Currency Analysis #4 – How To Use Support & Resistance In Bitcoin

This is Tai Zen – currency analyst for prisonorfreedom.com. It’s a blog where we talk about the tools, the techniques, the strategies and the technologies that are available to help people find freedom in their life and especially in health, wealth and relationships.

Here with me today is my two kids, Athena and Maximus. I want to bring them to get exposed to trading as early as they can so it’ll benefit them in the future. In this particular episode of currency analysis, number 4th, I’ll be focusing on what is support and resistance, how to use support and resistance in Bitcoin and how to draw them correctly using the majority touch rule.

I’m going to talk about the traditional versus the modern way to use support and resistance and the significant and insignificant support and resistance that you’ll see out there in the charts and like always, I’m going to have lots of fun and I hope you will along with this a video presentation also.

Along the way, I have me a nice cup of coffee here that I’ll be drinking things, the donations from previous viewers. I want to say thank you to Fabu on trading view who suggested that I put up my Bitcoin donation address. So I’ve been getting a lot of a beer and coffee donations, so I really appreciate that. So let’s go ahead and get started here.

I’m gonna jump over here. By the way, before I get started, I’d like to thank this gentleman here – great wolf, believer or not, I was sitting here for nearly an hour trying to figure out how to get this Camtasia recording button to show up on this viewable screen. I was using it on a multi-screen setup and it was way over here above my screen and for the life of me, I could not get that fricking button, this record button to show up on my screen here.

So if you guys see here I had to get on here and ask a non-trading related question down here., “Does anyone know how to bring a window that’s outside of the screen back into the screen?” And thank heavens that great wolf was there and he explained how to do it, so I want to say thanks to that, otherwise, I wouldn’t have been able to record this right now.

Now since the last currency analysis video, I’m getting a lot of views on this video thanks to Fabu’s mention of my video on Reddit. So you can see here I’ve got like 700 and something views here, which is quite a bit. So I’m glad that the videos are helpful and I’ve gotten some good feedback from it on trading view. I hope that it will help you guys out to reduce your losses and increase your probability for success in the Bitcoin market here.

First thing I want to do is I want to remove this down trendline, the channel here, the purple one, simply because it is no longer valid, meaning that we have no use for it anymore. Because of that, we want to go ahead and get rid of it so that it does not cloud our judgment.

I see a lot of people putting a ton of indicators in lines and all kinds of stuff on their charts and they forget to see the most important thing on your charts, which is the candlesticks, the price action. And it’s not necessarily just the candlesticks, if you or someone old school and you prefer to use a bar chart, it’s good. If you are really, really old school and you prefer to use line charts, it’s still good.

What you don’t want to do is confuse your eyeballs and your brain from not being able to focus on the relevant and most important data, which is the price, and when you hear people talk about trading off price action, or you guys hear me talk on trading view or anywhere about trading off price action,

I’m talking about looking at the price data here and letting it tell me how to make trading decisions. Since we’ve had a clear break above this intermediate-term downtrend, this line is no longer valid. What I’m going to do is I’m going to update it by bringing it down to here and take a measurement first from there to here.

Now, if you decide that you want to draw your trendline from here to the body of this green candle right here and to the body of this green candle, you are absolutely fine. There’s no law that’s written in stone anywhere or written on the blockchain anywhere that says that by law, you have to make this down here. It’s up to you. Whichever one that you used, just is consistent with it. And that’s the key. Don’t get into that argument with others about who’s right and who’s wrong in trading, it’s not about who’s right and who’s wrong, it’s about high probability.

Let’s slow down here because my five-month-old daughter says I’m going too fast. The other thing I want to do is I want to update some of these support and resistance lines here. I’m going to take this one right here real quick. And I’m gonna make it a lighter colour just so that it’s not so distracting to me on the charts. Remember I like to keep two or three layers. A price above the current price and then two or three layers of support and resistance below.

If you’ll notice that this one down here is greyed out the one that’s based on that support level and the one that is greyed out also. And usually the lighter coloured grey items, they let me know that they are longer-term support and resistance lines when I zoom in.

For example, if I zoom in to a four-hour chart and I see the greyed outlines, I know that that’s coming from the daily charts. Anytime your charts get compressed like this, there’re two things that you can do. You can hit reset the chart or you can go down here. I found out that this little circle button down here is also the reset buttons. So you can click on that and reset that.

So now the chart is that its normal proportion. Let me come back to what is support and resistance?

