References

CryptoCred:
https://twitter.com/cryptocred?s=21&t=8nZyDpFCmoVtSATYl3vdhg

Tom Dante:
https://twitter.com/trader_dante?s=21&t=8nZyDpFCmoVtSATYl3vdhg

Will Hunting:
https://twitter.com/wmd4x?s=21&t=8nZyDpFCmoVtSATYl3vdhg

2
Introduction
Welcome to this Chapter 2 of the new mentorship. This is a comprehensive
guide on trading, where we'll be diving deep into the world of support and
resistance levels and how to find them. You will be trained to buy these
rational levels and not just jump in the ocean at the wrong time.

This is my best attempt at breaking down these concepts so even a new

trader can understand these. I promise to deliver the best but also, these
concepts are supposed to make you money so obviously, it's not easy. It
might not be the best tutorial out there, but it is my best.
In this tutorial, we'll be discussing the dynamic landscape of market
movements, understanding the significance of support and resistance levels,
and mastering the art of trading from level to level. We'll also be exploring
more advanced territories like deviation/false breakdown and reclaim.

We've worked hard to include figures and diagrams to illustrate these

concepts, making it easier for you to grasp and apply them in your trading
strategy. The only thing I ask from you, is that everything you learn here, you
must practice, trading level to level is all about practice and experience.

By the end of this guide, you'll have a solid understanding of how to actively
engage with the range and be prepared to execute buy or sell trades when
the price interacts with these levels in the future. You'll also be well-versed in
the concept of confluence, which is when multiple factors or indicators align
together to provide a stronger and more reliable trading signal.

Please subscribe to telegram to keep up to date with the Bitcoin Trading

Masterclass Mentorship.
Let's Begin.

3
INDEX
2.1 How do markets move? 4
2.2 What is Support and and Resistance (S/R) 7

2.3 What are levels and which ones are important? 13

2.4 Trading- Level to Level 29

2.5 DEVIATION/FALSE BREAKDOWN 56

2.6 RECLAIM 58

3.1 CONCLUSION 61

4
2.1 How do markets move?
In crypto trading, the movement of markets is primarily driven by supply and

demand dynamics. The prices of cryptocurrencies are determined by the

interaction between buyers and sellers in various cryptocurrency exchanges.

Figure 2.1: Demand vs Supply

Here are some key factors that can influence market movements in crypto

trading:

I. Supply and Demand: When there is a higher demand for a specific

cryptocurrency than its available supply, the price tends to rise. Conversely, if

there is more supply than demand, the price may decline.

5
Image Legend: (S-Supply);(D-Demand);(P-Price)

Figure 2.2: Shift in supply

II. News and Events: News related to cryptocurrencies, blockchain technology,

regulations, partnerships, or significant events can affect market sentiment

and subsequently impact prices. Positive news often leads to increased

buying activity, while negative news can lead to selling pressure.

6
III. Market Sentiment: Sentiment plays a crucial role in crypto markets. If

traders and investors have positive expectations about the future of a

particular cryptocurrency or the overall market, they may be more inclined to

buy and hold, driving up prices. Conversely, negative sentiment can lead to

selling and price declines. The Fear and Greed Index is the most popular

gauge of market sentiment.

Figure 2.3: Market sentiment

IV. Technological Developments: Advancements in blockchain technology,

new features or upgrades to existing cryptocurrencies, and the introduction of

innovative projects can generate interest and impact market movements.

V. Market Manipulation: Cryptocurrency markets, like any other financial

market, can be susceptible to manipulation. Activities such as

pump-and-dump schemes, where a group artificially inflates the price of a

cryptocurrency before selling it off, can distort market movements.

7
2.2 What is Support and and Resistance (S/R)
Support and resistance (S/R) are two important concepts in trading that help

us understand how the price of an asset moves.

Support is like a price level where the demand for a cryptocurrency is strong.

It's a point where many people want to buy because they believe it's a good

value. Imagine a sale at your favourite store where everyone rushes to buy

discounted items. That rush of buyers creates an upward force and prevents

the price from going down further. Support acts in a similar way—it stops the

price from falling too much, causing it to "bounce" back up.

Figure 2.4: Illustration of support and resistance

Resistance, on the other hand, is like a price level where the supply of a

cryptocurrency is high. It's a point where many people want to sell because

they think the price is getting too high or overvalued. Resistance makes it

challenging for the price to move higher.

Resistance is a price level where an uptrend is expected to pause due to a

concentration of supply (sellers). As the prices of assets rise, more sellers

8
enter the market, creating downward pressure on prices, forming a resistance

level. It's like the ceiling that prevents the price from rising any further.

Figure 2.5: Support and resistance on chart

NOTE: Support and Resistance levels can interchange roles. We will learn

about this in this tutorial.

