Support/Resistance

Hi everyone,

Just a quick question on S/R levels, do you count the opening/closing price as S/R or do you look at the shadows as S/R.

Sorry if this sounds like a dumb question, just like to know what other people use.

Thanks

I use the shadows, but I use a zone of support or resistance rather than a set price. I don't define the zone with numbers though, I use the candle signals combined with their location to decide whether the price is experiencing support or resistance, it's very subjective though.

e.g. I would say that the FTSE 100 currently has support around 5200, and a close below 5188 would send me looking for a shorting opportunity.

I hope that helps

mrchuffster said:

Hi everyone,

Just a quick question on S/R levels, do you count the opening/closing price as S/R or do you look at the shadows as S/R.

Sorry if this sounds like a dumb question, just like to know what other people use.

Thanks

Click to expand...

This is very relative. Lots of TA enthusiasts make specific rules for these lines but, if you are with them, then you are one of the pack. Do your own assessment of the chart on where you believe the price appears to turn. If you are a little different from the rest, don't worry about it and watch for the spikes. Remember that that is where the stops are and the money makers like to trigger them, if possible. Many times I have been stopped out, only to find that that is where the turning point was. If only I had had it a little farther away

Split

Don't have stops hovering around these levels because as Splitlink point's out a bit of volatility and you get stopped. Give it plenty of room.

Support and resistance are HISTORICAL traded levels for HISTORICAL events .. TOMORROW 's levels are unknown to all market participants simply because no one knows how the future events are unfolded ..

Would you still use these levels to stop loss a perfectly correct trade to exit ?

Look at your L2 screen and notice how often gorrilla players ignore these levels ..
Do you know why most of you guys out there ignore your own stop loss levels? Simple ... because you have no faith in these levels ... historical levels are not good enough justification for future performance

grey 1

Interesting grey1, What do you suggest then?

Grey1 said:

Support and resistance are HISTORICAL traded levels for HISTORICAL events .. TOMORROW 's levels are unknown to all market participants simply because no one knows how the future events are unfolded ..

Would you still use these levels to stop loss a perfectly correct trade to exit ?

Look at your L2 screen and notice how often gorrilla players ignore these levels ..
Do you know why most of you guys out there ignore your own stop loss levels? Simple ... because you have no faith in these levels ... historical levels are not good enough justification for future performance

grey 1

Click to expand...

Unfortunately, one has to call it a day ,at some point, and close a trade. Stops are often used to do this and they are placed at or around the low of the present short term trend. Since lots of traders use the same areas, this causes a shortage of stock and the price goes up.

The mistake, in my view, is that the trade is opened too late, therefore creating too big a distance from the logical spot to close a losing trade . The trader places his stop at the very limit of risk that he is prepared to take. Big mistake- although, I, too, am a guilty party!

The trader sees the loss piling up and does not feel happy in the SR area because, if it does not hold and his trade turns sour, his loss will be compounded by what he has been taught by the gurus to be a potentially disastrous rise or fall .

Quite often, the closed trade reverses towards a more favourable level and the trader ends up disillusioned.

The experienced traders do not have their stop losses in these areas . They are, in fact, opening their trades there. Their idea is that the expected move will either be sustained or will fail and drift back towards their entry point. In many cases, they do not hold a trade below their entry point, considering it a failure.

The whole problem is psychological, centred around the greed and fear factor.

Split

Stops are all in your own head, and somebody else's also? I suppose very short timeframes require stops. Anything longer just requires ability. RUDEBOY.

Everybody needs to find thier own comfort zone, in all thier aspects of trading/investing. Trying to force ANY issues does not make any sense! Just as long as you can question yourself, you are on the right track. RUDEBOY.

Grey1, I am also very interested in your thoughts of stoploss. Thank you.

Personally I have found it easier for my temperament to set stops a little below a natural support area (usually 1% below the last low). This often means my stops are wide. I keep my losses manageable by buying fewer number of stocks. I understand that many traders set tight stops. They can spot high probability trades and they are better traders.

I am not there yet. I think all of us aspire to set tight stops and increase our rewards.

Good points, Split. The inexperienced player thinks in terms of how much he's willing to risk and generally sets his stop in the wrong place, usually after entering too late. But the market couldn't care less how much he's willing to risk. The market will drive the price up or down until traders find trades. If one can figure out where traders are most likely to find those trades, he will have some clue as to where to place his stop. If he can't, then he should stand aside until he can.