Support is a place where the price has been hitting and it bounces back up. And we’ll get into the psychology of it in a minute, so this right here, if this is the current price right here, anything that is below it would be considered support and anything that’s above it would be considered resistance.

Resistance is basically the price ceiling and support is the price floor. If this bottom line here is 454.37, the way that you would describe it to another trader is that price bounce off of 454 support. Then when it comes over here and it hits that same price again and it bounces up, then we call that a test 454 support, or it’s a retest or it’s a bounce off.

Now, some people will call this a dead cat bounce right here and that was made popular by, “Rich Dad, Poor Dad” by Robert Kiyosaki and his investment training programs and things like that. And I really don’t like to call it a dead cat bounce because that really does not tell you as a trader anything about what the price is doing or what the market is doing. I will explain more a little bit later about profit taking and trend reversals and that will be more of a better description than to sit there and call it a dead cat mouse.

One of the things that I liked to do when I talk about trading is I like to talk in technical terms when it comes to trading. And I’m not talking about technical terms as far as being complicated and fancy terms that makes it sounds like I’m smarter or something. I’m talking about the terms that actually describe what’s going on in the market when we use terms such as a bear trap or a bull trap or a dead cat bounce or a wall is moving.

None of those things really lets you know, those terms, those vocabulary, those terminology sounds really fancy and it makes you sound like you know what you’re doing in the trading world. But for me personally, they really don’t do much. I’m a simple trader so I need to use terms that let me know what is happening with the price or the market at that time. So you’ll hear me use the term profit taking a lot instead of these other fancy terms. It’s because that’s what a trader is actually doing out there in the markets.

Apparently, my daughter agrees with that. That kind of defines it, it’s a loose definition of support and resistance, but you will understand that much better once we get into the actual how to draw them and when we talk about the other components of support and resistance. So please bear with me on this. Let’s talk about how to draw them and using the majority touch rule, there are several ways to draw support and resistance.

One of the ways to draw support and resistance in the old days was to draw it at the top, like way up here and then at the bottom down here. Now when you’re a beginning trader, that may be kind of confusing because there are so many tops and so many bottoms that you may not know where to draw them.

So I’m going to give you guys some specific guidelines that are going to help you draw your support and resistance lines and to make them accurate so that you can actually use it in your trading and not just drawing just to look pretty on the chart.

I think that’s one of the mistakes a lot of people make, they draw too many indicators and too many lines on their charts and it turns out that they’re more focused on making it look pretty. Then to actually draw lines on there that actually helps to guide them in making entry and exit decisions.

So I know that being a trend trader, I do not go against the trend. So the trend here obviously is an uptrend. If you’re not sure if it’s an uptrend, just remember that we went from $13 per Bitcoin to $1,240 per Bitcoin. That is a clear uptrend in the long-term anyway.

So in the long-term, we have an uptrend and then in the intermediate-term, we also have an uptrend. So let’s go ahead and zoom in to the one-hour here. The one-hour is a very, very popular timeframe to use for trading, especially in this market or in any market. Here’s a little trick here guys.

When you zoom in, you’re not able to move the screen up and down right away and just in case you are trying to figure out how to move it up and down in all for direction. For some reason, you have to compress the price data here, just a hair. Once you compress it like that, what it does is it unlocks the screen and then you can drag the screen anywhere you want. So that’s the long-term trend right there.

Now on something like this too, so that you don’t get to confuse as what’s the long-term trend. There are several things you can do. You can draw the line is a grey like that, that lets you know that there’s a long-term or you can actually fatten it like that to make it thicker and the thicker the line, it just means that it’s a longer timeframe and in case you’re not aware of how to use the timeframes correctly, please watch my previous video, currency analysis number three, where I talk about how to use the correct time frames.

What I like to do is I can draw the trendline and then clone it and make a parallel line, but in this particular case, we have a parallel channel line. So I’m going to go ahead and use that. Now when I draw this line, notice how it hits those points like that. That’s one way that you can draw it.

Let me go ahead and zoom in a little bit. I’m using the scroll wheel on my mouse here. If you don’t have the scroll wheel, then you can use this button down here. I’d look at that and I see that it hits here pretty cleanly. Now, this is where you have to use your judgment as a trader to see where the lines go. I’m going to move this up here real quick here too, right there, and I noticed that there are more hits. Remember what we talked about here.