Traders use support and resistance levels to make decisions. When the price

approaches a support level, some traders see it as a sign to buy because

they expect the price to go up from there. They believe that others will also

see the value and start buying, creating upward momentum. Conversely,

when the price nears a resistance level, some traders might consider selling

because they anticipate that others will also sell, putting downward pressure

on the price.

9
Orders on the orderbook can act as support/resistance levels. The heatmap

chart attached above shows the orders or bids/asks. When price reaches

these levels, those orders can fill and cause price to reverse or bounce from

them. However, these can also be “spoofs” in the case that they are removed

or cancelled as price reaches them, trapping traders who thought they would

be strong S/R levels.

Support and resistance levels are not always exact and can be broken.

Market conditions change, and prices can surprise us. Traders use various

tools and indicators alongside support and resistance to make informed

decisions. It's like using different pieces of a puzzle to get a clearer picture.

10
2.2.1 What levels can normally be support or resistance?

A. Option Expiries and Support/Resistance Levels

Option expiries can influence the underlying asset's price and create

temporary support or resistance levels. This is particularly true for assets with

a large amount of options trading, like certain stocks or currencies.

When a significant number of options contracts are set to expire at a certain

price level, it can act as a magnet for the price of the underlying asset. This is

because market participants may have an incentive to steer the price

towards these levels to minimise their losses or maximise their gains.

For example, if there are a large number of call options set to expire at a

certain price level, the sellers (writers) of these options may try to keep the

price below this level to avoid having the options exercised. This price level

can act as a temporary resistance level.

Conversely, if there are a large number of put options set to expire at a

certain price level, the sellers of these options may try to keep the price above

this level to avoid having the options exercised. This price level can act as a

temporary support level.

11
B. Areas Where Excessive Buying/Selling took place:

Support or resistance exist at areas because of extra interest at these levels

for auction.
Traders perceive these levels to be an interesting level to enter the market.
There's no need to worry about using an X ray to look at these levels because
price behaviour is enough at most times, below is a Footprint chart shared to
showcase the interest the market has at these levels.
There is no difference between drawing support/resistance levels using the
price action techniques as we will learn here or using these tools to identify
them, support and resistance can be because of various reasons, these just
help us see them. They show executed orders and the number of buy and sell
orders lined up at different price levels.

These charts can help identify potential support and resistance

levels. A price level with a large number of buy orders can act as a support
level, as it represents a level where there is a strong demand for the asset.
Conversely, a price level with a large number of sell orders can act as a
resistance level, as it represents a level where there is a strong supply of the
assets.

You can see the market selling and market buying taking place in higher
quantities at these levels.

12
 Figure 2.6: Accumulation of orders at a specific price level.

The above image shows a large number of orders stacked at a certain price

level, this can be an area of support.

13
Figure 2.7: Sell wall builds with increasing unfulfilled sell orders at a given price.

The sell wall rises in proportion to the number of unfulfilled sell orders at a given

price. A high sell wall might mean that many traders don’t think an asset will rise

above a certain price (strong resistance zone), whereas a low sell wall might

mean the asset’s price is anticipated to rise (weak resistance).

Because it generates numerous sell orders at a single price, a large sell wall

prevents bitcoin prices from rising quickly. Traders may decide to sell and limit

their losses if they notice a large or expanding sell wall because they may think

the asset price will drop.

14
However, it's important to note that these support and resistance levels can

be very transient, as the order flow can change rapidly in response to

changing market conditions. Also, large orders can sometimes be placed to

mislead other traders, a practice known as "spoofing".

Figure 2.8: Spoofing

If a large number of buyers/sellers entered positions at certain levels, these

levels can then act as support/resistance. This is because traders will defend

their entry levels to stay in profit when price comes back to it, this is natural

human behaviour.

In conclusion, both option expiries and order flow charts can provide

information about potential support and resistance levels. However, like all

trading tools, they should be used in conjunction with other indicators and

analysis techniques to increase the probability of successful trades.

15
2.3 What are levels and which
ones are important?
In this section, we will introduce a systematic approach to analysing charts by

identifying Levels. By mastering this skill, you can confidently mark Levels on

different charts, removing uncertainty. It's surprising that 99% of traders lack

this knowledge. Trading level by level is the key to overcoming fear and

maximising profits. Practice on various charts to become fearless and ready

for any price movement.

2.3.1 THE OBJECT TREE OPTION IN TRADINGVIEW

Note: This is not necessary for trading but it is a tool to conveniently

organise your levels and tools.

The Object Tree option in TradingView is a useful feature that allows you to

effectively manage and organise the various objects and indicators on your

chart. It provides a hierarchical view of all the objects you have added to your

chart, making it easier to navigate and modify them.

With the Object Tree, you can access and control different elements such as

trendlines, support and resistance levels, drawings, indicators, and other

graphical objects. It provides a structured overview of these objects, allowing

you to expand or collapse sections to focus on specific aspects of your

analysis.

