# Term 2 master class ## The Course Architecture — What's Non-Negotiable vs Complementary ### Term 1 Weeks 1-6: THE NON-NEGOTIABLES Everything in the first six weeks is the foundation. If you're not doing ALL of these on every trade, you're missing a beat: 1. **Pivot points** → market structure identification (Week 1) 2. **Support & resistance zones** (Week 2) 3. **Failure swings & non-failure swings** → confirmed reversals and entries (Week 3) 4. **Volume & OBV** → supporting the move, effort vs result (Week 4) 5. **RSI divergence** → early warning signals (blinkers) before triggers (Week 5) 6. **Fibonacci retracements** → zag zones, trend strength, targets (Week 6) ### Term 1 Weeks 7-9: COMPLEMENTARY TOOLS These add confluency but aren't essential for a trade to exist: - Candlestick patterns, chart patterns (Week 7) - Index confirmation, multi-chart confluency (Week 8) - Market psychology, sentiment, contrarian investing (Week 9) ### Term 1 Week 10: RISK MANAGEMENT Not about your entry — it's about how small your stop loss is. A later entry with a better R:R can be more profitable than an earlier entry with a wider stop. ### Term 2: ADVANCED REFINEMENT All of Term 2 builds on the non-negotiables: - **Three types of divergence** — regular (reversal signal), hidden (continuation signal), directionally aligned (same direction, different rates = early warning). Complex divergence is where regular and hidden battle each other - **Multi-timeframe divergence** — hidden bullish on the higher timeframe (continuation) + regular bullish on the lower timeframe (reversal entry) = precise entry for a big move - **Pattern recognition + divergence fusion** — hidden divergence for continuation patterns, regular divergence for reversal patterns. Volume rules are OPPOSITE for each - **Moving averages** — SMA for long-term, EMA for short-term. Used as confluency, not standalone - **Gaps** — common (always fill), breakaway (new trend), runaway (continuation), exhaustion (reversal), professional (institutional), fair value (crypto imbalances) - **Market breadth** — looking under the hood to see if stocks are actually participating in the index move - **Sentiment analysis** — VIX, AAII, Fear & Greed, put-call ratio. Contrarian at extremes - **Fibonacci extensions & clusters** — projecting targets, combining retracements + extensions for ultimate cluster zones - **Fibonacci extension channels** — combining Fib targets with channel boundaries for precision take-profit --- ## Log vs Linear — When to Use Each **Linear (default, first port of call):** - $10 move here = same size as $10 move there (dollar-based) - Better for identifying accumulation/public/excess phases visually (accumulation looks flatter and longer, which is what you expect) - Use for most standard analysis **Logarithmic (for long timeframes and large price ranges):** - 10% move here = same size as 10% move there (percentage-based) - Much easier to see waves and chart detail when prices range from $3 to $50+ - Essential for crypto, uranium, lithium — anything with hundreds or thousands of percent moves - Makes the detail of smaller early moves visible instead of being squashed at the bottom ### Fibonacci in Log vs Linear — BOTH Are Valid This was a key insight from the masterclass. When applying Fib retracements: - **Linear Fib 618** creates a resistance zone in dollar terms - **Log Fib 618** creates a resistance zone in percentage terms - **Both work as resistance** — and they're at DIFFERENT price levels **Silver example:** In linear, the 618 retracement created a major resistance cluster at one level. In log, the 618 created resistance at a different level (the percentage-based retracement). Both levels acted as genuine resistance on the chart. So drawing Fibs in both modes gives you TWO valid zones to watch. **Pro tip:** To apply Fib in log scale in TradingView, open the Fib tool settings and check "log scale." ### When to Switch - Start in linear to identify phases and get the big picture - Switch to log when dealing with very long timeframes, very large price ranges, or parabolic moves - In log, a retracement that looks like 78.6% in linear might only be 50% in percentage terms — this changes your analysis of trend strength --- ## Phase Analysis — Equities vs Commodities **In equities (tech, financials):** The public participation phase is typically the largest. Excess phase is usually smaller. **In commodities (silver, gold, uranium):** The excess phase is often the biggest — bigger than public participation. Commodities tend to have blow-off tops. **The alternation rule:** If public participation is very extended (long duration), don't expect excess to also be very extended. One will be extended, the other normal. You rarely get both dramatically extended. --- ## Wave 2 Deep / Wave 4 Shallow - **Wave 2 retracements** are notoriously deep — 618, sometimes 786. Why? Nobody knows it's wave 1 yet. Sentiment is still bearish from the prior downtrend. Everyone thinks it's just a continuation of the bear market - **Wave 4 retracements** tend to be shallower — 382 or Fib 500. The trend is now established and people are bullish, so they buy the dip earlier This alternation is important for setting expectations and targets. If wave 2 was deep (618+), expect wave 4 to be shallow (382). If wave 2 was shallow (unusual), expect wave 4 to be deeper. --- ## Channels as Confluency Channels (trend lines + parallel lines) provide confluence with other tools: - **Maximise touches** when drawing channels — the more times price respects the channel boundary, the more valid it is - **Channels don't beat S/R zones** — a horizontal support/resistance zone with many touches is still the strongest level. Channels complement S/R, they don't replace it - When a channel boundary aligns with a Fib level AND a horizontal S/R zone = triple confluency - **Break of channel + change of market structure + hit Fib target** = the trend is over. The "nail in the coffin" ### Three Channel Types (Preview for Elliott Wave) 1. **Base channel** — drawn from the start 2. **Trend channel** — drawn during the trend 3. **Final channel** — drawn at the end These will be covered in depth during Term 3. --- ## The 50% Profit-Taking Strategy When your trade hits the target zone: 1. **Take 50% off the table** — lock in profit, remove risk 2. **Let the other 50% run** — trail your stop loss and see where it goes 3. If it continues beyond the target = bonus gains with zero risk (you've already banked profit) 4. If it reverses = you've already taken half your profit and the trailing stop catches the rest This removes the psychological battle of "should I sell all or hold all" — the answer is "both." --- ## Preparing for Term 3: Elliott Wave Everything from Term 1 and Term 2 translates directly: | What You Know | What It Becomes in Elliott Wave | |---|---| | Accumulation | Wave 1 | | First zag (deep) | Wave 2 | | Public participation | Wave 3 | | Second zag (shallow) | Wave 4 | | Excess phase | Wave 5 | | Correction (2 steps back) | ABC correction | The internal counts work the same way — within wave 3, there's its own 1-2-3-4-5. Within that sub-wave 3, there's another 1-2-3-4-5. Fractals all the way down. **Corrections are where Elliott Wave gets really challenging** — there are many different types. The course spends 4-5 weeks just on corrections because that's the hardest part. **The key thing you must feel comfortable with before starting Term 3:** Accumulation → public participation → excess. If you can confidently identify the three phases, the numbering is just labelling what you already know.