using the body of a candle or the wick. And let's use the right color.
Let's use yellow here. like this. Yellow's our four-hour candle.
And you would say, okay, I've got a four-hour level here. If I was to dig further into this, I could maybe make a second level that says, okay, here's the wick and the body. Now let's go inside of that and find the hourly level. So you've got the hourly level right here. So we can mark this blue.
And voila, you have a combination level. If you were to go further down that path, which in this moment we don't need to, but if you were to go further down in this path, you would go inside of where that blue candle exists, and you'd go a little deeper to the 15 minute candle. So you would go here and say, well, here's the combination level all the way to the 15, right? We can mark that as gray. We could maybe even go down one more time frame and find the next level too.
And the deepest part of this would be here. That's already tested, so maybe we would use the body of this one like that. So in essence what you've done is you've marked all the levels through a sequence of, hey these exist inside of that 4-hour candle.
You can see where this would exist inside of that range test and it could go deeper. Now we don't really need to pay attention to the 5 and the 15 here because we didn't test those. But it would also give you more accuracy to go inside this and find the combination level, the level that would get hit deeper inside that level.
Instead of just saying, here's the body of a candle, let's hold it over time. Let's reject the move and hey, we could have got better entry, but we don't know why. This is your classic combination level. And the way you need to do this is you need to move forward in time, as always on the charts. And we can go find another one or two, maybe.
Let's maybe just go to a smaller time frame and try something different. Here's an hourly level, so we could maybe just cut the chart off right there. Try to find this hourly level, combination level, and what you could do is you could start right here, and you would need to then move forward in your chart to find that combination level. So you've got the hourly here, and the idea is that you want to hold this hourly level because you believe it's strong, but you need to hold it over time, or you need to create the criteria where this could be a reverse level in the future. Maybe an event like this happens where you go down, and you come up, and you never test it, but this level is still in play because it then in the future could come down.
and hit it as a reverse level, therefore creating a trend. This is all very well indeed, and it can happen, but we need to have that accuracy. So what we can do is we can mark our highest time frame.
Let's check if there's a four hour. There is, so we can start with a four hour up here. We already know there's an hourly, so we're not going to change that to yellow, but we can see there's a four hour here. We can go down and find the wick of that next candle.
Go here and say, okay, well, here's the actual body of the candle, and we can start to duplicate these candles, leave that there. go here and say here's the 15 minute level mark that in a gray maybe we'll go a little bit darker usually like a dark gray for my level and then we could go in here and say hey there's also a five minute level in here you We don't necessarily want to use this one because this is tested, but we could use the body of this saying here's a one hour to the 15 to the five minute combination level or the one hour with combination levels inside of it. Heck, you could even go one step further and see if the three minute would be there. So you can't use this three minute because you're doing something different here. You're actually going backwards in time, which is impossible.
Whenever you're using combination levels or anything in these day trading charts, you have to go forward in time from the hourly to the 15 to the five. and this would break that chain because it's going backwards in time. Indeed, you would actually have to go hourly, 15, 5, and you would have to find something forward in that moment to find that level.
So we actually can't use the three-minute level here. So what we could do is simply take the replayer tool off and see how accurate this would get if you were to buy, say, that five or 15-minute level. and voila you've got a combination level that was um yeah pretty undeniably powerful we could look at the price here 29 078 and we could look at the candle and it was $29.80. So we were $1.20 off, or you could have just bought the combination level at $15. So these are combination levels.
It's when you have a bigger time frame and you end up holding that bigger time frame over time. But that's kind of the end goal is to say, here's the hourly level. Don't hard close under it so that you can create something in the future. And then, or you could even say the body of the candle, don't hard close under it.
but at the same time, you still need to stay above it. So you really need to work on refining your entry and getting those greedier spots to get in there. So we can just keep going over combination levels here.
You've got the hourly level here, you don't want to use that. We can just go to another random spot. Let's try this one right here. Yeah, let's try this one right here. So if you were indeed to use this, you would start on the 4 hour and you would say, okay, well here's a 4 hour hold level right here, we can use this one.