16
How to use the Object Tree

Figure 2.9: The object tree demonstration (A)

● 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.

17
Figure 2.10: The object tree demonstration (B)

Figure 2.11: The object tree demonstration (C)

18
 ● 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.

Figure 2.12: The object tree demonstration (D)

2.3.2 Levels on Monthly chart

i. Start with the monthly charts: This helps us understand the bigger picture

and shows us our position in the overall scheme.

Look at the linear chart to grasp the extent of the upward trend.

Identify the monthly levels for each cycle.

Note: We'll focus on the closing and opening prices as key levels. This means

that the resistance and support for different time frames will be based on the

closing and opening prices. These are important levels based on time and

19
Might not necessarily be S/R.

On each time frame, mark four levels: the opening price, closing price, highest

price, and lowest price.

Example 1: Monthly resistance

The monthly linear chart helps us gauge the magnitude of the price

movement and determine whether any pullbacks are within the normal

range, given the overall upward trend.

Figure 2.13: Monthly level high

To better understand how to plot the monthly levels, let's take a look at the

previous cycle in the chart below..

I've marked the previous all-time high (ATH) closing price.

Notice how exactly one year later, there was a re-test of the same level,

followed by a breakout. Levels often get re-tested frequently, returning to a

point where buyers previously couldn't enter. It's important to note that after

20
the breakout of this level at the end of 2020, the next candle crossed below

the level to claim liquidity.

For now, just observe the similar movement that occurred after the breakout

candle went below the breakout level to claim liquidity.

We will learn more about claiming liquidity later on.

Figure 2.14: Previous Monthly level high

Important

1. Take note of the significant price surge from the previous all-time high

(ATH). Understand that any pullback, no matter how large, is a natural

part of market dynamics and not necessarily a result of manipulation or

dumping. Just as prices can climb steeply, they can also come down

significantly. Don't assume that a pullback indicates the end of an asset

21
 or asset class. The monthly linear levels will help you anticipate various

types of movements.

2. label your lines clearly to avoid confusion and maintain a clear

understanding of each level. You can do this by right-clicking on the link

and selecting "Text" to add labels. This will prevent clutter and provide a

visual representation of what each level represents. You can save this

as a template for future use.

Figure 2.15: Labelling your line (A)

22
 Figure 2.16: Labelling your line (B)

2.3.3 The Monthly chart

Figure 2.18: Monthly chart

The monthly chart provides important levels that are crucial for my trading

strategy and staying vigilant in managing market movements.

23
I have identified the following levels:

● ATH level (All-Time High)

● Previous ATH (All-Time High)

● Yearly open for the current year

● Current monthly range

● ATH Monthly resistance

Please take note of the following:

The first level represents a re-test in the previous cycle.

Notice how we returned to re-test the yearly open at number 2.

During a market downturn, it can be beneficial to place small orders at these

levels and anticipate increased demand when re-testing the yearly open.

Whether I'm actively trading or holding positions, I closely monitor these levels

at the macro level. If Bitcoin reaches any of these levels, it should not be a

cause for fear or surprise. The purpose of recognizing these levels is to be

prepared to make trading decisions when they occur.

We will delve deeper into trading levels later, which will improve our chances

of success. Take a careful look at the chart and practice marking these levels

on your own.

2.3.5 Levels on weekly charts

Now that we have learned how to mark monthly levels, let's shift our focus to

the weekly chart.

In the chart below, you can see my previous weekly levels, and it's important

to observe how they differ from the monthly levels.

24
To emphasise, when we refer to levels, we are specifically referring to the

closing and opening prices.

Figure 2.20: Levels on weekly charts

To maintain clarity in the charts, I have marked only the levels of the closing

and opening prices. We will later include the high and low levels as well.

If you observe the marked levels above, you will notice that they represent a

range where the market spent a significant amount of time, approximately a

month. As we zoom in and analyse the chart in more detail, we will gain a

better understanding of how to trade within this range.

25
2.3.6 A Quick Review on Trading Ranges

Figure 2.21: Trading ranges

● Seek short opportunities at the highs and long opportunities at the lows

of the range.

● Avoid assuming a range will break until it actually does.

● Consistently applying the first two strategies will result in gains, except

for one instance where you may take a wrong trade after trading the

range successfully.

26
2.3.7 The Weekly Range

Figure 2.22: The weekly range

Now, let's examine the Weekly Range.

The range displayed above is the same as the one we previously marked, but

now on a daily graph for a closer view. You can use the range tutorial graph

from the previous page to easily trade within this range.

Notice how trading becomes much simpler when we are aware of the range.

The only challenge you may encounter here is managing deviations and

false breakouts, which we will address in the price action tutorials.

Once again, it's important to assume that the range will persist indefinitely

and trade both long and short positions within it until it eventually breaks. I

hope the zoomed-in weekly levels have demonstrated how to effectively

utilise the range.

