Introduction to Confluence

Trading
Background
This is an introductory course

I am going to share some basic concepts and talk about how I use them to find areas of confluence on a chart that I
can use to find potential trades

If you find the tools useful then spend the time and effort to learn more about them and practice/backtest using them
on real charts

There is no replacement for consistent effort!

Sources/inspiration for my TA:

I have learned from so many different sources that it would be impossible to list them all

However some of my heaviest influences have been:

● Chartchampions.com
● Tradingriot.com
● Mindset_BTC
● All of Crypto Twitter, for better or worse!
● The members and superstars in the MindJacked Discord
● Oh and George. Can’t forget George (no matter how hard I try!)
Part 2: High Time Frame Levels
Whatever style of trading you eventually end up using (and for most traders this is both a long and continually evolving
process) the ability to approach any blank chart in any asset class and start to build context around the key levels of
potential support and resistance is the one of the cornerstones of technical analysis

There are many methods that can be used to do this and in my opinion, the high time frame levels we are going to be
looking at in this lesson are the most effective and mechanical - meaning you don’t have to use much discretion at all to
mark them out once you’ve had some practice

This makes the method easily repeatable across all different assets and allows you to start building out your TA on a chart
without stressing about where to start

Through this lesson we will see how well these levels are often respected and therefore how useful they can be as a
building block for other levels of confluence on a chart, or even entries on their own
Part 2: High Time Frame Levels
Before we get into the meat of this lesson, let’s
just have a look at some recent levels that have
had marked a key reversal point or acted as
support/resistance on the Bitcoin chart
Part 2: Setting up Templates
First off, we need to set up our Monthly, Weekly and Daily templates for the Horizontal Ray tool

If you’re not sure how to do this, check Part 1 of this course for a step by step guide

We will want to end up with the following templates

Part 2: Setting up Templates
Daily Level
Part 2: Setting up Templates
Weekly Level
Part 2: Setting up Templates
Monthly Level
Part 2: Choosing the Best Levels
As with most TA the levels that you choose there are certainly some rules that dictate whether the
levels are, in general, valid or not - there is some art as well as some science to choosing the “best”
levels

All levels in this lesson will be drawn on the BTCUSDT Perpetual Contract on Bybit

These general rules will help to guide us towards them:

1 - Untapped levels

2 - Higher time frame preference

3 - The further away from price the better

4 - Recency bias

5 - Only closes

6 - Look for key pivots

Part 2: Choosing the Best Levels
1 - Untapped levels

Tapped/traded through/washed - these terms on a high

level amount to the same thing

There’s a lot of theories around why support and

resistance levels form, some of which we will go into
later in the course or of course you can research this on
your own

However for the purposes of this lesson I’m less

interested in getting into technical discussions about
why things work, we are going to be concentrating on
the practical application

An “untapped” level is similar to a “naked point of

control” in terms of the price not having traded through
the level after it has been formed
Part 2: Choosing the Best Levels
2 - Higher time frame preference

Often we have 2 levels very close to each other or

sometimes, as we can see in the images to the right, at
exactly the same level

In this case we would have a higher time frame

preference - i.e. keep the Weekly Level on the chart and
remove the Daily
Part 2: Choosing the Best Levels
3 -The Further Away from the Price the Better

Sometimes we have levels close but the lower timeframe level

(in this case Daily) is further away from the price when the levels
are drawn - in this case we are beneath them so are looking for
resistances to the upside

This takes some nuance so I would suggest leaving both on the

chart for a while until you get a sense of which one is likely to be
more relevant

However if you want a strict rule to abide by, take off the one
that is closest to the price - in this example the Weekly Level

This is because we will be looking for them to act as resistance

and so likely will be looking for short trades

As we always want the best possible entry for a trade, the

further away the level of interest the better entry it will provide if
the reaction occurs there

(ignore the fact both levels are “tapped” in this example, this is
just to demonstrate)
Part 2: Choosing the Best Levels
4 -Recency Bias

This is the theory that the more recently the level was put
in, the more likely it is to have a reaction if price hits it

