how do rankings work?

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Recent performance. This has nothing to do with what you have done in your career as a whole, but about how you are playing right now.

The lowest introductory Tier is Tier 3 and the highest is Chief Oga, that can only be occupied by one player. 

Within each tier there is a Level 1,2 and 3. So once you are a Tier 2 Level 3 for example, that means you are close to becoming Upper Tier 2 Level 1