Support and resistance - total rot ?

DionysusToast,.....LOL,.you're funny,..Anyway get back to work!,..you've got to earn your bosses some money,...; )
 
Surely s&r fails more often then not, otherwise price would not get very far on any tf.
 
Well I want to congratulate the OP. Partly for introducing such an interesting subject for discussion, but mainly for titling it in such delightful Terry-Thomas-esque language. I've been trying to find some clips of the great man actually using that expression, but so far, without success. Never mind, and as it's Friday, here are some samples of the great man at work. He would have been a wonderful "You, too, can earn £1M a day trading, in only 30 minutes of your time" salesman:


And I think BP could use a little of his help today:
http://www.youtube.com/watch?v=RNz8iQN4xfk&feature=related


http://www.youtube.com/watch?v=W6lFoEBG7Oc&NR=1

http://www.youtube.com/watch?v=RkfT7p6kBE0&feature=related

 
Splitliink,.....I didn't post my comment for debate,.I actually wanted to help folk,.....but as I've learnt through the years,...most folk know better (hence the small percentage of successful traders),....
 
Rossini said:
But to come to that conclusion how do you measure success or failure?
Click to expand...

Success, the lvl holds and moves on to the next support/resistance lvl

failure, price breaks through and it is considered a broken lvl.
 
Vaco said:
Success, the lvl holds and moves on to the next support/resistance lvl

failure, price breaks through and it is considered a broken lvl.
Click to expand...

As has been said before...It's all in how each person sees it them selves. (at any point in time)

Success---price level holds and moves on to next level for a reversal trade.
Success---price level does not hold and price breaks through for a continuation trade.
 
Vaco said:
Success, the lvl holds and moves on to the next support/resistance lvl

failure, price breaks through and it is considered a broken lvl.
Click to expand...

I don't agree with this and I will give 2 examples of why, both on the SPX.

1) 200d Moving Average

We have broken below the 200dma and failed twice to reclaim the level. Using the above the definition, did it work? Well yes, and then no, and then yes. You could repeat this pattern of "yes, then no" from T+201 until now.

On the other hand, if you use my earlier explanation of what S+R (et al) are "supposed" to do, you will agree that breaching and failing to reclaim the 200dma speaks volumes about the sentiment of this market.

2) Swing High/Swing Low (specifically the 1040 level)

I have this in as support. That does not mean to say I have orders resting there - a "buy at support, sell at resistance" strategy will most likely lead to Gambler's ruin. In this example, I have marked the level as noteworthy because my view is that if we break and hold below this "support", the sh!t will really hit the fan. It is one of those curious things about price action that it is full of tautologies - "it's going lower because it's going lower".

To be honest with you all, I think support and resistance should be amalgamated into one specific reference point. It builds a better picture of the market to say "we are inbetween reference point X and Y" rather than "there is support below but it might not be support so if we go below support we must be going down. Oh, and there is resistance above which may or may not resist".

They are well suited to providing qualitative information about the market, but on their own are sh!t for making money.
 

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Hilarymannah said:
Splitliink,.....I didn't post my comment for debate,.I actually wanted to help folk,.....but as I've learnt through the years,...most folk know better (hence the small percentage of successful traders),....
Click to expand...

Over the years I have made many posts about my opinion of H&S, along other signals and you are right, I should step aside and stop irritating you when you wish to do the same.

Good trading.
 
Price is falling towards a zero line like a rocket. Scalper/momentum trader sees this, goes short with a large(ish) position, manages to get filled for a quick 12 pips and covers - on his terms an excellent success. An hour later the next trader sees that price pierced the zero, found buying pressure then went north with good momentum, he calls this 'support' because 6 months ago and 2 years ago price moved upwards from this point after having approached it from above but he also recognises that 4 years ago, 18 months ago and 10 months ago price went straight through this level went back to it and then continued downwards. He goes long with a smaller position, holds for three hours and gets out with 35 pips. Meanwhile the short term trader has seen price bounce from the previous low, placed a long order at 25 and picked up another 8 pips.

Who's right and who's wrong? Did 'support' break or did it hold? The scalper, on his terms will say 'support' broke but that he doesn't really care because he's playing momentum, the day/position trader will say support held thus confirming his beliefs both about support and resistance at this price level.

It's all just perspectives isn't it? Both traders made money this time so does it matter?
 
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Mr Gecko, You make my point much clearer with this line a "buy at support, sell at resistance" strategy will most likely lead to Gambler's ruin.

as all I meant is that price breaks through s&r more often then not.
 
If we are talking about that number of pips, it probably doesn't matter.

In my opinion where it starts to matter is when people base longer-term decisions about trend change or trend continuance on whether a particular support or resistance was seen to hold or was broken.

Leaving aside for the moment the views of individual traders, many (presumably respected) analysts/pundits regularly mention S/R in their commentaries. Here is one more or less at random. I don't have any particular view of this particular blogger (Peter Ruud):

http://www.ashraflaidi.com/forex-blogs/1157/

Critical juncture for the EUR/USD
June 3, 2010 20:53 GMT:

The EUR/USD & US Dollar Index failed once again at the 14-day MA on Thursday, setting up the latest retest of the critical 1.2132/1.2155 & 87.45 region. The 1.2132 level marks the 50% retracement level of the 2000 to 2008 bull campaign and the 1.2155 level is a monthly trendline that originates off the all-time lows. In both cases, these key levels for the EUR/USD & DXY have been tested three times and generally the fourth attempt carries a high probability of breaking through these critical barriers. In the event of a clean break, the EUR/USD's first downside target lies near the 1.18 handle. If, however, these key levels hold (or are only marginally broken), then focus shifts back to the key 14-day MA.
Click to expand...
(There are charts in the blog).


To lay my cards on the table, I do use S&R to some extent, but I take it with a pinch of salt. I don't really use trendlines, but I do find certain MAs appearing to act as support or resistance surprisingly often (I don't use the ones he talks about, as it happens). Now, there is an element of the self-fullfilling prophecy about MAs of course, but nevertheless, they are at least occasionally useful.

Anyway, any comments on Ruud's analysis?
 
meanreversion said:
The title is meant to be get people interested.

Why do the concepts of "support" and "resistance" seem to work - is this because they are self-fulfilling, i.e. most people see the level and react in a similar way? Or is there something else going on?
Click to expand...



In a five year bull market, supportive action is prevailing for one reason only....the fundamentals.
 
Guys like Tony Oz don't use anything but s/r in their trading.

He has been around for ages and he has a public proven track record where he achieved a 56% gain on his account in a one month period that was audited with minimal risk, 69% winners, winners on average 3.9 the size of his losers, and all that daytrading in a bear market where he only went long.

http://www.amazon.com/Stock-Trader-Living-Trading-Stocks/dp/0967943507

Lotsa floor traders don't really look at anything else:

http://www.trade2win.com/boards/general-trading-chat/90062-what-real-trading-6.html#post1084766

Guy who was one of the biggest floor traders at the time, Lewis Borsellino was always going on about s/r levels:

http://www.trade2win.com/boards/general-trading-chat/90062-what-real-trading-7.html#post1084772

I'm mainly trading the bund at the moment, and the way that totally respects pivot levels is unbefrigginlievable.
 
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