This goes into theories about why support and resistance

levels are created and what actions result in them being
tapped

But for our practical application of them we’re going to

concentrate mostly on just where to mark them out

In this example we can see an “old” Daily S/R and a more

recent one

Although both would valid until tapped, we would place a

little more weight on the newest one
Part 2: Choosing the Best Levels
5 -Only Closes

We are going to take our levels from candle closes only

Lots of interesting arguments about why this is but for

simplicity, we’re doing it because it works

So while sometimes clearly the wicks are relevant

(especially as they relate to liquidity areas on a chart) that
isn’t what we’re doing here
Part 2: Choosing the Best Levels
6 - Look for key pivot points

When we are marking these levels we are looking for areas

on the chart where there has been a close and then price has
moved away from that close, even if it first wicks through the
previous close

The key is watching what happens after the second candle

closes - does price move away or not?

On the top picture on the right, we can see that even though
the second candle took out the high of the previous day, it
closed lower and created a pivot point on the chart that price
then moved away from. So this is a valid level

On the bottom picture on the right, we can see that even

though, arguably, on a lower time frame the level has acted
as resistance as the price wicked through it during the day
and then rejected, this is not the point the market pivoted
away from and therefore this isn’t a valid level
Part 3: Drawing your Levels
Before we put this into practice let’s set up the criteria for this practice:

1 - We will be using the BTCUSDT Perpetual Contract on Bybit as the Chart

2 - We will be drawing only Daily levels, so make sure you’re on the Daily timeframe

3 - The period that we will be drawing them on is from 1 January 2021 up to and including 1 May 2022

4 - To make it easy for you to see only the data you need on the chart, you can use the Replay function on TradingView which
is free to use for Daily time frames and above (you’ll need a paid account to use it on lower time frames)
Part 3: Drawing your Levels
Replay Function

Before you start, make sure you’re on the Daily time frame
on the chart

1 - Click the “Replay” icon on the top menu bar

2 - You’ll then see a blue vertical line on the chart which you
can move to 02 May ‘22 and click

The data on the chart including and after that date will now
disappear

3 - Once you’re done with this exercise and want all the data
back, you can click the “X” and then “Yes” on the next screen
and all of the data will come back
Part 3: Drawing your Levels
Draw Your Levels

At this point STOP READING!!!

I’m going to share the levels I drew on the next slide but you should take this opportunity to draw the levels that you
thought should be on the chart first

This way you can see if you got it right and if not, you can try to figure out why

Now, before we get into the “answers” I need to state that, while somewhat mechanical, there is always going to be an
element of discretion in these levels

So just because I drew a level and you didn’t (or vice versa) doesn’t mean either of us is right or wrong necessarily

What really matters is whether, with time and practice, you find those levels help you to trade better or not
Part 3: Drawing your Levels
Daily Levels

To the right is my take on the Daily levels on the chart for

the relevant timeframe

In the process of marking them out you’ve probably seen

how many times a level is well respected when price
revisits

Of course nothing is foolproof and works in isolation all of

the time

However hopefully it’s now clear how these levels make

sense as a starting place to start building out confluence

Now - go and mark the Weekly and Monthly levels on the

chart!
Part 4: Conclusion
In this lesson we have learned:

● Why we want to mark high time frame levels

● How to set up templates to make marking them easier
● The criteria we use for marking the levels
● Through practice, how many times historical levels have acted as a key support or resistance on the chart

Now, as with everything, the key is to go out and practice this on real charts

It takes time and experience to get used to which levels you feel are relevant and which aren’t, so there’s no better time to get started than now

Go to any exchange and pick the top 10 assets by volume and mark out all the levels on them and save them on your chart

Some will have more price history than others, which is great, because you want some variety in your practice

Now every day for at least a week, go and open those 10 charts and see which levels have had any respect on any of these assets

Drill down into lower time frames (3m or 5m) and see how the price reacted on those timeframes

Don’t worry about figuring out how exactly to enter trades using them, this will come later

Just get used to drilling down and watching the reaction for now