The majority of touch rule, this applies to support and resistance line as well as to trendlines. So what I mean by that is that if we draw this line right here, we have a two touch rule. We have one touch here, two touch there, and then three touches there. Now if I move this over here, I notice that the trendline is more touches to the trendline. There are more touches there and what I do is I examine that first and I bring this in here and I notice that there are more touches at that level.

Let me zoom in real quick here and uncompressed this chart so you can see what I’m talking about. You’ll notice that there are several ways to draw your support and resistance and trendlines right here. You can do it like that, or you can do it the other way. It really, really does not matter which way you do it.

Do not get caught in these debates and these arguments with people about which way is better to draw your lines. Whichever method that you guys choose; you just stick with that method. So now if I use this method right here, to draw my trendlines, you’ll notice that there’s one, two, three, and then four touches down here.

And then there is about, you can count right here, see how price shot up and hit there, 1 touch there, 2, 3, 4. This whole area here, I would just count as 5 or you can count 5, 6. And then somewhere around here, it’s close enough at 7 and then 8 up here. You can count it like that or you can count the other way like this.

There is no right or wrong in this, it’s just whatever’s a higher probability. So if I was drawing it like that, I would probably go with that. I let this poke through, some of it’s touching, poking through. I’ll explain to you why in a minute, why that is so and why it did not do that in the past.

Now we do it like that, then there’s a touch right there, it pierces right there. That’s not so much a touch because it went through so much, but notice how price came down to here, it shot back up and then there was a like a sticking point right there.

So I’m going to count that as a touch right here. Two more touches, three and then as price shot through and then it bounced back and retest it like there. So as of now, I will probably go with this. And this is actually the one I did go with because when touched here, that’s where I bought some more Bitcoin when it hit here and it bounced up, I took it long.

So notice how I just draw this trendline. Now when I go to all the support and resistance lines, it’s the exact same way. I’m relying on the most touches. So I’m going to rewind this real quick here. It was somewhere around here today and as the price was going up, me and the guys on trading view…

I’m expanding this a little bit bigger so you guys can see as the price was going up, I had already drawn this line here from a while back. Notice how there’s a touch here, attached to this group here. And then the majority of touch here. So I got 1, 2, 3 touches there. Now let’s just say that you were to draw this resistance line above here.

Now the reason why this is referred to as a resistance line is that the current price is right here somewhere, below it. No, I mean, at the time that I was drawing these lines, the price was down here somewhere. So I drew a resistance line here because the price was right here at the time that I drew it, and then I drew the support lines down here.

What I normally recommend you do is you draw three support lines below and three resistance lines above it and that’s a start. That’s a start. It doesn’t mean that it’s correct. It doesn’t mean that it’s right. It does not mean that it’s wrong. It’s just a guideline of where you should start because what happens is if you don’t have some kind of guidelines then you’re gonna draw too many lines or you’re not going to draw enough lines. And from my experience, three lines is an adequate start. So you can draw more from there, but you know, I would not draw less on that.

So when I looked at this, I was looking for price to break through this or if the price fell, it would fall down to somewhere around here. Now this line is based on a daily chart. So what I’m gonna do is I’m going to make sure that I don’t confuse that with my intraday trading or my day trading or my short-term trading then I go ahead and just grey it out like that.

So I know that when I look at it on a one hour or 15-minute chart or a 30-minute chart, I know that, “Hey, you know what that line is from the daily charts”. And like I said before, you can darken it and you can thicken the line just like I did with this great trendline. It’s up to you. I mean just pick whichever method that works with you and just stick with it.

So the price is here and I’m going to draw up here. Now, what if you were to draw your resistance line at the top of this week here instead of where I had it earlier. There’s absolutely nothing wrong with that. If somebody says that that’s incorrect, why they would say it’s incorrect, your estimate is as good as mine or anybody else, whether you’re a beginner or a professional.

I mean if you draw there and I draw here, the price difference is not that significant. I mean $773 to $778, for an instrument that is trading at $780, $12, $5 difference in support and resistance lines where you and I draw is not going to make that significant of a difference in your trading. So if you draw it here and I draw here, don’t freak out. I just used the majority touch rule. The reason why is this.

Let me cover this, the traditional versus the modern support and resistance since we’re saying here. In the old days before electronic trading, before computerized trading, people traded off of a piece of paper in a phone.

So you would have to call into your broker and they would charge you like 300 and some dollars. I remember one of my mentors, he said that when he was trading back in the 70s, he said that every time he made a trade it would cost like $375 or something like that in commission.

