Shownotes
Understanding support and resistance levels is critical for profitable crypto trading. Even if you don't trade crypto it can very beneficial to understand this trading fundamental to determine important price areas where you can manage your portfolio. So let's learn about trend lines, peaks and valleys, daily/weekly/monthly levels, moving averages and Fibonacci levels!
one note of errata:
the fourth fib level is 0.786 and is square root of the golden ratio (0.618). I said it incorrectly.
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Music Credits
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Transcripts
No one on this podcast is a financial advisor, and all information presented on this podcast
Speaker:is for informational purposes only.
Speaker:Now that we have the legal stuff out of the way, let's jump on in.
Speaker:Welcome to the Generational Wealth of Cryptocurrency podcast.
Speaker:I'm your host, McIntosh.
Speaker:Today we're going to be talking about support and resistance levels in the crypto markets.
Speaker:Before we jump into all of that, I do actually want to read a tweet by someone that I saw
Speaker:this week.
Speaker:His name is Dan McCardell, and this came out on May 13th, a couple days ago.
Speaker:And he was talking about referencing, of course, the Terra Luna ecosystem crash, which at this
Speaker:point is fate accompli, and I would caution anyone at this point.
Speaker:There are people who recently, they kind of bought at the very, very bottom, and it kind
Speaker:of pumped a little bit, and they've made some kind of really dramatic gains.
Speaker:I certainly would not encourage anyone to be trading that or buying that, and if you
Speaker:do choose so, please be very careful.
Speaker:Don't spend money you can afford to lose, and certainly use some very aggressive stop
Speaker:loss levels.
Speaker:But that being said, to give this perspective, and I already talked about Terra Luna and
Speaker:essentially a, well, I came out with a, let's see, I came out with a episode Thursday morning,
Speaker:I believe, I hope, I don't remember, it all kind of runs together.
Speaker:But anyways, I think I was pretty accurate in what I put out.
Speaker:It's definitely been a crash.
Speaker:I would call it a black swan, I think that's how it'll go down.
Speaker:And it is continuing to somewhat change the way that I think about crypto in general.
Speaker:And I discussed some of that earlier this week.
Speaker:But I did want to give some perspective now that things have maybe settled down a little
Speaker:bit.
Speaker:Dan McArdle tweeted this in like six different tweets.
Speaker:Seven, actually, maybe, no, eight.
Speaker:It's one of the reasons I'm not really a big fan of Twitter.
Speaker:You can't fit that much into a tweet and then you end up, it turns into this big long thing.
Speaker:But to each their own.
Speaker:All right.
Speaker:Number one.
Speaker:In 2011, this was a long time ago, 11 years ago, in the infancy of Bitcoin.
Speaker:And in fact, I believe Gox, Mt. Gox was the only centralized exchange.
Speaker:I think it was the only way to trade Bitcoin through a centralized server.
Speaker:Now, that may not be correct, but I do believe that's true.
Speaker:In 2011, when Mt. Gox was hacked and Bitcoin market dumped to a penny, that was the entire
Speaker:ecosystem.
Speaker:That was it.
Speaker:There wasn't anything else.
Speaker:In 2012, when Pirate 40 blew up, and I don't actually know what this is referred to, I
Speaker:was not involved at this point.
Speaker:And I just don't remember, I've never read about this or anything to my knowledge.
Speaker:That swung the market 50% in a few days, and you're talking about a market very much in
Speaker:its infancy still.
Speaker:In April of 2013, Bitcoin fell from $266 to $50 in a day.
Speaker:A lot of the mainstream publications had a lot to say about that.
Speaker:Then 2014, in February, Mt. Gox declared bankruptcy, and almost everyone outside of Bitcoin, and
Speaker:I think this is important actually, and a large number of people within, equated it
Speaker:with the protocol itself, in other words, Bitcoin, and wrote off the entire thing, leading
Speaker:to a minus 87% bear market.
Speaker:That's just Bitcoin, if the alts that were around actually were worse off, as they always
Speaker:are.
Speaker:In 2016, ETH suffered the Dow hack, and that wrecked a bull market.
Speaker:After the 2017 bull market, we had a nasty bear phase, and I certainly was involved in
Speaker:this.
Speaker:That saw Bitcoin down over 80% for months.
Speaker:ETH was down 90-plus percent.
Speaker:My assets that I put a lot of stock into, a lot of time, I don't literally mean stock.
