1.3 Picking the Correct Key Level

Main Ideas / Lessons

• Trade key levels on the higher time frames first (“smart money” approach):

  • Major institutions typically position on daily, weekly, monthly, quarterly, yearly charts (not 1H/15m/5m).
  • To align with where trends originate, focus primarily on daily charts and above.

• Daily + higher time frame key levels provide the best “direction, context, and targets”:

  • Using daily+ levels helps you understand:
    1. Direction/context (“why price is moving to that area”).
    2. Where price legs likely originate from (the source of moves).
  • The speaker’s “bread and butter” model is explicitly: daily + key levels for consistent reactions.

• Use a top-down, directional process (not random level selection):

  • Start from the highest relevant time frame, then drill down for entries.
  • Example structure described:
    • If bearish: look for monthly/weekly/daily key levels that align with the bearish target.
    • After identifying the higher-timeframe level, find the lower-timeframe wick/rejection/entry behavior.

• Key levels should be “sponsored” by higher time frames:

  • A lower-timeframe level (4H/1H) is treated as high probability only if it was created off a meaningful higher-timeframe event/level.
  • Contrast:
    • High probability: a 4H order block/4H breaker/gap created from a weekly/daily level, often with stop-run/sweep behavior.
    • Low probability: “random” 4H key levels in the middle of nowhere (pattern trading without context leads to inconsistent results).

• Match key level selection to the current market phase:

  • The market cycles through: ranges → manipulations → expansions → ranges → manipulations → expansions.
  • How this affects what levels you look for:
    • During higher-timeframe range/manipulation context: require a daily or higher key level to “sponsor” the expansion.
    • During expansionary phase: you may seek lower time frame levels (4H/1H) for continuation entries, but still in context of the higher-timeframe “sponsoring” level.
    • After targets are met / rejection occurs: wait for a new level (don’t keep forcing the old one).
    • When time/candle cycles complete and price re-enters a prior area: a new range may form, bringing new manipulation/levels.

• Consistency comes from logic, not pattern/chasing fair value gaps/order blocks blindly:

  • “Just because there’s a fair value gap or order block doesn’t mean it will hold.”
  • Patterns are useful only after identifying the underlying logic (top-down context + phase of price).

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Methodology / Step-by-Step Approach (as Described)

• Step 1: Set the bias using higher time frames

  • Determine likely direction (e.g., bearish or bullish) from monthly/weekly/daily context.

• Step 2: Identify the relevant higher-timeframe “key level” (the sponsor)

  • Look for weekly/daily/monthly key levels that correspond to expected targets.
  • Common higher-timeframe structures mentioned:
    • Gaps
    • Order blocks
    • Breakers
    • “Stop runs” / purging highs/lows inside those levels

• Step 3: Plan the entry by mapping expected behavior as price drills down

  • After setting bias + key level, drop to lower time frames to find confirmation, such as:
    • Wick formation toward the direction
    • Rejections off the level
    • Expansions following the rejection
  • Workflow described:
    • Monthly (check first) → if not present, go to Weekly → if needed, go to Daily.
    • Use hourly (intraweek entry) after the weekly/daily level is identified.

• Step 4: Only accept lower-timeframe levels if they have confluence/context

  • A lower-timeframe entry level (e.g., 4H/1H order block, breaker, gap) must be:
    • Created from the higher-timeframe swing point/level, and
    • Linked to a stop-run/sweep behavior within that higher-timeframe level.
  • Avoid lower-timeframe levels that look meaningful but have no clear higher-timeframe confluence.

• Step 5: Confirm with the current phase of price

  • Ask: Are we ranging, manipulating, or expanding?
    • Still in manipulation/range context: expect continuation into expansion only if a daily+ level sponsors it.
    • If expansion is already underway: seek 4H/1H continuation levels created by the higher-timeframe sponsor.
    • If a target is met / rejection occurs: don’t force trades—wait for a new setup/level after the next range/manipulation phase begins.

• Step 6: Apply the “weekly candle → daily candles” concept

  • After reducing a weekly candle into daily candles, the “most likely” trading days within that window are typically Wednesday and Thursday.
  • Main point: avoid trading the range improperly.

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Speakers / Sources Featured

• Speaker: Unidentified individual (the video author/instructor; no name provided in the subtitles).