When you’re paying 300 and something dollars for a trade, you want to be as accurate as possible and so back then, when they drew their support and resistance lines, they would draw at the tops like this.

Nowadays with computerized trading, you cannot just use one point of reference because we have lots of algorithmic trading. There are a lot of people who get in and out of the markets like before there was computerized trading, the 780 here would probably be considered an ideal resistance level or this right here would be an ideal resistance level at the top of this week right here. The 775 right here.

What happens is nowadays, because the cost of trading is so dirt cheap now that it costs less than 5 to $10 per 1000 shares or one standard lot in the four or a thousand shares in the stock market. The trading is so cheap now, even in Bitcoin that there are a lot of people that say, “You know what, I’m not gonna wait until price runs all the way up to here to take profit. I’m going to go ahead and take profits a few dollars or a few cents in advance.”

And there are so many traders out there now that’s trading using computers that there’s no set price for the resistance level to be anymore. So what happens is it looks something like this instead of one line. The way that I notice it from trading stocks and Forex and futures, the way that I notice is it looks like this now. There is a resistance zone of where price is going to be.

So whenever you use a support or resistance and you wonder why you draw your resistance line and if you get stopped out or you enter too early or you get out too early or too late or for whatever reason, your orders don’t get filled and you’re like, “Hey, my support and resistance lines are not working accurately.”

It’s not so much that it is not working accurately. You want to start looking at it as a zone, an area of resistance and an area of support and not just a single line like this because there’s so much computerized trading now that there’s a lot of people that get out before the price ever reaches that resistance level again. And I hope that you guys understand that. And it’s the same way when we talk about the opposite direction.

When we talk about drawing support lines, you can draw this support line right here. A price is right here. You can draw the support line right there. You can draw it down here, right there. You can draw it down here; you can draw down here or down here. So it’s up to you to see which line is significant.

For me personally, when I take a look at this, what I see is that the price here is somewhere right in here. Notice how the top of this, here it comes up, it gets retested right there into that support level, in that support zone right here. Then it comes up in a retest right here multiple times.

It comes in, it tries to break through a curtain. It comes up, it tries to break through again. It couldn’t. And notice how each time it tries it cannot set a lower low like right here. It could not set a low that was as low as this one.

This is what we call a higher low and then it comes up and tries to smash through this support level again and it could not and it tries again for the fourth time, it still could not. And after that, it shoots up and it shoots up. And those lows keep getting higher and higher. This has a higher low than this one. This one’s a higher low than this area here. This one’s higher than this one. This one’s higher than this one and this one’s higher than this one. And so on.

That’s what we call reading price action. I don’t need any indicator to tell me that we are in an uptrend. I need no oscillator or no fancy moving average that tells me that we’re in an uptrend. The trendline and the fact that the sellers could not push the price back down in lower tell me that we are in an uptrend.

So even with all of these lines here I can still tell that it’s an uptrend base on the price action itself and nothing more. And I can tell that way in advance before any fancy indicator or any fancy moving average will tell me or any oscillator will tell me. So that’s what I mean when you guys hear me talk about trading price action, it’s just looking at the price and being able to determine the overall health of the market based on that.

So I hope that that makes some kind of sense on how to draw your support and resistance lines. So let’s just say that we are here right now at 812, then what happens is this. We look here to see what is the next available level and the next one is probably this one right here. This is 825, 824, somewhere around there. And I want to show you guys something right here real quick so you guys understand why I said this the way that I did.

In this particular example right here, in the Bitcoin Talks on Tradingview, Rotox here says, “Asian Prepper, that would be me, any expected retracement before we get to 800? Trying not to panic buy here”. And I tell them that, “There will be a slight pullback at 800, but not as big as the one that at 775 though, $800 a whole even round numbers. So it’s psychologically important.”

So let me explain to you guys why I answered Rotox the way that I did. When the price was already here. I said that 775 right here at this level is an important level and so is this $800. Let me put that there. Now, 800 is an important level because of one reason.

Now I know this says 798 but just so that I don’t have to mess with it throughout this video guys, just imagined that was $800. So what happened was, I said that there’s going to be a bump right here in the road when price runs up to here, but it’s not gonna be as big as a bump in the road as this.

Now how did I know that I’m not a psychic or nothing? What I do is I just let the market tell me, I don’t try to be a psychic. I’m not Nostradamus, I’m not the Mayans that can predict what’s going to happen in 2012 or nothing like that.