Speaker:I mean a lot of work, and a lot of effort, and a lot of money, and I'd watched go up,
Speaker:and I watched them go back down a lot.
Speaker:A lot of people wrote off the ecosystem, and again, a lot of altcoins didn't make it.
Speaker:In 2020, you had a COVID liquidity crunch, Bitcoin fell 50% in a day, with a lot of other
Speaker:assets faring worse.
Speaker:Even with all of that, and Terra Luna now, we're up 581,000% over the decade, and he
Speaker:gives a little chart.
Speaker:Bitcoin in traditional assets, return on investment versus US dollar, one year, Bitcoin minus
Speaker:41%, gold minus 1%, S&P 500 minus 3%, well that sounds pretty good for gold, and for
Speaker:the S&P.
Speaker:Maybe Peter Schiff was right.
Speaker:Two years, Bitcoin up 205%, gold up 5%, S&P up 42%.
Speaker:Now the S&P people are feeling pretty good at this point, unless you've only been in
Speaker:the market for a year, and the gold people maybe aren't feeling so good, because they're
Speaker:only up 5%.
Speaker:Three years, 263% for Bitcoin, 40% for gold, 42% for the S&P.
Speaker:S&P's doing pretty good, by conventional wisdom, of course Bitcoin is doing better.
Speaker:Four years, Bitcoin 248%, gold 39%, S&P 48%, and this is where it gets fun.
Speaker:Understand we've only gone through a four-year cycle at this point.
Speaker:Bitcoin after five years, 1,626%, gold 47%, S&P 500, 67%.
Speaker:That's looking pretty good, Bitcoin after six years, 6,316%, gold 42%, S&P 500, 96%.
Speaker:Seven years, Bitcoin 12,260%, gold 48%, S&P 500, 89%.
Speaker:So just going back seven years, Peter Schiff, he's a gold bug, and I have nothing against
Speaker:gold, but it's not holding its value even against the US dollar, which is certainly
Speaker:inflating more than this over seven years, in my opinion, not financial advice.
Speaker:But you know, that's okay.
Speaker:Eight years, 6,417% up for Bitcoin, 40% for gold, 114% for the S&P, but McIntosh, look,
Speaker:it dropped in half, that's terrible.
Speaker:Nine years, 26,196%, 32% for gold, 143% for the S&P.
Speaker:And finally, 10 years ago, Bitcoin up 581,035%, gold up 16%, and the S&P is up 206%, which
Speaker:is good in a traditional market.
Speaker:So we've got one top 10 coin blowing up, representing less than 5% of the total crypto market cap,
Speaker:and people are freaking out.
Speaker:And yes, I still would call it a black swan event.
Speaker:It's not a good thing, it did push the price down even further, but you know, it is what
Speaker:it is.
Speaker:I do feel, as I said last week, I feel sorry for the people who lost a lot of money.
Speaker:I do hope that you learn from this, to be honest, and I hope after you've had time to
Speaker:process and whatnot, that you do learn.
Speaker:Don't put all your money, all your savings or whatever, in one asset.
Speaker:Don't do it.
Speaker:I wouldn't tell you to do that in the stock market, in any market.
Speaker:Diversification, because you never know.
Speaker:Look, I'm involved, my day-to-day job is a company that I'm not going to name, but this
Speaker:is all public information, this is not insider secrets, and our stock had been doing pretty
Speaker:good.
Speaker:A lot of the tech stocks have been going down recently, for six months or so, kind of times
Speaker:with the Bitcoin top.
Speaker:Gee, how that works out.
Speaker:But we were okay.
Speaker:Well in December, our CEO quit without notice, and it freaked the shareholders out, and our
Speaker:price dropped 50% over the next few days.
Speaker:Sounds like a black swan event to me.
Speaker:Now, it is yet to be determined whether the company that I work for is going to be able
Speaker:to recover or not, but this stuff doesn't just happen in the crypto market.
Speaker:Netflix, huge dump just a few weeks ago after earnings.
Speaker:Facebook, down a huge amount over the last, again, because of earnings.
Speaker:Stuff happens.
Speaker:Netflix hopefully will pivot.
Speaker:They're trying to do some things, and there was reasons behind Netflix's drop, so they
Speaker:either recover or they don't.
Speaker:Now, I believe as I expressed last week, we have assets, and as I have consistently expressed,
Speaker:we have assets that are more secure.
Speaker:We have assets that are safer, Bitcoin primarily, Ethereum, Cardano, but do not put all of your
Speaker:assets into one thing.