27
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.

Figure 2.22: Liquidity Grab

Pay attention to how the recent downward movement from the All-Time High

(ATH) has retraced back to the same range that we identified on the weekly

chart.

It is not uncommon for ranges to be retested, and for the price to return

completely within the same range.

1. This observation should help you understand that the dump was not

unexpected or something to be afraid of.

2. The dump was a result of simple price action and a rotation of price

towards the mean. Having this understanding, along with the marked

28
 range and the likelihood of ranges returning to their levels, should help

you navigate various market movements without fear. If a level is lost,

it's important to prepare for the next level

2.3.8 The Daily Range

Now, let's explore how we draw the levels on the daily time frame.I have

marked the price from which these levels have been drawn.To establish the

levels, we have used the close and open prices.

Observe how these levels have remained relevant for an extended period,

even after the market dump. Take note of the number of times the price has

interacted with these levels.

Figure 2.23: The daily range

Going forward, let's mark the high and low levels at the same point and

observe how the future range responds to them. Take note of how, in the

29
aftermath of the dump from the All-Time High (ATH), the wicks of the price

candles closely adhered to the previous range's highs and lows.

Key points to remember:

● Mark the levels on the daily timeframe to establish a range.

● Actively engage with the range and be prepared to execute buy or sell

trades when the price interacts with these levels in the future.

● The levels are typically respected until they are not. The chart above

demonstrates how the same level continues to be respected even after

several months.

2.3.9 CONFLUENCE
Confluence refers to the occurrence of multiple factors or indicators aligning

together to provide a stronger and more reliable trading signal. It is a concept

used by traders to increase the probability of a successful trade by

combining different sources of evidence or analysis.

Figure 2.24: Confluence

30
Pay attention to the graphs and observe how there is a confluence between

two different time frames, specifically the weekly and daily charts, at a similar

price range.

This area of confluence can be considered a high-probability trading zone.

Note that when trading, it's important to look for confluence between various

factors such as levels, Fibonacci retracements, exponential moving averages

(EMA), and volume profiles.

When these levels and indicators align and show confluence, it can serve as a

strong entry point for trades as these areas tend to be respected by the

market.

Figure 2.24: Important levels

Here is a graph displaying the important levels that I consider significant for

analysing opportunities and changes in market structure. These levels

represent the ranges I focus on and should be observed from a long-term

perspective.

31
If the price reaches any of these levels, it should not come as a surprise. This is

the essence of being prepared. I have provided labels for your convenience,

and I encourage you to pay attention to the yearly and monthly opens, as

they often serve as areas of high probability re-tests.

By incorporating these levels into your analysis, your perspective shifts from

wondering where the price will drop to considering "This is where it could

drop." This preparedness enables you to anticipate potential market

movements with greater clarity and reduces the element of surprise.

Tip: When trading on a specific time frame that doesn't require the inclusion

of higher time frame levels, you have the option to hide those levels to reduce

clutter. However, there is an even better approach to managing your charts

and ensuring they appear clean and organised

32
2.4 Trading- Level to Level
Identifying Support/Resistance Levels.

By the end of this tutorial, you will gain a clear understanding of what levels

are and how to effectively trade them. Throughout this tutorial, I will

emphasise the significance and logic behind levels trading, highlighting its

importance over other aspects of traditional trading systems, such as chart

patterns and classical divergences.

2.4.1 What are levels?

In trading, "levels" typically refer to specific price levels on a chart that are

considered significant due to their historical significance or technical analysis.

These levels can act as support or resistance areas, where the price tends to

react or reverse.

Before delving into charting, it's essential to grasp the concept that each level

should be viewed as a zone rather than a single line. This means that levels

have a range of price action rather than being a precise horizontal line. When

using higher time frame (HTF) charts like monthly or weekly, they can be

useful for forming a bias and developing trading plans. However, executing

day trades solely based on a weekly level can be challenging due to the fact

that it represents a zone rather than an exact horizontal line. A small zone on

the weekly time frame might encompass a larger zone on the 4-hour time

frame, emphasising the importance of understanding the relative size and

significance of levels across different time frames.

2.4.2 Common types of levels in trading

33
Support Levels: Support levels are price levels at which the buying interest is

strong enough to prevent the price from falling further. Traders often expect

the price to bounce back up from these levels. Support levels are usually

identified by previous lows, trendlines, moving averages, or other technical

indicators.

Resistance Levels: Resistance levels are price levels at which selling pressure

becomes significant enough to prevent the price from rising further. Traders

often expect the price to reverse or consolidate near these levels. Resistance

levels are typically identified by previous highs, trendlines, Fibonacci

retracements, or other technical indicators.

Figure 2.25: Support and Resistance

2.4.3 How to use Price Action to Draw Horizontal Lines

In our approach, we will utilise price action to draw our horizontal levels.