All I know is I look at the charts and the charts tell me that it hit here and it fell. It hit here and it fell. It came up here and it touched there and it fell again. So, and then I look at 800 and it came up here and it only fell once. So that lets me know that for some reason… I don’t know the reason why, if you ask me, “Hey Tai, why did price fall at these levels?”

I don’t know why and I really don’t care to know why because it’s not going to change anything in my trading whatsoever. The reason could be that the Chinese ban the third party payment processors, it could be that Obama decided, he comes out with new health policy and it’s free for everyone. I don’t know what the reason is. I really don’t care. It really does not matter to me why the price moved the way it did because I cannot predict, I cannot do anything about that. I cannot do anything about what the market does, all I can do is respond to the market.

If the market goes down from here, what do I do? If the market shoots up from me and right through this level, what do I do? That’s the only thing that I can control is myself in the market. I cannot control what the market does when governments do to Bitcoin or any of that. So don’t worry about why it’s happening to me is just a waste of time.

Because of that, I said to Rotox that I expect an obstacle right here, but it’s not going to be as big as an obstacle here simply because I look to the left here and I see that price fell from this level three times. They only fell from 800 once. So this level is a thicker wall of resistance for the price to smash through than this up here at 800.

Now let’s take a look at it, we fast forward and sure enough, price right here and when you look at this on an hourly chart, you won’t see anything, you won’t see that there is a stumble right here. From an hourly chart, it looks like the prices zip right through it. Now I was sitting here watching this life in the markets and I can tell you that I did not just zip right through. It met heavy resistance there.

Let’s zoom in to like a 15-minute chart price does not just one run right past it. Notice how price came up here, stopped on a dime right here, stopped dead in its tracks, fell down, tried to go through, fell down, tried to go through, fell down, finally busted through. And then when it did, look how it got up to 800. Somewhere around here and busted right through.

Why do we know that? We know that because, in history, it shows that 800 was not a strong resistance level as 775. So because of that, so as you can see here that, when price broke through 800, it did not have a big resistance like it did over here at 775 simply because if you look at the past, you’ll see that there are more hits or there are more touches here at 775 than there were up here at $800. So I hope that makes some sense to you guys when we talk about the majority touch and the traditional versus the modern.

Now I want to talk about the last thing here. The significant versus the insignificant support and resistance. So which ones do we pay attention to when we are looking at this? Because when I first started trading, what happened was everything seemed like it was a support and resistance level to me. And let me show you guys what I’m talking about here.

Let me go back to the one-hour just so that we have a bigger picture view here. Again, come down here and hit reset and it’ll bring it back. When I first started, this is what my support and resistance lines look like because I did not understand a particular concept that I’m going to share with you in this.

When I first started, I would put support and resistance lines everywhere. I put it up here at the top and then I put it right here, next to it right there, and then I put more down here, right there, and then I put more right there. And then I would put some down here below this. And then I would put some more down here at the bottoms of those tails. And then I would put some more at the top of this week right here.

Now you can quickly see that if I keep going the way that I go, there will be a thousand support and resistance lines here, it’s going to be all over the chart and you’re not going to know which one and I did not know which ones to rely on and which one meant anything.

So here’s what I’m going to do to help you guys break that down into simpler ways to know where to draw the support and resistance lines because it seems to be everywhere. We want to draw the support and resistance line where there is a reversal or a significant change in direction.

For example, 775 here is a very significant number because price fell down here and it shot up and it fell through here and then it shot up again and stopped dead in its tracks right there and then fell down to here. And the buyers took it back up and bounced all the way back up to here only to have the seller pushed them back down all the way down to here.

I remember when we zoomed into the 15-minute timeframe, there was a huge battle right here before it finally busted through and now it’s testing the 800 and the 825 level.

If we go back to this over here. To another conference I had right here with Ronaldo. He said, “Hey, Asian Prepper, does your plan involve getting in pass 800.” And I told him, “I haven’t looked into getting in after 800 because the risk is higher and the reward has been diminished. Like I always say, I like to end near the bottom of a trend channel as close to an ideal exit as possible to reduce risk and increment, increase the size of the reward. I got it at 650 yesterday when price fell to my predetermined ideal entry.”

Let me give you guys an example of what I’m talking about. When price fell down to here, this was when I saw that this was price was bouncing up this trendline, if you guys think about this. A trendline is nothing more than a support and resistance line.

