Buy at Support - Sell at Resistance

Mr_Nasdaq

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Consistently Successful Traders buy at areas of Gathering Support and sell at areas of Gathering Resistance. Knowing where these areas are located helps them to determine when to buy and when to sell.


The following 5-Minute Chart shows how the QQQQ rose to Tuesday's area of Gathering Resistance (Sell Trigger) and then spent the rest of the week below it:

Chart5Min44QQQQb.PNG

 
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Gathering Support and Gathering Resistance Defined:

When multiple individual aspects of Support coincide, they form an area of Gathering Support (Buy Trigger).

When multiple individual aspects of Resistance coincide, they form an area of Gathering Resistance (Sell Trigger).

Areas of Gathering Support and Gathering Resistance form much more reliable trading opportunities than do individual aspects of Support or Resistance that are standing alone.
 
QQQQ - Chart Pattern Alert!

In chart work, chart patterns are used to predict the direction of a stock's next move.

The Daily Chart of the QQQQ currently displays an unmistakable and very reliable chart pattern known as a "Bull Flag".

A "Bull Flag" is characterised by a pull back from a recent high ($38.98 in this case) on declining volume.

Traders watch for "Bull Flags" because they ordinarily give way to higher prices:

ChartDaily01QQQQ.PNG
 
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QQQQ - Tuesday Morning's 5-Minute Chart

Monday's rally off of a test of Support at Friday's Low ($38.24) gives traders a new Support line to work with.

Note the effects of the the 10:00am "Consumer Confidence Report".

Another market moving report will arrive at 2:00pm (EST). It is the minutes of the last FOMC Meeting.

Chart5Min46QQQQc.PNG

 
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Tuesday's Economic Reports...

The following 5-Minute Chart for the QQQQ demonstrates the importance of being aware of which Economic Reports are being published within the trading day and at what time they are being published:

Chart5Min46QQQQb.PNG
 
laptop1 said:
Looks easy after the event
laptop,

Support at $38.24 was being successfully tested going into the 2:00pm release of the FOMC Minutes and Support is a "natural" place to venture a purchase.

Buy at Support
Sell at Resistance

Chart5Min46QQQQb.PNG
 
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Symmetrical Triangle...

The following 5-Minute Chart shows that a Symmetrical Triangle is forming.

For Friday, the QQQQ will trade initially based on the 8:30am (EST) Employment Report. The Employment Report is often a market mover.

A favorable response from the QQQQ would be in agreement with the Symmetrical Triangle. That's because a Symmetrical Triangle is a Continuation Pattern. Since the QQQQ has been enjoying an up trend, a Symmetrical Triangle suggests a "continuation" of that trend.

For more information on Symmetrical Triangles, click on the following StockCharts.com link:
http://stockcharts.com/education/ChartAnalysis/symmTriangle.html


Chart5Min48QQQQb.PNG
 
AKAM - Thursday's "Sell" Trigger...

Mr_Nasdaq said:
Consistently Successful Traders buy at areas of Gathering Support and sell at areas of Gathering Resistance. Knowing where these areas are located helps them to determine when to buy and when to sell.
The attached 5-Minute Chart shows how AKAM penetrated Thursday's area of "Gathering Resistance" (Sell Trigger) on two occasions and pulled back each time.

Thursday's area of "Gathering Resistance" was composed of two individual aspects of Resistance that resided within 10 cents of one another:

1) The Daily "R2" Pivot Point ($39.70) and

2) The Previous Week's High ($39.75)

Chart5Min02AKAM.PNG

 
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Hi,
Would you mind explaining where you come up with the daily R2 pivot point? Your knowledge of chart patterns seems very good. Keep up the good work.
Martinh1
 
Daily Pivot Points ...

martinh1 said:
Would you mind explaining where you come up with the daily R2 pivot point?
Martinh1,

Daily Pivot Points are commonly used aspects of Support and Resistance within the current day's trade.

On a 'normal' trading day in which no extraordinary forces (news or other events) are pushing the price of a stock up excessively or pressing it down excessively, traders use Pivot Points as an indication of the upper and lower boundaries of the current day's price action.

Each stock receives a fresh set of 5 Pivot Points each day. The 5 Pivot Points are derived from the previous day's High, Low and Closing Price. They are labeled as follows:

1) "Pivot" is the middle member of the 5 Pivot Points. As such, it represents neutrality.

2) "R1" is the 1st Resistance Price from the "Pivot". It represents an intermediate level of Resistance for the current day's trade.

3) "R2" is the 2nd Resistance Price from the "Pivot". It represents an extreme level of Resistance for the current day's trade.

4) "S1" is the 1st Support Price from the "Pivot". It represents an intermediate level of Support for the current day's trade.

5) "S2"is the 2nd Support Price from the "Pivot". It represents an extreme level of Support for the current day's trade.

The "Pivot" as an Indicator:

Professional traders use the "Pivot" to gage whether a stock is demonstrating bullish behavior, bearish behavior or neutral behavior within the current day's trade

A stock that trades above its "Pivot" is demonstrating neutral to bullish behavior. It often rises to its "R2" Price at some point during the trading day. When a stock is finding Support at its "Pivot", odds favor a trade on the long side.