However, it's crucial to maintain the perspective that these levels are not just

single lines but rather areas of interest where buying or selling interest is

concentrated. By considering our levels as zones rather than mere lines, we

34
recognize the dynamic nature of price and the clustering of bids or offers

within these areas. This perspective allows for a more comprehensive

understanding of the market and aids in making informed trading decisions.

Here are few tips to consider in drawing your lines

Tip 1: Colour code your lines (Tom Dante uses this trick to avoid

labelling)

To effectively distinguish between different time frames and ensure visibility

of levels across various charts, you can utilise colour coding and line

thickness. Here's a suggested approach using colours and labelling:

Weekly Levels: Use a thick red line to represent weekly levels. These levels

should be visible on the weekly, daily, 4-hour, and hourly charts.

Daily Levels: Use a medium blue line to denote daily levels. These levels

should be visible on the daily, 4-hour, and hourly charts.

Hourly Levels: Opt for a thin green line to indicate hourly levels. These levels

should be visible on the hourly chart.

By assigning specific colours and line thicknesses, you can easily identify and

differentiate the levels based on their corresponding time frames. This helps

ensure that each level remains visible on time frames equal to or lower than

the level's timeframe. You can also right-click on the lines and label them

accordingly to provide additional clarity.

35
 Figure 2.26: Color coding you lines

Tip 2- Use Object Tree

As discussed in the above sections.

36
 Figure 2.27: Object Tree in TradingView

2.4.4 How to Determine the Importance of a Level

When assessing the importance of a horizontal level in trading, Dante, an

experienced trader, provides a framework that includes the following

considerations:

● Number of Times Price Interacted: The more times price has touched

or reacted to a level in the past, the higher its significance. Levels that

have been respected multiple times indicate strong market interest and

are likely to be important.

● Recent Price Interaction: Levels that have been tested or respected

more recently carry more weight. Recent price action provides a more

relevant indication of market sentiment and can help determine the

level's current importance.

37
 ● Timeframe Alignment: Confirm if the level aligns with other timeframes.

Levels that are visible and respected across multiple timeframes carry

greater significance as they have a broader impact on market

participants.

● Magnitude of Price Rejection: Consider the strength of price rejections

or bounces at a level. Sharp and significant reversals indicate a

stronger level compared to minor or shallow reactions.

● Higher Timeframe Confirmation: Seek confirmation of the level's

importance from higher timeframes, such as weekly or monthly charts.

If a level is respected on these higher timeframes, it reinforces its

significance.

● Volume and Liquidity: Assess the volume and liquidity at the level.

Higher trading volume and liquidity near a level suggest increased

market participation and validate its importance.

● Role Reversal: Levels that have switched from acting as support to

resistance, or vice versa, tend to be more influential. These role

reversals indicate a shift in market dynamics and attract attention from

traders

2.4.5 How I would draw the levels on a weekly chart

38
 Figure 2.28: Levels on weekly chart

Figure 2.3: An illustration of how I would draw the levels on a weekly chart

First, I will zoom out to see the individual candles and wicks clearly but include

as many candles as possible on the chart.

The arrows show you my reasons for marking it. Before you start to get

overwhelmed with all the levels, just mark all of them out first. Note the points

which make a level important.

Which levels should you keep on your chart after this process?

You should prioritise the levels that present trading opportunities aligned with

your trading strategy. These are the levels that you want to actively trade off.

39
2.4.6 Which levels do you mark out?

Figure 2.29: Levels to mark

Use the importance roadmap as a guide to identify straightforward support

and resistance points on the chart. Look for significant levels that hold

importance and act as barriers to price movement.

On the same chart above, it is recommended to mark out daily levels in

addition to the previously identified levels. Observing the daily chart can

provide insights into how it respects the weekly levels marked on the first

chart. This confirmation is a positive sign that your level marking is accurate.

Remember to maintain the practice of looking from right to left when marking

your levels, as this helps in identifying key areas of support and resistance.

How can you further reason the drawing and assess the importance of
the levels on a chart when there can be 100 levels drawn?

40
 Figure 2.30: Assessing the importance of the levels on a chart

2.4.7 How to refine your levels for trading

Refining trading levels requires more than just drawing lines on a chart. Here's

is a process of level tuning using recent price action:

1. Pick Final Level: Choose a final level within the range that has the most

touches, aiming for a level close to the middle. The exact midpoint is not

crucial.

2. View S/R as Zones: Consider support and resistance (S/R) levels as

zones rather than precise lines. S/R flips represent orders being placed

and executed. Think of them as areas where price fluctuates.

3. Exceptions to the Mean: Avoid using the mean of the range when there

is a violent breakout. If there is a strong breakout above a range high,

expect a slight dip to retest the highs before continuing higher. The

same concept applies to range breakdowns.

