The funniest thing you have heard on a trading forum?

[DionysusToast]

Ledgy

Answer yourself this:

When you buy support - who are you buying from? Why are they selling to you there? What is it that you know that they don't which gives yourself a consistent edge and has them hand their money to you?

If the answer is "I don't know", then it's not much of a cornerstone.

S/R does indeed look fantastic in hindsight though. Most people are trading things that look obvious in hindsight too - MAs, Channels, Trendlines etc.

Same question to them too - who's taking the opposite side of your trades in those scenarios?

 

[ledgy]

Dionysus,
Your right, I don't know who is taking the other side of my trades. I'm fully aware in the world of trading I'm lower than a snakes belly, a mere amoeba, sat in front of my PC with MT4, a spread betting account, and itunes. The only link I have into the market is what I see before me on a chart, and what I read in the news, how would I know at any one time who is taking the opposite side to me, and I'm still unsure of the importance of this knowledge?

I believe there are many contributing factors that will formulate my edge, not all of them have been discovered yet but one of them is not having to trade, i.e. only taking trades that have a greater likelihood of going my way.

I take your point about hindsight, but future price does seem to react to strong levels of S&R, are you advocating ignoring this completely?

 

[Vorbis]

When you buy support - who are you buying from? Why are they selling to you there? - who's taking the opposite side of your trades in those scenarios?

I suppose that if you buy at an obvious 'sitting duck' level and put your stop just beyond, you are setting yourself up and making it easy for someone to connect the two for a quick profit?

Presumably, the more predictable you are, the easier it is for sharper traders to use your orders to their own advantage.

 

[DionysusToast]

Dionysus,
Your right, I don't know who is taking the other side of my trades. I'm fully aware in the world of trading I'm lower than a snakes belly, a mere amoeba, sat in front of my PC with MT4, a spread betting account, and itunes. The only link I have into the market is what I see before me on a chart, and what I read in the news, how would I know at any one time who is taking the opposite side to me, and I'm still unsure of the importance of this knowledge?

I believe there are many contributing factors that will formulate my edge, not all of them have been discovered yet but one of them is not having to trade, i.e. only taking trades that have a greater likelihood of going my way.

I take your point about hindsight, but future price does seem to react to strong levels of S&R, are you advocating ignoring this completely?

In your case, the broker is on the other side of your trade, which is an interesting proposition.

Have you ever wondered, when the market shoots straight up - who is it that is selling to all those buyers as the market goes up? Are these people dumb? Who are they?

- people that brought earlier and are selling, despite signs the market is still making a one-way move upwards?
- an endless supply of idiots that that think the market is about to turn around, all the way up?
- liquidity providers that are paid per-trade to take the other side of your trade?

If you think the last answer is a major contributor, then how would these people get back onside after an extended move against them? Could this provide any insight into how markets move or retrace their steps on occasion?

More importantly, if you think such people are a major force in the market, do you think they will not be consistent winners? What proportion of their profits comes from retail traders trading the techniques in most trading website, book & course? Would reading a book by Alexander Elder give you a consistent edge over them or other traders?

This mp3 file is something you might find interesting:

http://hotfile.com/dl/115545972/74173d6/interview.mp3.html

 

[DionysusToast]

I suppose that if you buy at an obvious 'sitting duck' level and put your stop just beyond, you are setting yourself up and making it easy for someone to connect the two for a quick profit?

Presumably, the more predictable you are, the easier it is for sharper traders to use your orders to their own advantage.

I read a good analogy somewhere....

If you take a shopping mall, it is impossible to predict where all of the shoppers there will be in the next 15 minutes. If you ring the fire alarm, it is very predictable where all of the shoppers will be in the next 15 minutes.

So it is in the markets when people panic and get out. If you were to trade against the people panicking, you'd know very well what your edge was and who was handing money to you.

Just an example.

 

[brettus]

Ledgy

Answer yourself this:

When you buy support - who are you buying from? Why are they selling to you there? What is it that you know that they don't which gives yourself a consistent edge and has them hand their money to you?

If the answer is "I don't know", then it's not much of a cornerstone.

S/R does indeed look fantastic in hindsight though. Most people are trading things that look obvious in hindsight too - MAs, Channels, Trendlines etc.

Same question to them too - who's taking the opposite side of your trades in those scenarios?

