The funniest thing you have heard on a trading forum?

[DionysusToast]

Brettus - at what point were you able to draw in that support line? Mid 2009, early 2010, later 2010 or have you put that on there recently (not sure how long you've been trading).

Are you saying that there is no other point on that chart that would have been considered support at any time in the past, without the benefit of hindsight? No support lines have been removed from this chart, just that one has been drawn on, perhaps a few years ago?

 

[SanMiguel]

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.

It's not necessarily that SR works better but the majority of the big money operates at the higher TF level...if they are even bothering to view charts that is...then it will be on the Daily, Weekly, and Monthly levels. All those guys pissing about at the 5min TF will get caught up in a lot of crap with being very careful about why they are buying support during a downmove.

 

[brettus]

Brettus - at what point were you able to draw in that support line? Mid 2009, early 2010, later 2010 or have you put that on there recently (not sure how long you've been trading).

Are you saying that there is no other point on that chart that would have been considered support at any time in the past, without the benefit of hindsight? No support lines have been removed from this chart, just that one has been drawn on, perhaps a few years ago?

I saw this chart back in November 2010, when the shares desk pointed it out to me. This is just one of the stocks that i remember. You don't have to believe this if you don't want to.

The lines you have drawn as far as i'm concerned are levels of support but on a shorter timeframe, and therefore more likely to fail, considering they are very close to my support line, they were all gonna break eventually, but as long as your stop is below my level, 255, you would have been ok. There's alot that you can see with the benefit of hindsight there, but if the price doesn't bounce off 390p, i'll quit trading. Sell at 390p with a 40p target. (350p) Is that the best trade out there for this stock. Nope. Safest trade would be to buy at 350p when it comes back off 390p because that's going with trend.

All S&R doesn't work, but i wouldn't dismiss it.

 

[DashRiprock]

well look this is basically a *******isation of a PM i was goin to send someone about chart reading and scalping - if you have recently PM'd me then think if the original recipient could be you;

there is a quote by abraham maslow or adrian maslow or whatever maslow. Maslow was def his last name, fo' sho'. anyway the quote is "if the only tool you have is a hammer, you tend to see every problem as a nail".

(Which is basically what I am going to say here and kill the thread in a pwnage of sageness.)

If the only tool you have for making trading decicions are graphs of price over time (or the various incarnations thereof), then you tend to think that every problem in trading (and every trading decision that you will ever have to make) can be solved by correct applications of graphs.

*FLASH: Probably not.

Double tops have their merit. Trendline breaks have their merit. But on there own they are a sandwich short of a picnic, and so are you if graphs are the only thing you look at.

Look, in the very short term markets are driven by volumes and liquidity. In the long term, markets are driven by Joe Bloggs and how he spends his wage packet. You can look at graphs on a per trade appropriate perodicity , or on a per-cycle appropriate periodicity - it is well quoted that graphs of market activity are " fractal" in nature - that is, they look the same over all timeframes...

Well, yes this is true, they do look the same. But graphs are complimentary on both extremes - it's like salt and pepper in a recipe, use it right and it can compliment the ingredients, but you won't make a decent dish out of salt and pepper alone.

So S+R on their own (and using them without tasting the dish) are about as rewarding as a plate full of salt and pepper. NOT.



Now watch this drive.

 

[brettus]

So S+R on their own (and using them without tasting the dish) are about as rewarding as a plate full of salt and pepper. NOT.

I think this is all that needs to be said.

 

[DashRiprock]

I think this is all that needs to be said.

dont forget the "now watch this drive" part

 

[brettus]

dont forget the "now watch this drive" part

Didn't get that bit so left it out...

 

[DashRiprock]

http://www.youtube.com/watch?v=Z3p9y_OEAdc&feature=related

 

[SanMiguel]

Didn't get that bit so left it out...

"You teach a child to read, and he or her will be able to pass a literacy test."

This just comical reading if you want to waste 5mins or so: http://politicalhumor.about.com/od/bushquotes/a/dumbbushquotes_3.htm

 

[DionysusToast]

Look, in the very short term markets are driven by volumes and liquidity. In the long term, markets are driven by Joe Bloggs and how he spends his wage packet. You can look at graphs on a per trade appropriate perodicity , or on a per-cycle appropriate periodicity - it is well quoted that graphs of market activity are " fractal" in nature - that is, they look the same over all timeframes...
.

Indeed.

Retail traders create pools of liquidity with their predictable trading patterns and this has an inevitable consequence.

It's a bit like saying.... "I'm going to short lions. I'm leaving this gazelle over there with all those other gazelles as a stop loss" and then being shocked that the lions ate your gazelles and then carried on where you thought they were off to anyway but with fuller stomachs.