We could go do this one too, but I think this one is good for now. Here's a 4 hour level, we can mark that as yellow, right? you can go into your hourly.
So there's nothing there forward in time. So we can't use anything there. There is a 15 minute here.
So we have a four hour. We have no one hour, but we do have a 15 minute level that was tested. We can move forward in time out of the timeframe.
And now we can go and use either this candle or we can use this candle down here because this isn't tested. I would just simply like to use this as the five minute and then you have a four hour. with a five minute combination level. And let's see if that gets hit or not.
Now, we don't know if this is going to get hit or not. Maybe yes, maybe no. But yeah, we can take a gander here. got to go a little bit back in time here here is your four hour level and the thing that we missed with this trade here is that you actually would have been at that further one up so you kind of have to make that decision between the combination levels so when you're marking this we go back to that five minute level this was the choice we had from the four hour down to the combination five minute this is never tested right here so you have the greediest body right here or you have that one right there so you have two combination levels and the five minute gets hit either five minute the kind of the choice is yours but regardless you still have the execution you of a perfect combination level.
When you are to go to this and you are to say, hey, here's the four hour level. Where's the one hour in front of that? Find that one hour. We couldn't find it. Find the 15, wasn't there.
Find the five. We found two different five minute levels and then it becomes a choice of what we wanna buy. And yeah, we can kind of just keep working with this and keep looking at different kind of combination levels.
Let's go to somewhere else in the move. Let's just kind of pick a random spot. What about right here, right?
Let's, no, that's never a tested level. That's not a good one. What about...
right here. How about this level right here? Yeah, that's right in the middle of our screen.
That looks good. So you've got a four hour level. Let's cut the replay tool off.
We know, unfortunately, it was on the screen. We know it marks pretty close to that. You have the four hour level from here.
You could go to your one hour level in the front of the chart right here. You could go find a 15 minute level. Your 15 minute level would be down here. And let's color code these so we don't get kind of lost in the in the groove here. Now, I think this is kind of obvious that you are not going to hit this one because it looks like.
they may have pushed through, but we can still go check it out and see what happens. You got a 15 minute level here. And I think if we click the five minute button, we're going to lose the time frames here because I think that's a little too far back.
So let's just go here. Let's press play and let's see what happens because we've got a four hour with a one hour with a 15 minute. So let's see what happens at this combination level here.
Oh, actually look at that. We now, oh, we, we nailed them both perfectly. I thought for sure this was going to go right through.
My eyes deceived me when I first opened this chart and went to the middle of the screen. This looks like it went way down. Yeah, too much Bitcoin action moving down. I'm predisposed. I'm indoctrinated to think Bitcoin's moving down, but that's okay because I've been saying that for a long time.
So here's a case in scenario where you have a four-hour level with a combination level to the hourly and a combination level to the 15. And you can see exactly where that four-hour. the only important thing here with this four hour candle, like when you rewind this replay back to here is that it doesn't hard close the four hour level. I think we actually accidentally adjusted that. So we're just going to control Z, move that back. But the only thing that's important here is we don't actually hard close this four hour level.
So we don't actually have a blue candle in distribution that closes underneath this. So we need to look for the buying opportunities that are happening deeper in the move while still respecting these kind of combination levels, these moments where... you can have a greater impact or a greater accuracy by looking inside of that candle, forward in time.
Again, remember, never backwards. We couldn't go here and say... Here's the hourly.
Let's use this 15 down here. Number one, this is a tested level, so you wouldn't want to use it regardless. Both timeframes are tested here. Both, not only the backside here is tested, but this level is tested here. Body or wicket doesn't matter.
It's all one same test, so that's tested, and so is the backside. But this would anyways break the principle of having a combination level where you can only go forward in time. At this moment, I could possibly find the five-minute level, but I think I'm going to lose the charts if I click the five.