If you really think about it, a trendline is nothing more than taking a horizontal line and then moving it so that it’s at an angle. That’s all it is. That’s all a trendline is, so that’s the reason why you always hear me talk about support and resistance and trendlines at the same time because they are really the same thing.

The only difference between them is that one is at a slight angle and the other one is flat. That’s the only difference, but the idea is the same. If there was some way that I can rotate this chart and this way, then this will just seem like a support level down here in a resistance level up here. So that’s what I did.

I drew this line here and I saw it bounced up. And I said, “Hey if it ever touches this line, I’m buying some.” Because I needed some extra Bitcoins to get some copycat coins. So I said, “Hey, the next ideal buy entry for me to get these Bitcoins will be if the price hits this level.”

So when the price was over here, let me show you this. When the price charts looked like that, I was already looking at buying. And then when it hit boom right here on this green candle immediately somewhere down here from Coinbase. I did not care if this thing went through or not.

My goal was to buy here and if price broke below 660, below this area right here, I was going to get out. So it didn’t matter. So in other words, my point to you guys is that do not rush into a trade.

I have another example here that I wanted to share with you guys right here, “I would not advise anyone to short during this rally”. No, it’s not this one right here. It’s another one that I had. There was another one where I talk about what you don’t chase after price when you see price fall like this, you don’t run out there and chase after it like that.

You don’t want to chase after this and try to go short because your stop is up here. So if you go short down here, you just gave up that much risk. You gave up that much profit and that profit has now become risk so you never chase after price.

Matter of fact, anytime you see one of these short candles like this and all of a sudden, boom, you see a long candle, that’s a good sign that you should not jump in. That’s a very, very good sign when you see one of these long impulse candles that you should not be jumping in. So when the price hit here I bought, now, when, when the price comes up to here like it did today.

I saw this and notice this long, long wick right here. That means that price skyrocketed all the way to 825 and then boom, the sellers just pushed it all the way back down and the distance between the top of that to the top of this, normally you would call that it’s a shooting star pattern, like right here.

This is more of a shooting star where it has a long comet tail and the head of the comet is here. So anytime you see that that’s a very good sign that there’s a trend reversal. This is not a clean shooting star and neither is this one and neither is this one, but it is shooting star like and this one is definitely not a shooting star, but it’s a shooting star like in the pattern.

So when I saw that I said there’s going to be a very good chance that price when it shoots up to here, it’s going to bounce right back and sure enough it did. It shot up to here and boom bounced right back. And now it’s back and forth.

When you’re in a situation like this, the question that you have to ask is… Like I always say, the price can go up, it can go down or it can go sideways. Right now it’s going sideways. So if we want to go with the trend, the long-term trend is up.

The short-term trend or the intermediate-term trend there. This right here, this whole channel right here is the intermediate-term and it’s up in the short-term, right here is also up. If we just draw a trendline from here to right there…Remember guys a trendline is nothing more than a support and resistance line at an angle.

And if you draw it to where it touches the bottom of that tail in the bottom of this tail, it’s fine. Don’t freak out and lose sleep over that. So we’re looking here and we noticed that if we go here and we touch that, there’s a trend right here. And to me, that’s not very accurate. So there’s not really like a defined channel here in the short-term like there is in this intermediate-term channel.

So what I would do is if I was looking to go long, I would wait for it to come down here and bounce off of this area here, meaning that I would have to see it come down to here. And whenever we get ready to go into a short-term that we need to zoom into a 15 minute.

Why? Because smaller timeframe, the more accurate that you have to be in your lines. So in this particular case, let’s see, what happens is if we move it in right there. Now that’s more realistic to where the trendline is at. It’s hitting here, it’s hitting here and it’s hitting here.

So I’m going to stick with this as my very, very short-term trendline. So there are several places that I could go long, I could go long when it bounces off of that, I can go along with it bounces off of that. So right now price’s at 805. It’s not unrealistic for me to go if I wanted to go long somewhere around 800 or a crack below 800 and then put my stuff either below this or below this at most. Let’s take a look at what happens if we decide to go long there.

If we go long right here at 800 and put our stop here. If you want to go with a conservative stop… Let’s go here. Now, keep in mind that the next available level is up here, right there. Let’s go ahead and put this right here, right there.

So that’s the first available, let’s just say, a resistance level that we have right there at 848 which is about 850. So if we were to take it long right here, right there, we have to figure out how much reward is there, how much reward is available if we are right.