A stock that trades below its "Pivot" is demonstrating neutral to bearish behavior. It often dips to its "S2" Price at some point during the trading day. When a stock is finding Resistance at its "Pivot", odds favor a trade on the short side.

The chart below is a 10-Minute Chart of the QQQQ. It shows how Support at the "Pivot" (the gray line) could have been purchased and then sold when the QQQQ rose subsequently to Resistance at "R2" (the green line):

1) The "Pivot" was $36.27.
2) After the QQQQ opened at $36.39, it pulled back to test Support at the "Pivot" ($36.27).
3) Support was found.
4) The QQQQ rose subsequently to test Resistance at "R2" ($36.70).
5) Resistance was found.
6) By the close, the QQQQ had pulled all the way back to the "Pivot" ($36.27 to the penny).

QQQQPivots03.PNG


For more information, Google "Pivot Points". You will find web sites that provide the formula for calculating the "5 Pivot Points". Some web sites will do the calculation for you when you enter the previous day's High, Low and Closing Price.
 
Mr_Nasdaq said:
Martinh1,

For more information, Google "Pivot Points". You will find web sites that provide the formula for calculating the "5 Pivot Points". Some web sites will do the calculation for you when you enter the previous day's High, Low and Closing Price.

Thanks a lot for this thread. I don't follow the US, myself, but the information is applicable to most trading and is appreciated.

Split
 
Thanks

Splitlink said:
Thanks a lot for this thread. I don't follow the US, myself, but the information is applicable to most trading and is appreciated.
Split,

Thanks for the kind words. It does me good to hear them.

Mike
 
Mr_Nasdaq,

Thanks for the easily understood explanation of the pivot points.
I will study these and also check out other websites on Google. Keep up the good work and thanks for sharing.
martinh1
 
Pivot Points

martinh1 said:
Thanks for the easily understood explanation of the pivot points.
I will study these and also check out other websites on Google.
martinh1,

You are very welcome.

In addition to 5 Daily Pivot Points that are derived from the previous day's High, Low and Closing price, there are also 5 Weekly Pivot Points that are derived from the previous Week's High, Low and Closing price and also 5 Monthly Pivot Points that are derived from the previous month's High, Low and Closing price.

The life span of Daily Pivot Points is 1 day. They are, therefore, used primarily by day-traders. The exception to this is when a Daily Pivot Point coincides with a longer-term aspect of Support or Resistance to form an area of "Gathering Support" or "Gathering Resistance". In the example from Post #9, Resistance at the Daily "R2" Pivot Point coincided with Resistance at the previous week's high to form an area of "Gathering Resistance" (Sell Trigger):
http://www.trade2win.com/boards/showpost.php?p=273519&postcount=9

The life span of Weekly Pivot Points is 1 week. They are, therefore, used by both day-traders and longer-term "swing" traders as are Monthly Pivot Points whose life span is 1 month.

In my work, I do not use the "S1" or "R1" Pivot Points. I limit myself to the "S2" and "R2" Pivot Points because their extreme nature makes them more reliable providers of Support and Resistance.

There is a lot of information on Google about Pivot Points. Here is one excellent article:
http://www.marketaces.com/magazine/articles/106.cfm
 
Mr Nasdaq,

Wow, Thanks again for the further update on pivots. I have a lot of studying to do on this. Ymonly posted above about using apex points that work 100% of the time. Do you have any experience with these? I will see if I can find any info on apex points. If I do, I will post it on this board. Take care!
[email protected]
 
Tread Carefully, VERY Carefully . . .

As with anything in this business, if it works for you - great. I for one, am wary of pivots for the same reason that I'm wary of Fib' levels and most other indicators. As many people have pointed out before, the problem with them is that it's easy to find a chart where they appear to work brilliantly. Inexperienced traders may even think that price falters or reverses at key pivots, Fib' levels or whatever, specifically because they are there. This is the exact opposite of the reality.

The idea that the market is sensitive to and cares about what it's participants want and expect it to do is as lovely as it is naive. The trader who observes price 'behaving as it should' around key pivots and Fib's is lulled into a very false sense of security. S/he then starts to predict what price will do because they know precisely where all these levels are. Price duly obeys and the trader's confidence sky rockets. Then comes the point of putting real money on the line and it may even work for a while, resulting in profitable trades. This success reinforces the trader's belief in the levels to the extent that they become even more important and increasing amounts of significance are placed upon them. Unbeknown to the trader, the levels become a smokescreen that obscures what is really happening in the market. Inevitably, sooner or later, price appears to take absolutely no notice of a major pivot point, Fib level or whatever. But not to worry, if it shot through S1, it will definitely find support at S2 and then the trader takes the brilliant decision to average down and add to a losing position. Then price does indeed slow down its decent as it approaches S2. Now the trader thinks "aha, just as I thought" and loads up to the max and buys yet more stock. You can see where this is heading I'm sure. Suffice to say, the ending is not a happy one. How do I know all of this? Well, a few years ago, I had a strategy based around a 89 period SMA. It was brilliant - it really was. The success rate was 80%+. But, as in the sorry tale above, I became so dependant upon it and so convinced of its reliability that I failed to notice the numerous other signals that the market was screaming at me. The result: a blow up, losing 70% of my account on one trade.