Speaker:And there are Bitcoin maximalists and probably Cardano and Ether maximalists who are sitting
Speaker:here, probably yelling at the podcast, and that's okay.
Speaker:This is my opinion, and I gave you the reasons for it.
Speaker:You can choose to do it, or you can choose to pile it all into something, and that's
Speaker:okay.
Speaker:I'm telling you what I do in general, and I'm telling you why.
Speaker:So we're going to move on, and we're actually going to talk about today's topic, but I thought
Speaker:that kind of neatly summarized last week in regards to this whole Luna thing.
Speaker:All right, so we're going to talk about support and resistance today.
Speaker:This is going to be a little bit different.
Speaker:A lot of people would equate this topic, support and resistance, in terms of trading, and traders
Speaker:certainly use this.
Speaker:It's one of the first things I believe that a trader should learn.
Speaker:But even if you're not a trader, even if you're just wanting to look at the market in general
Speaker:and try and figure out where are we in the overall scheme of things, and should I listen
Speaker:to this person or that person, and can I back up what they say?
Speaker:I think this information is very useful.
Speaker:Now I use TradingView for my charting, and I pay for it because I use a lot of extra
Speaker:charts and different indicators and things.
Speaker:You can get a free account and do some basic charting on it.
Speaker:So feel free, and of course I don't get anything for this.
Speaker:There's other platforms out there, whatever.
Speaker:I think you will find that a lot of people in crypto do use TradingView, as well as traditional
Speaker:markets for that matter.
Speaker:But you can bring up historical data.
Speaker:You can review this, what we're fixing to talk about, and I think that would be extremely
Speaker:helpful.
Speaker:All right.
Speaker:So what are we talking about?
Speaker:Support and resistance.
Speaker:When I say support and resistance, I'm talking about levels, basically price levels, that
Speaker:you reach with an asset that provide either support, i.e. I'm coming down and I kind of
Speaker:bounce off of it, okay, or I muddle along it for a while and then I go up or maybe even
Speaker:go down at that point.
Speaker:Or resistance.
Speaker:In other words, I've been in a downtrend, now I'm trying to go up, and I've reached a ceiling,
Speaker:so to speak.
Speaker:A lot of people use the floor and ceiling analogy, and it's very apt.
Speaker:The floor provides support, the ceiling provides what?
Speaker:Resistance.
Speaker:If I bounce a ball and it hits the ceiling, what's it going to do?
Speaker:It's going to come back down.
Speaker:But with enough force, if I took a bowling ball and threw it really hard, it might break
Speaker:through that ceiling, right?
Speaker:And it's the same idea, actually.
Speaker:The market has to have a lot of oomph to it, and that's not a technical word, but volume
Speaker:and investor interest to break through those resistance levels.
Speaker:So when we talk about that, that's what we're talking about.
Speaker:I came up with five different ways of looking at support and resistance levels.
Speaker:Now, there are probably more, but these are certainly some of the most common.
Speaker:Arguably, one of them could be folded into some of the others, and I'll mention that
Speaker:in just a minute.
Speaker:And I kind of do these from simplest to most complex.
Speaker:The first one is trend lines.
Speaker:What do I mean by that?
Speaker:You will a lot of times see an asset, whether it's a stock or whatever, in a ascending pattern.
Speaker:So it's moving up.
Speaker:And you basically can draw a line.
Speaker:You can draw a line underneath it, and you see the price will go up and then come down
Speaker:and hit that line and go up and come down and hit that line and go up and come down
Speaker:and hit that line.
Speaker:And it kind of bounces its way up.
Speaker:At the same time, a lot of times you can draw a resistance level on top, a very even resistance
Speaker:level.
Speaker:Now, I'm not saying that the resistance is, say, $30,000 for Bitcoin.
Speaker:It could be angling upward.
Speaker:But when you draw that straight line that's at that angle, it connects all those points.
Speaker:It's an amazing thing to see.
Speaker:I love doing charting.
Speaker:I didn't realize I was going to like it so much.
Speaker:And I don't know why.
Speaker:I've always kind of been good at patterns and whatever.
Speaker:And that's part of it, I guess, because I can pick out – I see these things.
Speaker:I'm like, oh yeah, there it is.
Speaker:And once you figure that out, then you can like, oh, it's going to go up here, and most
Speaker:likely it's going to come back down, and then most likely it's going to bounce back up.
Speaker:And as you get more advanced, you can figure out there are some patterns that are more
Speaker:likely to break one way or the other, right?