I think you're right about who is taking the otherside of the trade, but this only works on smaller timeframes. The chances are if the intraday level is obvious then a lot will be looking at it they will caught out like you say. I think what you dont understand is that most retail traders don't buy at support and sell at resistence, but they do the opposite and play the break out and get caught trying to go long or short through it. So on an intraday timescale you want to fade the breakout instead of buy or sell S&R? All financial instruments have their own unique characteristics, hence S&R cannot be the only tool in the toolbox. I would never dismiss it though.

So S&P is a faders market, i can kinda get that as USDCAD is similar to that and they highly correlated, but the market is rangebound 80% of the time anyway, so i'm not suprised. USDJPY is similar. I would rather fade it than play a breakout.

 

[trader_dante]

So S&P is a faders market, i can kinda get that as USDCAD is similar to that and they highly correlated

The USD/CAD and the S&P are inversely correlated.

I think you've made some good points on S/R and the difference in the short term and the swing and also the nuances of different markets. I think there is a total inability to see the bigger picture here.

 

[fasar khan]

Funniest one has to be some guy telling me forex doesnt exist its fictional lol

 

[DionysusToast]

I think you're right about who is taking the otherside of the trade, but this only works on smaller timeframes. The chances are if the intraday level is obvious then a lot will be looking at it they will caught out like you say. I think what you dont understand is that most retail traders don't buy at support and sell at resistence, but they do the opposite and play the break out and get caught trying to go long or short through it. So on an intraday timescale you want to fade the breakout instead of buy or sell S&R? All financial instruments have their own unique characteristics, hence S&R cannot be the only tool in the toolbox. I would never dismiss it though.

So S&P is a faders market, i can kinda get that as USDCAD is similar to that and they highly correlated, but the market is rangebound 80% of the time anyway, so i'm not suprised. USDJPY is similar. I would rather fade it than play a breakout.

Let's take the S&P, which I agree is a faders market. I agree these levels cannot be ignored too but newbies read this forum and actually want specifics which no-one seems to want to discuss.

If trade A faded the market at resistance and trader B played the breakout (lets presume 1 tick over the line), then both traders would lose over time. Partly this is a symptom of attempting to take a totally objective approach to trading.

There's a link on Dantes post above to "tips from succesful traders" one of them is:

2. Double tops and bottoms can be very profitable opportunities

Sell at double tops and buy at double bottoms AS they form. These are potentially very profitable opportunities and you can trade them with tight stops.

Is this comment REALLY from a succesful trader? If so - what does it suggest, exactly? Let's say you have a 'resistance level at 1350.00' - where do you fade it?

1 - with a limit at 1350.00?
2 - with a limit at 1348.00? To catch the shallow reversals
3 - with a limit at 1352.00? To catch the 'stop run'
4 - with a a stop order at 1348 After it hits 1350, to effectively get in when it's confirmed?

Where are your 'tight' stops then?

1352-1253 ? Might seem logical, not many retailers will be prepared to put in more than a 3 point stop but what if you got in at 1348? Are you going to give up 5 points on the trade? Seems you's need some pretty wide targets right?

Visually, the levels are very appealing in hindsight but if you consider the risks and the games played, these areas are not the best entry points. Note also that when you look back at old charts, the failed levels don't stand out much.

The best thing you can do at those levels intraday is - NOTHING. There's simply too much going on there, too many people trying to play it and too many people leaving orders in really obvious places.

The second best thing is to let people get burnt a few times before you enter. Let the first reversal traders and the first breakout traders get burnt first. If retail shorts have been run over 2 or 3 times, you can be sure they will think twice about shorting and are probably considering the long side. This is a much better time to short.

Of course, if you are using the Tape/DOM, sometimes these reversal points are delivered on a plate, but this is not the norm. Most people use charts only and therefore wont benefit from this.

 

[DionysusToast]

The USD/CAD and the S&P are inversely correlated.

I think you've made some good points on S/R and the difference in the short term and the swing and also the nuances of different markets. I think there is a total inability to see the bigger picture here.

Why don't you explain what you mean by this & tell us about the bigger picture, as well as how it is being missed?

Or is actual detail reserved for your paying members?

You did after all bring this up as the "silliest thing you ever read" - yet you have not put in an ounce of detail yet.

Perhaps you can start with:

"Sell at double tops and buy at double bottoms AS they form. These are potentially very profitable opportunities and you can trade them with tight stops. "

 

[DionysusToast]

Like I said - the double tops/double bottoms work well in hindsight as hindsight doesn't show the failures very well.

Attached is 60 min ES chart. We can of course argue where the lines should be - the green ones are potential double bottoms - price bounced off there and came back. At some point, all of these would have looked like perfect double bottoms. Blue ones are potential double tops.