By leaving your gazelle/stop loss there, you created the conditions that pulled price to that area.

A lot of people blame 'them' for running stops. It's not 'them' at all - it's YOU - if you put liquidity out there at a really attractive price, it's YOU that's causing the stops to be run. Any marketplace would find those attractive prices and trade them - fruit market, flesh market, stock market.

The big difference is HOW the market knows that liquidity is there. In a fruit market, you might get a whisper that apples are being sold off cheap in row 3.

In a financial market, retail traders entry points are at times predictable as are their stops, there doesn't need to be word of mouth. Plus - with the right tools, you can actually see the little guys jumping in.

 

[Jason101]

The funniest thing I have heard on a trading forum is…

Set ideas on what does and does not work.

From the Market Wizards through to having a drink in a pub with Andrei Knight I would estimate I have heard about 160 full time profitable traders’ strategies. Yes a lot would use the dome/ladder and some would not. Andrei Knight described to me how he uses support and resistance, Fibonacci and price action around the s/r. (I showed him no respect back buy drinking to much and calling him Frank!)

Out of all these traders not two of them traded the same way.

So it really makes me laugh when I read the above types of posts.

By the way I use to trade using support and resistance a long time before computers were common places in the home. My method was when a stock came back down to a price I would buy it, after it had gone up after a few days I would sell it, this was without ever seeing a graph of a stock in my life.
(That makes me wonder whether institutions and companies buying stock tell the traders – yes buy at any price you like, and if it’s a minnow don’t worry about putting the price up on us, or if they specify a certain price range to accumulate over a period of time i.e. reinforcing support and resistance .)

I know little about the dome/ladder (in my mind it is for the lower timeframes) but I have heard of many traders who would not trade without it.

The sad and embarrassing thing is that I tried to get a friend who trades, to join in with T2W. He posted his first post, and then deleted it (and looked into removing his membership) after reading these above types of posts saying how childish the members were and he was not interested in being a school boy in the playground surrounded by childish squabbles.

 

[DionysusToast]

Interesting points Jason.

Let's say you have a trader that makes money consistently in day trading by fading people that trade clearly defined S/R in an objective manner. Now - if that trader makes money, isn't it by definition proving that the people he's fading are NOT making money?

Also - is your mind open enough to say that people trading based on astrology could be making money?

Finally - it seems you are saying that your edge (simply buying support without any supporting factors) is in doing what most retail traders do. Who is on the other side of your trades and why are they transferring money into your account?

Serious questions.

 

[Bullishbear]

Great post Jason!

 

[brettus]

Indeed.

Retail traders create pools of liquidity with their predictable trading patterns and this has an inevitable consequence.

It's a bit like saying.... "I'm going to short lions. I'm leaving this gazelle over there with all those other gazelles as a stop loss" and then being shocked that the lions ate your gazelles and then carried on where you thought they were off to anyway but with fuller stomachs.

By leaving your gazelle/stop loss there, you created the conditions that pulled price to that area.

A lot of people blame 'them' for running stops. It's not 'them' at all - it's YOU - if you put liquidity out there at a really attractive price, it's YOU that's causing the stops to be run. Any marketplace would find those attractive prices and trade them - fruit market, flesh market, stock market.

The big difference is HOW the market knows that liquidity is there. In a fruit market, you might get a whisper that apples are being sold off cheap in row 3.

In a financial market, retail traders entry points are at times predictable as are their stops, there doesn't need to be word of mouth. Plus - with the right tools, you can actually see the little guys jumping in.

I think you give retail traders too much credit, for actually trying to buy support and resistence, most don't. Alot don't even know that you can sell before you buy.

 

[Doomberg]

The sad and embarrassing thing is that I tried to get a friend who trades, to join in with T2W. He posted his first post, and then deleted it (and looked into removing his membership) after reading these above types of posts saying how childish the members were and he was not interested in being a school boy in the playground surrounded by childish squabbles.

I nearly cancelled my membership on my 1st week, i posted about the Bank Of Ireland saying i that i think its time to buy whats your views? I was then called a cnut / deluded and was also accused of being involved with BOI... people seemed to pipe down when there was a 47% increase in the SP the next day, but at the end of the day thats forums for you... there will always be people looking to put others down, there will always be arguments simply because of different opinions... arguments are often amplified because of this syndrome:

 

[DionysusToast]

I saw this chart back in November 2010, when the shares desk pointed it out to me. This is just one of the stocks that i remember. You don't have to believe this if you don't want to.

The lines you have drawn as far as i'm concerned are levels of support but on a shorter timeframe, and therefore more likely to fail, considering they are very close to my support line, they were all gonna break eventually, but as long as your stop is below my level, 255, you would have been ok. There's alot that you can see with the benefit of hindsight there, but if the price doesn't bounce off 390p, i'll quit trading. Sell at 390p with a 40p target. (350p) Is that the best trade out there for this stock. Nope. Safest trade would be to buy at 350p when it comes back off 390p because that's going with trend.