So if we go up to here, we can clearly see that there is at least a 3:1, so that means that 3 of these red boxes can fit into this long green box. Now, for sure, if price broke below this down here, below the tail of that, then you need to get out.

There’s no reason to stay in longer than that because if the price falls below a load of this right here, you might as well admit that you’re wrong and if it goes below this, you’re definitely wrong. This is the case you might ask yourself, “Is it worth it for me to risk this much to just gain two units of reward for one unit of risk?”

If the answer is not really or you expect it to go higher, then you can get into the trade or you can reduce your position size. Instead of trading a big size, you can reduce it smaller so it fits within your risk tolerance and then you can take this trade long.

If you decide to take this trade short, for example, I don’t like that, I don’t like it at all because here’s the reason why, because if you take it long from here, the chances are if price goes through this, then it can go up to a thousand or higher or go back up to 1240 because we are in a current uptrend.

If you decide that you want to be a contrarian and let’s just say that your short here right now at the current price around 805, your stop loss would be up here above the high of this wick right here. And now, let’s take a look at your potential reward. You’re a potential reward is going to be somewhere right there because that’s where the price stopped at last time.

And I’m going to give you the benefit of the doubt that the price will fall lower. Now, notice how it may appear that the price, it may appear to you that the price can come all the way down into this channel.

But I would say that it has a higher chance of stopping here at this short-term channel right here because of look, the price hit here, bounced up, hit here, bounced up, hit here, bounced up, hit here, bounced up, hit here, bounced up, hit here, bounced up.

So now the chance of it coming here and just breaking through are much slimmer, so when you’re going with the twin, which is the long-term daily trend is up, the intermediate-term hourly trend is up and now the short-term 15-minute trend is up. It’s more ideal to take it long.

There’s more reward potential for a longer than there is for a short and even if you take a short and you say, “Hey Tai, I expect that short to come down to the bottom of this trend.” Okay, let’s just say that you are correct on that, and so let’s calculate the risk and reward on that and see if it makes sense to counter-trend this.

Now the way that you calculate this is very simple.  You calculate this based on the historical facts, not on your opinions, but the historical facts. Notice how when it goes up, it tends to go up at that angle like that.

I’m going to remove that extension so it shorter and I’m going to thicken this line and I’m just going to make it…Let’s just make it purple or the line here, let’s make it purple just so it’s easy to represent how passionate I am about trading Bitcoin here.

Notice how when it goes up, it goes up at like 85, 90, almost 80-degree angle up. But notice that when it goes down, notice that the angle that it takes to go down, boom, it takes like a 45-degree angle.

It takes like a 45-degree angle that when it goes up? It goes up at an 80-degree angle. But when it goes down, it goes down like a 45-degree angle from there. So if you were right, right here, I would say that by the time the price hits the other side, it would be hitting it at a 45-degree angle.

. I would say that the true estimate of this would be like somewhere right there. So really the height, the potential reward that you have is not as long as you thought it was. It’s somewhere like right there. So that’s how much risk that you take and this is how much potential reward that you have in reality if we calculated based on the fact that it travels at a 45-degree angle.

Now if it travels as it does right here, notice how long it took to go from here to here. Notice how long it took to go from here to there. Notice how long it took to go from the height of this to here.

So if you really calculate that, if you factor in that aspect and instead of a 45-degree angle downward. Now you’re factoring in a, maybe a 30, 35-degree angle. And I would say that somewhere right here, so it actually reduces your potential reward even more to that.

That’s the reason why I don’t recommend going against the overall trend, especially when we have a major uptrend, intermediate uptrend, and short-term uptrend.

And I hope that this video helps you guys in some way understand better the support and resistance. I hope that I was able to provide some type of help with you guys on the correct entries for a long in the correct entries for short, which I don’t recommend if there’s more way more potential for a long trade right now than there is for a short trade.

And remember guys. No matter how fast the price moves, there’s always more opportunities in the market. If you miss this whole move right here, it does not matter, you just pull back and you don’t look for a price. In other words, you don’t try to figure out when to get in or out when the candle looks like this. Right now when it’s going sideways, that’s when you determine what’s your ideal entry and what’s your ideal exit.

And I hope that that helps you guys in some way. And let me see to make sure that I covered everything. So the last slide here guys, please leave some feedback, some questions, and some comments. If you want to leave some coffee and beer donations to the Bitcoin address below, that would be awesome.