Would the successes have paid for the failures? Would breakout traders with 'tight stops' have fared any better? Would you have not gotten 'shaken out' on that top in early April?

Hindsight rocks!

Still - a trading vendor is saying that this is some of the SILLIEST stuff on this site, without providing any counter argument.

 

[trader_dante]

I read a good analogy somewhere....

If you take a shopping mall, it is impossible to predict where all of the shoppers there will be in the next 15 minutes. If you ring the fire alarm, it is very predictable where all of the shoppers will be in the next 15 minutes.

Here's an idea: If you want to remove the "leeches", try not quoting them as "good" examples of your hypotheses.

Your tireless and rather childish obsession with bad mouthing vendors and then resorting to quoting them to validate your opinion, is ludicrously hypocritcal.

No surprises there ;-)

For those interested: the "good analogy" is from Lance Beggs' Price Action Trader, Vol 2 (only $197) .

Sorry if I've interrrupted the "learning process". I am hoping my link to another vendor doesn't mean the thread has to be closed?

Or is that just when vendors make astute observations and ask questions you can't answer?

As for my two cents on your theories:

There is a very simple reason that S/R doesn't work.

Either it is because the short term trader can't afford to go a tick or two offside, sees a 10 tick move through the level, pukes the high/low in a panic and then laments how unreliable it all is.

Or it's because they received a lesson in drawing it correctly from Stevie Wonder.

As for the "Sell at Double tops..."

Read the introductory paragraph. It's all in the nuances

Looks like I'm not the only one that misses them? ;-)

Over to you.

 

[wackypete2]

Re: The funniest thing you have heard on a trading forum?

This entire thread. So much for staying on topic.

Peter

 

[Liquid validity]

This mp3 file is something you might find interesting:

http://hotfile.com/dl/115545972/74173d6/interview.mp3.html

Good interview :smart:

 

[brettus]

Let's take the S&P, which I agree is a faders market. I agree these levels cannot be ignored too but newbies read this forum and actually want specifics which no-one seems to want to discuss.

If trade A faded the market at resistance and trader B played the breakout (lets presume 1 tick over the line), then both traders would lose over time. Partly this is a symptom of attempting to take a totally objective approach to trading.

There's a link on Dantes post above to "tips from succesful traders" one of them is:



Is this comment REALLY from a succesful trader? If so - what does it suggest, exactly? Let's say you have a 'resistance level at 1350.00' - where do you fade it?

1 - with a limit at 1350.00?
2 - with a limit at 1348.00? To catch the shallow reversals
3 - with a limit at 1352.00? To catch the 'stop run'
4 - with a a stop order at 1348 After it hits 1350, to effectively get in when it's confirmed?

Where are your 'tight' stops then?

1352-1253 ? Might seem logical, not many retailers will be prepared to put in more than a 3 point stop but what if you got in at 1348? Are you going to give up 5 points on the trade? Seems you's need some pretty wide targets right?

Visually, the levels are very appealing in hindsight but if you consider the risks and the games played, these areas are not the best entry points. Note also that when you look back at old charts, the failed levels don't stand out much.

The best thing you can do at those levels intraday is - NOTHING. There's simply too much going on there, too many people trying to play it and too many people leaving orders in really obvious places.

The second best thing is to let people get burnt a few times before you enter. Let the first reversal traders and the first breakout traders get burnt first. If retail shorts have been run over 2 or 3 times, you can be sure they will think twice about shorting and are probably considering the long side. This is a much better time to short.

Of course, if you are using the Tape/DOM, sometimes these reversal points are delivered on a plate, but this is not the norm. Most people use charts only and therefore wont benefit from this.

So, how do you trade exactly? You don't trade S&R by the sounds of things? You trade by the tape? You trade pinbars or reversal patterns off S&R?

 

[DionysusToast]

T_D

You say it is in 'nuances' - are these nuances things you can discuss here or does are they a secret? You say I can't recognise nuance yet you started this saying 'the silliest thing on this forum' was someone saying S/R doesn't work, when what was actually saud was:

"I think it's necessary to give an explanation of why clear support & resistance won't make you money. No matter how you play it, if you play it in an objective (rules based) manner. "

Do you understand the word "objective". I rather think the nuance of that word in the above is lost on you.

You say that there's a vendor making an astute observation. Is that you? In this thread? Really? I've not see you put anything forward yet. I'm trying to put make this a debate by putting up charts and my opinions as to the reasons for the failures.