Speaker:It's all about probability, okay?
Speaker:So those are trend lines.
Speaker:And you can – they form different patterns.
Speaker:I gave you like an ascending pattern – I'm trying to think of what it's called, to be
Speaker:honest.
Speaker:It's a very simple name, but it's like two parallel lines going up in an uptrending pattern.
Speaker:Ethereum for a long time was in a pattern like this.
Speaker:I mean, literally like months and months.
Speaker:I think it was like a year and a half, if I'm not mistaken.
Speaker:And it just – you could just trace it bouncing up this trend line.
Speaker:It was amazing.
Speaker:And then it broke out of it.
Speaker:All right.
Speaker:The next is peaks and valleys.
Speaker:If you look at a chart on a kind of a higher level, maybe on a weekly or certainly a daily
Speaker:or weekly level, a lot of times you'll see peaks and valleys.
Speaker:You'll see the price will come up to this certain level, and then it'll fall back down.
Speaker:And it'll reach a level at the bottom, and it'll go back up.
Speaker:This is very similar trend lines.
Speaker:Trend lines can go kind of any direction.
Speaker:Peaks and valleys are really more flat.
Speaker:Again, going back to the analogy of Bitcoin, a $30,000 Bitcoin, for example, maybe that's
Speaker:its resistance, and it's bouncing off of that.
Speaker:And then it does some other things, and then two months later, it hits $20,000, and then
Speaker:it bounces back up and goes back up.
Speaker:And three months later, it hits $30,000, and then $20,000, and then $30,000, and maybe
Speaker:it breaks at that time.
Speaker:Those are peaks and valleys, and you can see those generally in the longer time frame.
Speaker:It's an interesting indicator, and you can use that to draw support and resistance.
Speaker:If you see that three even twice, really, it may or may not break it on that third time,
Speaker:but if you have two or three peaks, you could draw a horizontal line there, a trend line,
Speaker:and most likely, that's where it's going to come back up to, and then it's going to get
Speaker:rejected.
Speaker:Another thing that we can use to determine support and resistance are the daily, weekly,
Speaker:and monthly levels.
Speaker:If you zoom out, this kind of goes along with the peaks and valleys, but if you zoom out
Speaker:daily, weekly, or even monthly, you will see places where the daily open and close, weekly
Speaker:open and close, monthly open and close consistently hit certain levels, and you can trace a horizontal
Speaker:line across there.
Speaker:You're getting support or resistance at those levels.
Speaker:So those are very useful, especially the weekly and monthly and the longer term.
Speaker:I don't put personally much stock in the daily levels, but sometimes they can be helpful.
Speaker:So that is kind of a play on peaks and valleys, if you want to look at it that way.
Speaker:Moving averages, this is something completely different.
Speaker:Moving averages are constructed in several different ways, but basically, they're a way
Speaker:to provide an average based on the price in the past.
Speaker:So you'll see reference to, let's take like a really simple one, a five-day simple moving
Speaker:average.
Speaker:We'll talk about the simple moving averages first.
Speaker:What that means is you take the last, the price for the last five days, and you average
Speaker:that and then that plots the point.
Speaker:So you can see as you move along, well, the next day, it would be the previous five days.
Speaker:So now we've removed one day and added one day.
Speaker:So the average should change a little bit unless it was exactly the same price across
Speaker:that timeframe.
Speaker:So you will see if you plot this, there are actually, you can see it in charts.
Speaker:It'll provide support and resistance.
Speaker:Now that's a very simple one, but you can go much longer, 10 days, 50 days, a number
Speaker:of weeks.
Speaker:There's actually a 200-week moving average, for example, which has come up a number of
Speaker:times recently as people have talked about how when we're in a bear market and we've
Speaker:broken the 50-week moving average, I hope I'm getting all this right, that it has consistently
Speaker:reached that 200-week moving average level.
Speaker:That currently is around $22,000.
Speaker:So you will see a lot of speculators, traders, well, traders maybe would be the better word,
Speaker:that are predicting that Bitcoin will reach $22,000 because three times, it's either three
Speaker:or four times previously when it's broken that 50-week and stayed under it, not just
Speaker:kind of dipped under it, that it's reached that 200-week moving average.
Speaker:So understand 200-week moving average, that's 200 points of data, the last 204 years worth
Speaker:of data.
Speaker:So it is obviously, it should be much lower than what our current price is.
Speaker:And a few months ago, it certainly was, we were at $69,000.