Refining levels involves considering price action, order flow, and

understanding that S/R levels are zones rather than perfect lines. Adapt to

41
different scenarios and continuously refine your approach based on market

conditions.

Figure 2.31: Refining your levels (A)

Figure 2.32: Refining your levels (B)

42
 Figure 2.33: Refining your levels (C)

2.4.8 Seizing Trading Opportunities with Precision

Once you have honed your levels, it's crucial to understand that relying solely

on knowledge of price action is insufficient for consistent profitability in

trading. To achieve that goal, you must establish a strategy or system that

you strictly adhere to, regardless of your emotions. Backtesting your strategy

and monitoring your success rate over time are also vital steps. It's worth

remembering that even with a 50% success rate, taking trades with 2:1

risk-reward setups can make you a trading legend.

Now, let's delve into the trading scenarios using the refined levels:

● 3 touch level: This scenario involves a level that has been tested and

respected by the price three times. Traders typically expect a reaction or

potential reversal when the price approaches this level for the fourth time.

Look for trading opportunities based on reversal strategies. For instance, if

the price fails to break above the level, you may consider taking a short

position. Conversely, if the price fails to break below the level, a long

43
 position could be considered. Strengthen the validity of your trades by

incorporating confirmation indicators or analysing candlestick patterns.

Figure 2.34: 3 touch level

● 2 touch level: In this scenario, the price has tested and respected a

specific level twice. Similar to the previous scenario, traders anticipate a

reaction or potential reversal when the price approaches this level for the

third time. Apply reversal strategies, such as seeking additional

confirmation signals or combining the level with other technical indicators

or patterns, to increase the probability of successful trades.

Figure 2.35: 2 touch level

44
● 1 touch level: This scenario involves a level that has been tested and

respected by the price only once. While a single touch level may hold less

significance, it can still present trading opportunities. Consider potential

breakouts or bounces from the level. For breakouts, take a long position if

the price breaks above the level, or a short position if it breaks below. As for

bounces, take a long position when the price retraces back to the level

after a temporary decline, or a short position when the price retraces back

to the level after a temporary rise.

Figure 2.36: 1 touch level

2.4.9 Targets and stop/trade management

It is important to consider the following points regarding levels, trade

management, and stop placement:

Multiple Time Frames (TFs) and Level Drawing: Analyse different TFs and

draw levels accordingly. Fibonacci retracements should be drawn from daily

swing highs to lows (and vice versa), rather than using smaller TFs. However,

the execution TF, where you take your trades, should be predetermined (e.g., 1

hour) and provide a clear trade idea.

45
Selective Trading and Patience: While every level you draw will likely trigger a

price reaction, it is crucial to exercise patience and avoid trading all of them.

Focus on trading levels where you believe you can capture significant price

swings based on chart analysis.

Trade Entry and Categorization: Trade entries can occur at any level.

Categorise these entries into three sections, each with its own requirements

for entering a position.

Figure 2.37: Trade entry

● Stop Placement: Set your stop loss at any level above the weekly level. If

the 4-hour level above is flipped to support, indicating an invalidation of

your trade idea for a stop-fakeout or rejection at the weekly level, it is

necessary to exit the trade. Adjust the stop loss based on the evolving

market conditions and level flips.

● Profit Target: Aim for the first trouble area (FTA) as your target, which

could be the lower 4-hour level. The final target may be the blue daily

level. If the price finds support at the target level, consider taking profits,

but keep a portion of the position running for potential bounces.

46
 ● Trading the Levels: There is no specific requirement for price to reach

your level. If price rallies into a level where you intend to short, take the

trade. A violent price rally into your level suggests that more

participants are trapped in the process.

● Practice and Conviction: Profitable trading with levels requires practice

in drawing accurate levels and developing conviction in your trades. Do

not be deterred if price strongly reacts to your level; trading the trend

on lower TFs does not hold significance in this approach.

● Comprehensive Level Marking: It is recommended to mark out all the

levels, even if the chart becomes crowded. Knowing all the trouble spots

in advance will help you manage your trades effectively.

● Adjusting Stop Loss and Managing Longs: Once price surpasses an

important level, you can move your stop loss up to below that level. If a

new support forms, it is preferable for price to hold that support before

reaching the target. This approach allows for careful management of

long positions.

4.4.10 Most important factor when trading levels

The most important factor when trading levels is trade execution strategy.

How you enter trades and manage orders at key levels can significantly

impact your trading success. There are two key approaches to consider:

i. Placing Limit Orders at Role Reversal Levels: When a level changes its role

from support to resistance or vice versa, placing limit orders can be effective.

By entering the trade at the level itself, you aim to catch potential price

47
reversals. This approach requires anticipating the role reversal and setting

appropriate limit orders in advance.