The simple reason that obvious S/R does not work is that when so many people jump on a trade, it creates the conditions that force the trade to fail. Thus when the S/R is obvious, is is more likely to do what opposite of what the crowd bet it will do.

You can of course put yourself a 4 point stop on your ES reversal off S/R trade and give yourself a mental 10 point target.
- Then there's the trades that stop you out
- Then there's the trades that move your way 5 points, put you in a panic and when they reverse back, you close them out
- Then there's the trades that were never going to make it 10 points anyway, regardless of the fact you made it a mental target.

That excellent R:R ends up a losing proposition, precisely because the trader attempted to engage the market right where everyone else did and so between them they create the conditions that force failure.

1 - entering the market at a point where there is too much going on
2 - giving yourself a tight stop (and by tight I mean 2-3 points on ES)
3 - giving yourself an unrealistic target in the name of R:R
4 - making the proposition even worse by trying to create an objective rules based system that accounts for shallow reversals, to-the-tick reversals and overshoots

 

[ledgy]

This entire thread. So much for staying on topic.

Peter

Sorry Dude,
Probably my fault, not really up on internet forum etiquette, I'm only a binman after all, a damn good one mind!

Perhaps I should dip my toe in the thread starting world because some interesting topics are raised here, the validity of S&R & does it matter whose opposite you?

Good interview by the way DT, however, the fella doesn't rule out the importance of S&R.

Debate to be continued perhaps, wherein the obvious chemistry between you and trader_dante could possibly blossom into full blown love.



Where would I site such a thread?

 

[DionysusToast]

So, how do you trade exactly? You don't trade S&R by the sounds of things? You trade by the tape? You trade pinbars or reversal patterns off S&R?

No pinbars, no patterns. It's not so much WHAT you analyse but how you analyse. Your approach needs to be subjective and not objective.

Everyone wants a set of rules to trade forever. No-one wants to read the market every day and do something different on Tuesday and Monday given a similar set of price action on the two days.

The tape helps because occasionally you will see things that give you a low-risk area to enter the market. Examples of this would be lots of 1-10 lot buy orders going through on the ES tape but which fail to tick price up. This is oftern retail buying with liquidity providers sucking up the buying before a drive down.

For a reversal off resistance, lets say retail shorts take two attempts to play a reversal off a well known area, do you think they will play a third? It's possible. Will they play a fourth, fifth? Probably not as they'll be nursing their wounds. Would a retailer who's shorts have just been stopped out 3 or 4 times now go long? Quite possibly. It's referred to as 'chasing the market', we've all done it and it's painful.

The first few attempts at shorting the resistance effectively create a price 'magnet' higher up and price moves to it in the abscense of a stronger 'magnet' lower down. What happens when shorts are bruised & there is no further attempt to short the market ? Nothing else created higher up to act as a magnet. Price will more than likely move downwards.

Lack of sellers created the conditions that caused the market to go down. :-0 :whistling I know the reaction this will get but I don't care.

The people that got bruised going short are now long. What will they do when they see price move down - yes - they'll now sell BUT this time closing out a position and not creating anything to attract price up.

The market is very efficient at finding traders achilles heel. This is what it's good at. Whilst it's doing this, it creates opportunities for those that aren't bound by a rigid, fixed ruleset.

 

[DionysusToast]

BTW Brettus - that chart you posted is a very good example.

If your trading package has a 'step through' or 'replay' feature, you should pick another bank and on it's daily chart, mark off the Support points as you replay each day.

So - click through one day at a time & mark off the points in the chart. You will see a lot of difference between lines you draw in real time and lines you draw in hindsight.

I've drawn in some more - are they unreasonable?

 

[brettus]

BTW Brettus - that chart you posted is a very good example.

If your trading package has a 'step through' or 'replay' feature, you should pick another bank and on it's daily chart, mark off the Support points as you replay each day.

So - click through one day at a time & mark off the points in the chart. You will see a lot of difference between lines you draw in real time and lines you draw in hindsight.

I've drawn in some more - are they unreasonable?

Unreasonable by the time displacement between each point and the distance between the high and the marked pivot point. If my support is weekly, i would say yours is daily, and Barclays works better on a Weekly support than Daily. My Support is at 255 and resistence 390ish. Yours is tighter say 60p wide max.

S&R works better on higher timeframes, so in order to find a balance between the number of trades and win loss ratio, you have to determine the best time frame for that financial instrument.