I'm tempted to click the button and test it, but we've done that too many times already in Butterfly Effect 2 where we've lost our spot. So we're just going to leave that. And this is really the only thing that matters is not hard closing this four hour level, right?
So we can just let this thing play. There's one test, there's two tests. And then really the important thing is losing that level right there.
If you were to zoom in, you can see the loss of that level. and that's really the only thing you're looking out for is that hard close of that level now you could go back and i'm sure you can find um you know what had this had tested and so forth to justify this move but not really important for right now the only thing that's important right now is actually finding those combination levels. So you could even do another one here. Looks like this one's tested on spot. This one here, where's the combination level?
So if you were to try to take a trade here, you could simply just go and say, well, I want to find the greediest spot. Let's put our entry on the combination level. You got the four hour. let's mark the one hour.
I don't quite think you're getting back here and possibly the 15 minute in front side of that. But hey, we were wrong last time. Maybe we are actually going to be able to go and test this deep into the move.
I think we get to see, right? and there's no combination level. You could justify this five minute because you can't really find the 15 minute before.
So you could use this five minute indeed. And let's try it. You always have to make that choice of combination levels, just like we did earlier in the trade where you're saying, here's a combination level. Here's two possibilities. Which combination level am I gonna buy?
we can go to a bigger time frame. In either case, I think both of these are missing here. But if you were to set an order on this four-hour chart as a knife catch, you would more want to do it towards what would be your combination level and instead of the actual time frame that has to close.
Because it's going to go over this time frame, it's going to attempt to close it, and then it's going to either dump or hold after. And yeah, we don't quite reach that combination level, but it was a much better spot to enter this trade had we found the right level or had that actually been the the combination level that was hit, like we saw on the bottom side where you have combination level and sometimes they're, you know, a little bit, price is a little bit over under, it still doesn't invalidate the combination level, just being a better spot to place your order. And you can just kind of go through timeframes and continuously practice this. This looks like another good spot where possibly you have a combination level inside of here.
We're getting quite far back in time frame, so I don't know how deep I'm going to be able to go into this, but if you were to go here, that's, um... the hourly. Let's hope we can have access to the 15. And we do.
And we have access to the 15 right here. You have the body and the wick. Either one is a test. You can make your choice what to buy.
Now, in this case, I think the wick looks like the smart place to buy. And I'm going to base that on the fact that this body was tested. So I'm not going to buy the wick.
If it was just this wick that was tested and not as deep as the body, I would probably buy this wick as well. But I think I'll go for the body on this one. And let's see what happens.
Hopefully we're not wrong and we get the right entry here. Not sure if this thing goes up a second time. You just have to kind of watch and see.
If we can switch time frames and make it go a little faster. and there it is right there so it actually does indeed go after that level and exactly what you would expect your what we talked about earlier in the video where you're opening up that possibility for this to be a reverse level on the four hour the four hour can be a reverse level but the smarter entry is always going to end up being the combination level because it simply is thinking about the heart it is it is thinking about or i just shouldn't say it's thinking we should be thinking uh we should be thinking about that hard close is kind of that critical information here you need to be in a point where you are not hard closing that four hour that one hour that 15 and by realizing that you can also say and take your your ta one step further by going hey there's a combination level. What's the deeper part of this that could hit that level, reject, and still close underneath this original level that we are trying to stay under?
Well, and that's where you look for the combination level. So a nice short and sweet lesson today on combination levels and their value. And this is something that I've seen happening on the charts for like a decade.
They are incredibly accurate and they are an amazing piece to add to your... repertoire whenever you're thinking about entering a knife catch and specifically for knife catches whenever you're thinking of trying to enter one of these knife catch scenarios the combination level is where you need to look because they are uh they're well there's lots of other spots that you could definitely go after and hit um including origin levels including um some other stuff we'll talk about in butterfly effect too but a combination level is a really good one so good luck with it enjoy it practice it and we'll see you on the next butterfly video Till the next video, cheers!