Figure 2.38: Placing Limit Orders at Role Reversal Levels

ii. Waiting for Stop Hunt or Stop-Fakeout: When trading levels where you

expect a similar role as before, waiting for an SFP can be a valuable strategy.

An SFP occurs when price briefly moves beyond the level to trigger stop

orders, only to reverse and move in the opposite direction. By waiting for the

SFP, you can capitalise on the trapped traders' orders and enter a trade in the

direction you anticipate.

48
The Swing Failure Pattern

To really grasp the Swing Failure Pattern, it's important to first understand the

concept of liquidity. It sets the foundation for comprehending how this pattern

works and why it's significant in trading

Figure 2.40: The concept of liquidity

When we talk about a liquid asset or coin, we're referring to its ability to be

bought or sold quickly without causing significant price fluctuations. In other

words, large buy or sell orders can't be executed all at once without impacting

the price. Liquidity is determined by the number of trades happening for a

particular asset and the amount being exchanged between buyers and

sellers.

How the interplay between stop losses and breakout trading can
contribute to market liquidity and the fulfilment of large buy
orders.

49
In order to successfully fill large buy orders at a favourable price, it's

important to maintain a balanced ratio, as close to 1:1 as possible, between

buy and sell orders in the market. Also, it's worth noting that stop losses

placed on long positions actually act as sell orders, while stop losses for short

positions act as buy orders.

Let's consider a bullish example to further illustrate this concept.

Figure 2.41: interplay between stop losses and breakout trading

When the price of an asset breaks through a resistance level and establishes

it as a new support level, many traders enter long positions, anticipating

further price increases. These traders typically place their stop losses just

below the newly established support level. The reason for this is that if the

price were to break below that support level, it would indicate a shift towards

bearishness.

At the same time, there are breakout traders who take short positions as soon

as the support level is breached, even before the candle closes. These traders

50
aim to benefit from the expected downward momentum resulting from the

support level being broken.

The stop loss orders placed on long positions and the short orders from

breakout traders act as liquidity injections into the market. These orders help

to meet the demand of large buyers who are looking to purchase a

significant amount of the asset. The selling pressure from stop losses and

short orders is absorbed by these large buy orders. As a result, the price tends

to recover and the candle eventually closes above the support level, creating

a "sweep" of the level.

● Key highs/lows

Key highs/lows are significant price points where a trend reverses or enters a

consolidation phase. For example, during an uptrend, if the price forms a high

and starts ranging for a month, that high becomes a key level. Traders use

these points to analyse trends, make trading decisions, and anticipate

potential reversals or breakouts.

51
Figure 2.42: In an uptrend, the price reaches a high point before transitioning

into a month-long consolidation phase

Figure 2.43: In an inverted pattern, the key low acts as the starting point for a

ranging structure.

52
2.4.11How to Spot the Pattern

Identifying the Swing Failure Pattern is a straightforward process. By

understanding and implementing the following steps for both bearish and

bullish examples, you can successfully recognize the pattern and utilise it to

make well-informed trading decisions.

Example 1: Bearish

Figure 2.44: Spotting the pattern in bearish chart

i. The price forms a key high or resistance level.

ii. A subsequent candle attempts to break above the high but fails, closing

below it.

iii. Confirmation of the pattern occurs after the candle closes, preferably

waiting for the 'sweep' candle before taking a short position.

53
Example 2: Bullish

Figure 2.45: Spotting the pattern in bullish chart

i. The price forms a key low or support level.

ii. Following candles try to break below the low but fail, closing above it.

iii. Confirmation of the pattern happens after the candle closes. It is preferable

to wait for the 'sweep' candle before taking a long position. If the low is tested

again, it may present an opportunity to add to the position.

2.4.12 How to Execute Swing Failure Pattern

It's important to note that not every sweep of a high/low constitutes a Swing

Failure Pattern (SFP). Take into account liquidity considerations and analyse

where retail traders are likely to place their stop losses or be tempted to enter

positions.

54
To effectively execute the strategy:

i. Entry: Wait for the candle that sweeps the high/low to close, and enter the

trade accordingly.

ii. Optional Second Entry: If desired, you can consider a second entry based

on the candle that closes below/above the high/low after the initial sweep.

iii. Set your stop loss (SL) at the level of the wick of the 'sweep' candle. You

can either place an order with a predefined SL or manually adjust the SL to a

close above/below the wick.

For setting targets, consider the following options:

Target the last swing low/high as your initial profit target.

Alternatively, target the range high/low, aiming to capture potential price

movement within the range.

Example 1: First entry

Figure 2.46: First entering

55
Example 2: Second Entry

Figure 2.47: Second Entry

The second entry remains valid even if the initial Swing Failure Pattern (SFP) is

missed. It carries higher conviction as it indicates that sellers lack real

strength and bids have absorbed all orders, causing the price to move below

the low. This reinforces the notion that the second entry can still be a valid

opportunity.