Speaker:The 200-week moving average was way below that.
Speaker:Well, now we're getting very close, right?
Speaker:Just a few, well, we're at $30,000 basically as I record this, $30,360.
Speaker:But just a few days ago, we reached somewhere around 25, 26, 24,000, I don't know, it depended
Speaker:on what exchange you were on.
Speaker:I actually saw, I think it was 25,400 on the one that I use.
Speaker:So we're getting pretty close.
Speaker:At that point, you're only talking about like 10%, yeah, roughly 10% dip, 10, 15%.
Speaker:And there we're at 22,000, we've touched our 200-week moving average.
Speaker:You will find that that 200-week moving average is a strong place of resistance.
Speaker:There will be people buying, buying, buying at that level.
Speaker:Not saying we can't break it, but it will be a resistance level.
Speaker:And here's a way that you can use this as a non-trader, just FYI.
Speaker:If you believe that we break the 50-week, I hope it's the 50-week, man, if I'm mistaken
Speaker:about that, I apologize, that we're going to reach this 200-week moving average.
Speaker:And put your buy orders in at the 200-week moving average.
Speaker:I might put them a little bit above that because I always want a cushion.
Speaker:And by the way, one of the things I wanted to point out, these are different on different
Speaker:exchanges.
Speaker:It just is.
Speaker:I don't know why I can't explain it, but they do tend to vary a bit from exchange to exchange.
Speaker:So if somebody says, well, you should buy at 22,000, well, that may be true, but I would
Speaker:hate for you to miss it by $100.
Speaker:So something to think about, you also might want to ladder into an order where maybe you
Speaker:only get to 23,000.
Speaker:So you put, well, you don't know, so you put 25% of your order at 23,000 and then 25% at
Speaker:22,000 and then maybe 25% at 21,500 in case it dips a little lower.
Speaker:So that's how you as a non-trader can use this.
Speaker:Now, I'm not saying you should stop dollar cost averaging, and unless you're going to
Speaker:take the time to do the research, you should not be depending on this.
Speaker:Don't just take my word for it.
Speaker:This isn't financial advice, but just as an example, you can see on a chart, there have
Speaker:been multiple times where Bitcoin has hit that 200-week moving average and bounced.
Speaker:Now, I think there was one time when it hit it and dropped and actually stayed there under
Speaker:it for a month.
Speaker:That was even worse than normal bear market in terms of how far we dropped, but it did
Speaker:come back up, of course, and then retrace back up and we moved on.
Speaker:Now, there are more complex moving averages.
Speaker:One that you will often hear talked about beyond the simple moving average is the, it's
Speaker:an EMA.
Speaker:I'm trying to find what that actually means.
Speaker:I don't remember offhand.
Speaker:Maybe exponential.
Speaker:It is exponential moving average.
Speaker:The calculation on that one is more complex than what I just said.
Speaker:It gives more weight to the more recent prices.
Speaker:It's more reactive if you want to call it that.
Speaker:It's the same type thing, maybe a 50-day exponential or 200-week exponential moving average, whatever.
Speaker:There are a lot of traders that like those, but I would personally probably plot both
Speaker:of them.
Speaker:They both can be very relevant.
Speaker:What else are we going to talk about next?
Speaker:The final thing actually that we want to talk about and probably the most complex, but the
Speaker:most fascinating in my opinion is the Fibonacci levels.
Speaker:I don't know if you've ever heard about this.
Speaker:I'm going to give a very brief overview of this.
Speaker:This is all math based, so you don't have to be a math wizard to understand what's going
Speaker:on here, but I'm going to cover very briefly what Fibonacci numbers are, and then we're
Speaker:going to talk about what the retracement numbers are.
Speaker:There's a tool in TradingView that you can use to chart this out.
Speaker:Fibonacci numbers were actually discovered in the 13th century.
Speaker:He published a book in like 1203 or something, so it was very early in the 13th century by
Speaker:a man named Leonardo Fibonacci of Pisa.
Speaker:You'll see in some places he's called Leonardo de Pisa or Leonardo of Pisa.
Speaker:They don't even give his last name, but his last name actually was Fibonacci.
Speaker:Fascinating thing about it, he discovered these while doing a study of rabbit population.
Speaker:There you go.
Speaker:I don't know.
Speaker:He discovered a sequence of numbers called Fibonacci numbers, and you determine a sequence
Speaker:by the sum of the two previous numbers, so it goes something like this.
Speaker:In fact, these are the first few Fibonacci numbers.