All S&R doesn't work, but i wouldn't dismiss it.

I do believe you - in fact, you have done more than any other person on this site to defend playing S/R. Most people just stop at just shouting loudly about it because "it just works".

This is merely a debate with argument & counter argument. If people like you add 'meat' to the topic, it makes it better in my opinion. If people add to the conversation without actually arguing their point, nothing is added.

Did you trade this already or is it on your watchlist?

I'd say hanging up your hat if it doesn't work out is a bit severe. For the trade you'd like here - what would be your stops & targets? What percentage of these would you expect to be stopped out on vs succesful?

Would you consider an early entry or just go in with a limit as price came to you? If you didn't get a fill on the limit order - would you get back in later as it moved away from you?

Serious questions...

 

[DionysusToast]

I think you give retail traders too much credit, for actually trying to buy support and resistence, most don't. Alot don't even know that you can sell before you buy.

Why would you think that? It's the number 1 topic in every book ever written about TA trading.

I would wager that if you took every unprofitable trader on the planet, the one thing they would all agree on is that S/R 'works'.

This is one of the reasons there is so much gameplay in those areas.

 

[dmt257]

DionysusToast, have any chart examples? I want to understand this.

 

[brettus]

I do believe you - in fact, you have done more than any other person on this site to defend playing S/R. Most people just stop at just shouting loudly about it because "it just works".

This is merely a debate with argument & counter argument. If people like you add 'meat' to the topic, it makes it better in my opinion. If people add to the conversation without actually arguing their point, nothing is added.

Did you trade this already or is it on your watchlist?

I'd say hanging up your hat if it doesn't work out is a bit severe. For the trade you'd like here - what would be your stops & targets? What percentage of these would you expect to be stopped out on vs succesful?

Would you consider an early entry or just go in with a limit as price came to you? If you didn't get a fill on the limit order - would you get back in later as it moved away from you?

Serious questions...

So if i was to buy at 350p, i would expect it come back to 350p before bouncing, if it goes to 353p and rallys 20p, i would consider that i missed the entry, so i would pull my order. If it fell below 340p i would consider myself wrong, even i thought it was trading into more support, because if it goes to 340p, theres a good chance it falls to 310p. Target would be 390p.

I don't need a massive win ratio on this, but i expect to be right 50% of the time at least.

I do believe that banks go chasing for liquidity, because that's the only way they can make real money, but it takes alot to make it worthwhile. Theres a cost gunning for stops, moving the price there. In the FX market it takes more than 100mio to move the market 10 ticks, if you're gunning for stops 50 points away, you're talking over a yard of buying or selling to get the price there and the stops have to be worthwhile, because there's no point moving the price 50 points if when you go to get out of it you move the price back 50 points.

 

[SanMiguel]

So if i was to buy at 350p, i would expect it come back to 350p before bouncing, if it goes to 353p and rallys 20p, i would consider that i missed the entry, so i would pull my order. If it fell below 340p i would consider myself wrong, even i thought it was trading into more support, because if it goes to 340p, theres a good chance it falls to 310p. Target would be 390p.

I don't need a massive win ratio on this, but i expect to be right 50% of the time at least.

I do believe that banks go chasing for liquidity, because that's the only way they can make real money, but it takes alot to make it worthwhile. Theres a cost gunning for stops, moving the price there. In the FX market it takes more than 100mio to move the market 10 ticks, if you're gunning for stops 50 points away, you're talking over a yard of buying or selling to get the price there and the stops have to be worthwhile, because there's no point moving the price 50 points if when you go to get out of it you move the price back 50 points.

There is a volume and waterfall effect to add, it's not just simply gunning stops all the time. In that interview DT posted, the guy talks about everyone wanting to buy the bottom but no-one selling the bottom. I'm not sure I totally agree with that as that is the whole basis of greed and fear. When people see support breaking there is going to be a greed factor into selling the break out of the panic move and that also brings in a volume and waterfall effect where stops and limits for that matter are all hit around the same place. Extra volume in a downmove will push through a support quite easily before either buy limits are hit (=BUY), existing shorts are covered (=BUY), or buys at the red line have their stops hit (=SELL).

Example of EU attached. Actually the EU chart is an excellent example of SR working (on the Daily).
To highlight a less liquid pair where the spikes are greater, GU can be checked out.
I would go as far as to say most traders stops are 1, 1.5, 2 pts on the ES so it's no wonder they don;t have much success at SR areas as volatility is going to take that out much of the time.

Hang on, what thread am I on again?