If you can just, you know, leave me a question or leave me some comments or your feedback to see if this video is helping you out and the format in which I’m doing it is helping you out or not. If it’s not a light to change it or stop doing it. If I don’t know any feedback, then it’s hard for me to tell if it’s benefiting anyone.If you like it, please share it like a Fabu with on Reddit and many of you guys introduced it to my currency analysis videos.

Remember, sharing is caring. Send me some screenshots of your success. If you guys do well with your trades and you’re able to use some of the material that I share with you and you’re able to have some type of success. It’s not always about making money. If it prevented you from making a big loss, please let me know as well because I’m always happy to share in the success of other people, not just my own.

And one thing that I want to share with you guys is this. One of the questions that I got today when I was on tradingview.com in the chat room was that one of the guys asked me why I was making these videos.

Let’s me explain to you guys why I’m making these videos so that you’ll know. You know, for many, for many years, some of you guys know that I was locked up in prison for half my life and during that time I saw a lot of violence and I saw a lot of things done to the prisoner of war during the US war on drugs and there was nothing I could do.

There were times when I was stuck in the hole and I would watch the prisoners next door to me, get hosed down with a water hose, get beat up by the police. There’s a bunch of nasty stuff I saw, sometimes I saw other prisoners getting hurt, getting sexually assaulted, getting stabbed, getting beat up. And there are times when I see these things and there was nothing I can do.

Not because I was a coward or nothing, but when you’re in the hole or you’re in a prison cell and the guy next to you is acting crazy because he did not get his proper medication. Or they forgot to give him his medication and I did not realize it and I think he’s trying to act up and we’d go in there and mess him up. If you open your mouth and say anything, then you become the next victim in line.

So for many years, I would watch different things happen to people and I could not do anything about it. So when I came out and I got released and I always made a commitment to myself that if there’s a way that I can make a change and do it without getting hurt or without hurting other people, that I would definitely take action towards it.

There’s a lot of people that I know that they bitch and they whine and they complain about how the government’s treating them bad, how fiat currency is not doing well and a bunch of other nonsense government conspiracies and things like that.

However, when there’s a revolutionary technology such as Bitcoin that comes out, they don’t do anything about it. They don’t invest in it. They don’t trade it, they don’t share it with other people. They don’t take the time to research it. They call it a bubble, they call it a Ponzi scheme, they call it a scam and things like that.

And so if I was a programmer, if I was a programmer or a developer and my brain was good in math and science or computer science, I would help the core development team to shape Bitcoin, to revolutionize the world. However, I was not born on this earth to have that kind of mental capacity to do programming, you know, there’s other things I’m very genetically gifted for, but that’s not one of them.

So by doing these videos, I share my experience with other traders such as yourself. What it allows me to do is actually be a real freedom fighter, not someone that is just on the sidelines screaming and yelling and protesting and holding a picket sign because to me there’s a special type of people for that.

I like to do things that actually make a difference. Like when I talk about helping people find freedom, I’m talking about things that actually will actually change and give you freedom and there’s nothing that I know of that can give people freedom faster than having extra money in their pocket.

Now, I don’t care what anybody says. I’ve been poor, dirt poor for most of my life and it’s only been recently that I’ve been able to make money in my life and there’s so much more freedom in my life when I have money versus then when I don’t have money.

If I was broke, flat broke and poor, there will be no way for me to have time to make these videos and share with you guys. So when I say become a real freedom fighter, take a moment out of your time. I invite you to take a moment or your time and share these videos with other people or just spread the word about Bitcoin instead of letting people get duped and Gail, properly uneducated by the media, by Bloomberg or CNBC or the Wall Street Journal.

You know, none of those guys own a Bitcoin or sell or trade a Bitcoin. Those guys have no clue whatsoever about Bitcoin. Look at the guy that spent 12 days on Bitcoin on Bloomberg and the guy was so ignorant, he flashed his private key in public and got rob on the middle of a TV set. So we don’t need people like that. We need more people to educate others.

And making these simple videos is my way of contributing to the Bitcoin community and spreading the word on Bitcoin. So that’s enough of me personally I hope that this video has been a valuable informational piece for you guys and it helps you tremendously with your Bitcoin trading.

And I’ll look forward to seeing you guys in the next currency analysis number five. Until then, take care and remember don’t rush into a trade, plan ahead of time. Don’t chase trades. Trading is like fishing, throw your bait out there, wait for the price to come to you and I’ll see you in the next episode.

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