Just to be clear, I am not saying that pivots and Fib's etc. aren't of value and that traders be advised to steer clear of them. Far from it, they can be very useful tools. My experience has taught me that the market / price will do what it wants to do which may or may not coincide with pivots and Fib's etc. It most definitely does not take it's lead from these levels because that's what's expected of it. Charming and quaint though this idea is, it's a deadly one that's guaranteed to result in catastrophic loss. I know, I've got the T-shirt to prove it.
Tim.
 
timsk said:
Just to be clear, I am not saying that pivots and Fib's etc. aren't of value and that traders be advised to steer clear of them. Far from it, they can be very useful tools. My experience has taught me that the market / price will do what it wants to do which may or may not coincide with pivots and Fib's etc. It most definitely does not take it's lead from these levels because that's what's expected of it. Charming and quaint though this idea is, it's a deadly one that's guaranteed to result in catastrophic loss. I know, I've got the T-shirt to prove it.
Tim.

It comes down to the fact that any popular way of calculating how the markets are going to react
will be acted upon, not only by those that believe in them, but by those who do not believe in them but do believe that there is an advantage to be gained by knowing what the majority are going to do. This not only refers to pivot points, but to every other pattern under the sun.

Much as I appreciate Mr Nasdaq's thread I am wary of anything that can be calculated on Google. That's too easy, Mr Nasdaq! What is good is that these threads help to open up ideas. That is what is important. What I would say to newcomers is

Beware of what is common knowledge.

(1) Absorb it and develope your own method accordingly.

(2) Don't let it become common knowledge.

Good trading

Split
 
Trading Rules

timsk said:
Tread Carefully, VERY Carefully . . .
timsk,

Thank you for your word of caution.

It is true that no one trading strategy works 100% of the time. The best that one can hope for is a strategy that works most of the time.

Losing trades are, therefore, unavoidable facts of trading, no matter what strategy is used.
Since Losing Trades cannot be avoided, they must be managed.

The following 3 steps explain how to limit the damage of a losing trade:

1) Accept without reservation the reality that "No matter how good a trade looks, it can turn into a loser".

2) Predefine the risk of EVERY trade by establishing a maximum amount that you are willing to lose on it.

3) Honor your predefined risk when it is reached. Do not rationalize, hesitate, justify or hope. Close the trade. There is always another trade just around the corner.

These three steps will help you avoid the common trading error of letting a small loss turn into a big loss.

They will preserve your capital and enable you to return to trade another day.

They would have saved you from the 70% loss referenced in your post.

An excellent book (and required reading for all who wish to be consistently successful traders) that addresses the issues that you present is, "Trading In The Zone" by Mark Douglas. The best price is at Amazon.com. Buy it, read it and post your feedback as you do. It will be a benefit to the entire board:

http://www.amazon.com/Trading-Zone-Confidence-Discipline-Attitude/dp/0735201447/sr=1-1/qid=1157284929/ref=pd_bbs_1/104-7712369-2902331?ie=UTF8&s=books
 
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Mr_Nasdaq said:
timsk,

Thank you for your word of caution.

It is true that no one trading strategy works 100% of the time. The best that one can hope for is a strategy that works most of the time.

Losing trades are, therefore, unavoidable facts of trading, no matter what strategy is used.
Since Losing Trades cannot be avoided, they must be managed.

The following 3 steps explain how to limit the damage of a losing trade:

1) Accept without reservation the reality that "No matter how good a trade looks, it can turn into a loser".
2) Predefine the risk of EVERY trade by establishing a maximum amount that you are willing to lose on it.
3) Honor your predefined risk when it is reached. Do not rationalize, hesitate, justify or hope. Close the trade.
There is always another trade just around the corner.

These three steps will help you avoid the common trading error of letting a small loss turn into a big loss.
They will preserve your capital and enable you to return to trade another day.

They would have saved you from the 70% loss referenced in your post.

An excellent book (and required reading for all who wish to be consistently successful traders) that addresses the issues that you present is, "Trading In The Zone" by Mark Douglas. The best price is at Amazon.com. Buy it, read it and post your feedback as you do. It will be a benefit to the entire board:

http://www.amazon.com/Trading-Zone-Confidence-Discipline-Attitude/dp/0735201447/sr=1-1/qid=1157284929/ref=pd_bbs_1/104-7712369-2902331?ie=UTF8&s=books

very, very true.
 
no offense intended but, emini trading intraday....i use a max stop loss....avg trade far exceeds that loss...and avg trade is rarely stopped....stop loss is the almost irrelevant factor for strong system...but no stop used usually will mean bye bye..won't c u later trader because ur money is gone.......even mental stop is a stop.....most can't do that mental stuff...because it is mental..........if weaker system gets hit often that would be more relevant....and time to improve the system..for most. ...mark douglas in the zone is very very helpful for emotional development.....
 
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