Speaker:One, one, two, three, five, eight, 13, 21, 34, 55, 89, 144, 233, 377, 610, and so on and
Speaker:so forth.
Speaker:Now, if I take one and one, the first two numbers, and sum them up, what do I get?
Speaker:Two, the next number.
Speaker:If I take two and one and sum them up, I get three.
Speaker:Three and two make five.
Speaker:Five and three make eight.
Speaker:So you see how that works.
Speaker:Okay?
Speaker:So keep that in mind, and that, like pi, it just, the pi, the PI number, not blueberry
Speaker:pi or pecan pi, which is my favorite, but it's a number in math.
Speaker:It's a ratio, 3.14, blah, blah, blah, so on, and it goes on to infinity.
Speaker:Same thing with Fibonacci numbers, right?
Speaker:That could just keep going up.
Speaker:Now that's not crazy, but they discovered some very interesting things.
Speaker:These Fibonacci numbers actually show up a lot in nature and in all kinds of things out
Speaker:in the real world, and I'm not going to take the time to go into that.
Speaker:You can look it up, but things like the spiral of a seashell, it's actually the Fibonacci
Speaker:number.
Speaker:It's crazy.
Speaker:Now, where does this come into trading?
Speaker:Well, they have what they call retracement numbers.
Speaker:So when there are levels that are given, and they are derived from Fibonacci numbers.
Speaker:So first of all, how do you find the retracement numbers, okay?
Speaker:They're derived by the ratio between the adjacent numbers in the sequence.
Speaker:So those same numbers, 1, 2, 3, 5, 1 and 1 actually, 2, 3, 5, 8, 13, and so on.
Speaker:If I divide 1 by 1, I get 1.
Speaker:If I divide 1 by 2, I get 0.5.
Speaker:I divide 2 by 3, I get 0.66 on out to infinity.
Speaker:If I divide 3 by 5, I get 0.6, and probably some other digits.
Speaker:If I get 5 by 8, I get 0.625, and then if I divide 8 by 13, I get 0.61, okay?
Speaker:And I'm going to skip some of the numbers.
Speaker:If I divide 21 by 34, I get 0.6176470588.
Speaker:And you may be sitting here saying, McIntosh, that's riveting, what's your point?
Speaker:The next number, 34 by 55, is 0.61818.
Speaker:And you could keep charting that out, but if you were to analyze that, what you see
Speaker:is that you get closer and closer to 0.618, and that is called the Fibonacci, the first
Speaker:Fibonacci retracement number, okay?
Speaker:So we approach that number.
Speaker:We never really get to it, but it's close enough that we can use it.
Speaker:That ratio, 0.618, translates to a percentage of 61.8.
Speaker:That is a 61.8 retracement level, percent retracement level, I should say.
Speaker:And that is a key level.
Speaker:It's called the golden ratio, actually.
Speaker:And so it's a very strong level when you talk about these Fibonacci numbers.
Speaker:You will often see a reversal at 61.8% or at 0.618.
Speaker:Now how do we get, there's four of them, and how do we get them?
Speaker:There's probably more than that, but we're going to talk about four of them.
Speaker:The second one is derived by dividing one digit, one of the Fibonacci digits, by not
Speaker:the next value, but the value after that.
Speaker:So for example, 2 and 5, not 2 and 3, 2 and 5, and then 3 and 8, and so on and so forth.
Speaker:Then the higher you are, again the higher you are in the sequence, the closer you get
Speaker:to the value, which is 3.82 or 38.2%.
Speaker:The third retracement number is found by, surprise, dividing every third number in the
Speaker:sequence.
Speaker:And this may be a little less, listen to a podcast.
Speaker:If you want, you can write out these numbers, I gave the list, or you can simply look them
Speaker:up online.
Speaker:You could do this for yourself.
Speaker:I did it in prep for this, and I don't know, this stuff just interests me.
Speaker:Maybe it doesn't interest you.
Speaker:But it's good to know where these numbers come from.
Speaker:That third number is 23.6%, 0.236.
Speaker:The fourth and final level is the square root of 0.618.
Speaker:I do not know how they arrived at that, to be honest, but that is what it is.
Speaker:It's 0.786, and so it's 78.6% retracement.
Speaker:Now, we chart these out, how do we chart these out?
Speaker:We chart these out by taking a section of chart where we're going from a low to a high.
Speaker:So a very good example, if I bring up Trading View real quick, and I, well, I will tell
Speaker:you one that I had been doing, or maybe a high to a low, actually.
