Original subtitles

0 Hello, guys, and welcome to the first lecture in Section 3. 1

In this lecture, I will introduce you to the top-down approach, which I use in my trading to get 2

a more comprehensive view of a security's price action by narrowing down from larger timeframes to 3

smaller timeframes. 4

This approach allows me to establish the key support and resistance levels in the past, which provide 5

me an edge over those who are only looking at single timeframes for trade entries and exits. By using 6

the top-down analysis in this strategy, I am anticipating that major support or resistance levels from 7

the past will act as price points, where security will either enter the sideways or consolidation phase 8

before the price continues advancing in the direction of the previous trend or it reverses. 9

Therefore, these levels present a perfect trading opportunity in near future once 10

the consolidation phase ends. Later on, 11

in this course, I will also teach you how these support and resistance levels, when combined with 12

volumes and candlestick patterns, present timely trade entries and exits. 13

In the examples discussed later in this section, you will learn how support from the past becomes resistance 14

as we move from left to right on your trading chart. Before we proceed, 15

there are few key guidelines which I want you to understand here 16

while labeling the support and resistance levels on any freely traded market. 1. Draw the most obvious support 17

and resistance levels. 18

That is, if it is not obvious support and resistance, it is not very significant. 19

So, guys, these major support and resistance levels are clearly visible and I do not want you to stress 20

too much while plotting these levels. 2. Build up from larger timeframes and look for opportunities on 21

smaller timeframes. 22

Therefore, I recommend using monthly and weekly charts for establishing major support and resistance 23

levels and then use daily and f4-hour charts for trading opportunities. 24

As we discussed in the last lecture, use weekly charts when there is very small amount of past price 25

data available on monthly charts. 3. Larger the consolidation phase, the more dramatic the resulting 26

price action will be. To explain this guideline, 27

the Law of Cause and Effect by Richard Wyckoff is a perfect example. 28

A security will reflect the strength of an extended consolidation phase in the resulting price action. 29

Therefore, it is worthwhile studying these extended sideways price movements to capture the larger 30

move, which occurs once a consolidation phase ends. Plot support and assistance zones 31

instead of using single lines while plotting key support and resistance areas. 32

You need to understand that price is very dynamic due to momentum and volatility factors. 33

Due to this, retail traders often see price spike through their support and resistance lines before 34

it returns back to the actual level. 35

This price spiking is also associated to professional traders understanding that most retail traders 36

will place their stop losses below or above these levels. 37

Therefore, using the top-down analysis as we approach daily and 4-hour time frames, we will plot 38

zones instead of single lines using the levels we have plotted on the larger timeframes, such as weekly 39

or monthly. 40

If this is completely new to you, do not worry. 41

Once we start going through examples starting from the next lecture, you will learn how to use this effectively 42

in your trading. 43

Traders, please go through these guidelines once again and I will see you in the next lecture.