How to avoid Common Mistakes Traders make in executing SFP

Not every low/high will have significant liquidity resting below/above it, which

means Swing Failure Patterns (SFPs) can be found almost anywhere if you

search diligently. The key is to practise extensively before implementing the

strategy.

Constantly ask yourself whether the setup is obvious or if you are forcing it.

Consider whether there are stop orders resting below a specific low or if

56
breakout traders were lured into long positions by a move above a particular

high.

Here are a few tips to enhance your accuracy when trading SFPs:

I. Review the section on key highs to ensure you mark them correctly. Also, be

cautious of dojis, as they often indicate market uncertainty. It's advisable to

avoid trading SFPs based on doji formations.

Figure 2.48: Review the section on key highs

ii. Avoid rushing your setups: Allow price to develop and be patient. It's

perfectly acceptable to have only one trade per week if you maintain a high

success rate. Avoid impulsive trading and execute your trades with

calculated precision.

57
 Figure 2.49: Avoid rushing your setups

iii. Seek confluence: by considering additional indicators such as volume, RSI

divergences, and moving averages. These can provide added confirmation

and strengthen your conviction in the trade.

Figure 2.50: Seek confluence

58
2.5 DEVIATION/FALSE BREAKDOWN
In trading, deviation refers to a divergence or deviation from an established

pattern or trend. It indicates a departure from the expected or normal

behaviour of a particular market or asset.

Deviation can be observed in various aspects of trading, including price

movements, indicators, and market behavior. Here are a few key points about

deviation in trading:

● Price Deviation: Price deviation occurs when the current price of an

asset significantly deviates from its expected or average price based

on historical data or technical analysis. It can be a result of market

sentiment, news events, or other factors that cause a sudden shift in

supply and demand dynamics.

● Indicator Deviation: Deviation can also be observed in trading

indicators such as oscillators or moving averages. For example, if an

oscillator indicator diverges from the price trend, showing a different

pattern or momentum, it indicates a deviation and can potentially

signal a reversal or change in the market direction.

● Standard Deviation: Standard deviation is a statistical measure that

quantifies the amount of variation or dispersion from the average or

mean. In trading, standard deviation is often used to assess market

volatility. Higher standard deviation values indicate greater price

variability and potential trading opportunities.

59
 ● Trading Strategies: Traders may incorporate deviation into their

trading strategies. For instance, mean reversion strategies aim to profit

from price deviations by assuming that prices will eventually return to

their average or mean levels. On the other hand, breakout strategies

seek to capitalise on significant price deviations that indicate potential

trend changes or strong momentum.

Example: Liquidity grab.

Figure 2.51: Liquidity grab

Take a look at the price structure depicted above. It shows a falling wedge

pattern, which typically breaks to the upside. Retail traders may have entered

the market at the lower support level, expecting a breakout to occur.

As you can see, the breakout did happen as anticipated. However, there was

a temporary dip below the support level of the falling wedge.

60
But why does the market behave in this manner? Many retail traders tend to

place their stop-loss orders just below the support level. This creates an

opportunity for the market to trigger those stop-loss orders, causing many

traders to get stopped out, even though their prediction of a breakout was

correct.

This is a deliberate move to stop out retail traders and it can occur frequently.

It is referred to as a liquidity grab event, where the stop-loss orders placed by

traders provide liquidity for buyers to enter the market at a lower price (as the

stop-loss orders act as sell orders).

2.6 RECLAIM
reclaim" refers to a situation where the price of an asset moves below a

certain level, but then manages to rise back above that level again. It

signifies a potential reversal of the previous downward movement and

indicates that buyers have regained control.

When an asset price reclaims a level, it suggests that there is renewed

buying interest and support at that level. It can be seen as a bullish sign,

indicating that the buyers are stepping in to defend the price and push

it higher.

Traders often pay close attention to reclaim levels as they can provide

valuable insights into market sentiment and potential trading

opportunities. If a price reclaims a significant level of support or

61
resistance, it may signal a potential trend reversal or a continuation of

the existing trend.

Example

Figure 2.52: Reclaim

62
Conclusion
Dear Friends,

The aim of this tutorial is to strengthen your fundamentals in trading. If you

read this slowly and with time, you would have mastered it after practising it

a few times.

My aim after the release of this article is to provide cost free and open to use

best trading tutorials which can be used practically to trade, make the money

and also beat the market at times.

Learning how to identify and trade levels is the first step to being a great

trader. This ability alone can make you a profitable trader.

P.S. This is the second chapter of the NEW MENTORSHIP SERIES, we will be

releasing new chapters soon with new examples and more concepts.

Please share the doc if you like it and practise well before the next lesson.

Love,

EmperorBTC

Telegram: https://t.me/EmperorbtcTA

Twitter: https://twitter.com/EmperorBTC

63