Speaker:Let's do it that way.
Speaker:So you can do it either way.
Speaker:So we had a high back in November, November the 8th, 9th, 8th or 9th, or the 10th, I'm
Speaker:actually not sure now.
Speaker:Looks like the 10th of our famous $69,000, right, $69,156 on this chart, or very close
Speaker:to that.
Speaker:That's your high point.
Speaker:You trace, you use the Fibonacci retracement tool, which I'll go ahead and do right now,
Speaker:and you trace it down to the low point on your chart.
Speaker:In this case, that low until just recently, and this, so this is no longer valid for where
Speaker:we're at, but I retraced it to the 24th of January when we reached roughly 32, let me
Speaker:click there and then maybe I can tell.
Speaker:That's right around 33, 33,245.
Speaker:So from top to bottom, and then I get all of these levels, right?
Speaker:We get zero at the very bottom, you get 0.231, 23.16.
Speaker:That happens to be at 39, 246, or 296, and then 0.382, excuse me, 43,808, 0.5, oh, by
Speaker:the way, 0.5, we often include it, and I do on my charts.
Speaker:It's not really a Fibonacci number, but it's a psychological level.
Speaker:It's halfway from top to bottom, and you'll find that a lot of times you'll see activity
Speaker:like that.
Speaker:So a lot of trading, trading is really about psychology, it's kind of crazy, but it's about
Speaker:what's the market going to do, right?
Speaker:And a lot of times the market can frankly be irrational, 0.618, that golden pocket or
Speaker:that golden level, I'll talk about golden pocket in just a second, is at 52,201, okay.
Speaker:And then the top level, oh, I missed the 73, I can't read it, the 786 level, excuse me,
Speaker:is at 59, 146.
Speaker:Now, if you were looking at my chart, you would see as we dropped from 69K, we dropped
Speaker:below the 0.786 level, but then we bumped into it a number of times over, and this is
Speaker:a daily chart, one, two, three, four, it looks like four, five, six times, and then it fell
Speaker:maybe seven to eight times.
Speaker:So you saw it was a ceiling, we had already dropped below it, we dropped below it, it
Speaker:provided a little bit of resistance, and then we dropped below it, but then we were trying
Speaker:to go back up, but it was providing resistance.
Speaker:And then it dropped down, I'm guessing to the golden pocket, it very briefly stopped
Speaker:there, it did.
Speaker:When we dropped, we wicked through the 0.618 level at 52,000, and then the next day, it
Speaker:actually looks like it dropped quite a bit that next day.
Speaker:In fact, my goodness, I do not remember this offhand, I'm sure it was, we've had so much
Speaker:go on over the last few months, hold on, I've got to move my chart just a second so I can
Speaker:see it.
Speaker:Where did that go?
Speaker:Here it is.
Speaker:So I already talked about the, let's see, we went down, okay.
Speaker:So when we broke that 0.618 level, by the way, that 0.618 level is a very, I think I've
Speaker:already mentioned this, but it's super important in both terms of support and resistance.
Speaker:So when we broke it, we dropped a lot, and I think that's pretty common.
Speaker:But we actually dropped in one day straight through the 0.5 level and the 0.382 level,
Speaker:and then wicked back up during the same day to just above the 0.5 level.
Speaker:Now what do you think happened?
Speaker:We spent one, two, three, hit the bounce at 0.618 after three days, and then went back
Speaker:down one, two.
Speaker:We kind of sat right there at that 0.5, three, four, and then we went up, and then we went
Speaker:back down.
Speaker:We spent like a week, I'd have to draw it to be sure, but at that 0.5 level, just kind
Speaker:of oscillating around it, and then it went back up to 0.618 for four days.
Speaker:It was providing resistance, and then it went down, and so on and so forth.
Speaker:I'm not going to go through all of this.
Speaker:You guys would all tune out on me, but the point is, each of these levels tends to provide
Speaker:a lot of support or resistance, depending on the direction of travel, and they are very
Speaker:useful in trading a trend.
Speaker:They're very useful in trading.
Speaker:You can combine these with things like trends, for example, back here on the 30th of March,
Speaker:so not too long ago, we were at a local high, which coincidentally was almost exactly at
Speaker:that 0.5 level, and so we bounced off that, and we started heading down, and I drew a
Speaker:trend line where it would go down and come back up.
Speaker:We basically bounced off this trend line for one, two, three, four, five days, almost a
Speaker:week right there at the start, maybe six days, and then it dropped down to 0.236.
Speaker:By the way, guys, I didn't prep this.
Speaker:I just drew this out and started talking about it, so don't think that I made some special
Speaker:case.
Speaker:This was just what was going on.
Speaker:Then it went up and hit that trend line that I had drawn out on April the 20th, 21st, so
Speaker:almost a month later, and then it went back down, bounced around the 0.23, a little bit
Speaker:of support, and then it actually went under it and provided some resistance, and then
Speaker:it shot back up on May the 4th and hit that trend line again, this downward trend line
Speaker:that I had drawn, and spent basically a day there and then dropped, and that was the start
Speaker:of a downward pattern that ended us up, of course, at our low of 25.4, 25, 25, 25.1.
Speaker:No, I'd had to zoom in somewhere around 25,000, and I don't even know.
Speaker:This is on Bybit.
Speaker:Okay, so that's the kind of thing you can do with Fibonacci.
Speaker:It's a lot.
Speaker:I did not understand Fibonacci's for a long time.
Speaker:They were like, it's like you may have listened to this the first time you've ever heard about
Speaker:this and you're like, what are you talking about?
Speaker:I would encourage you, for one thing, having this graphical would help, and when I get
Speaker:video set up, I will probably redo this.
Speaker:Maybe it's a separate thing, so I don't bore people twice, but that would probably help,
Speaker:but you can certainly find stuff online.
Speaker:You can take this as a basis and hopefully figure it out if you haven't already.
Speaker:It's fascinating.
Speaker:I love looking at a chart and seeing, oh yeah, it hit there, it hit there, it hit there.
Speaker:I would, again, say these are not obviously, you can't count on these, but they provide
Speaker:a good degree of reliability.
Speaker:Trading is about taking risks and managing those risks, and that's the problem.
Speaker:We don't manage our risk and then we lose our shirt, right?
Speaker:What you want to do is you want to say, oh, I'm in this certain pattern and it's basically
Speaker:70% likely to break up, so I might even wait for it to break up and then set a stop loss
Speaker:below it, and knowing that it's going to trend upward, and then if I can figure out where
Speaker:based on resistance levels, for example, that it might stop, I can start placing my take
Speaker:bets.
Speaker:I'm going to take profit here and I'm going to take profit there, and you don't have
Speaker:to just believe what somebody says.
Speaker:I'm not saying that everybody on YouTube is a terrible trader, terrible TA, whatever.
Speaker:TA is technical analysis, which is basically what we're doing here, but you can do this
Speaker:yourself, especially if you're a trader, and use this so that you don't have to rely on
Speaker:what somebody says, and you don't have to spend a whole lot of money to do it.
Speaker:Trading View is free, at least to start with, for a basic setup.
Speaker:You can bring up some of these other indicators, and if you guys want, I mean, I need to hear
Speaker:from you, but we can provide other things about, there's other technical indicators,
Speaker:certainly that I did not go into, I have not gone into, and we can talk about some of them
Speaker:if you want.
Speaker:I don't know if this is the kind of content you all want or not.
Speaker:Maybe you don't, but I thought this might be helpful for some.
Speaker:So that's it.
Speaker:Man, this has gone a long time, a good 20 minutes longer than I really wanted to.
Speaker:Next week, I'm actually going to break down, with the market and the state that it's at,
Speaker:at that point, where we might go from there.
Speaker:Some support and resistance levels.
Speaker:At that point in time, obviously, this stuff doesn't last forever.
Speaker:So I hope that's been helpful in your understanding.
Speaker:I do know that, I thought, the Fibonacci stuff is, obviously, it's fairly complex, and if
Speaker:you don't take the time to pencil it out or do some more research, you may find it very
Speaker:confusing.
Speaker:But it does work, and you can look at chart after chart after chart.
Speaker:It's amazing stuff.
Speaker:These other things do too.
Speaker:The moving averages, the daily, weekly, monthly closing levels, right?
Speaker:All of this stuff, to an extent, works.
Speaker:If you combine it and you start, oh, I've got resistance here, and you get confirmations.
Speaker:If I have a simple moving average, for example, providing support right underneath a support
Speaker:level that I've already drawn using a Fibonacci, well, now I've got two different things that
Speaker:are saying, I mean, that most likely is going to provide a turnaround point if your asset
Speaker:goes down.
Speaker:Does that make sense?
Speaker:I hope it does.
Speaker:So we're going to end there.
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