Are S/R lines usable on an index fund?? ex: QQQ

Lindsaybev

Junior member
31 7
I have been day trading on the QQQ for over a month now. I am using trend lines and support / resistance (S/R) areas along with other candlestick formations to get in and out. I have not been doing poorly using this method, although I am still new and the market has had some VERY strong trending days, so it may just be the current market circumstances. ( I trade on the 2- and 5-minute charts, using higher time frames to mark S/R areas.)

But I am reading a book on S/R so that I continue to hone my skills, and this book just said, "SR does not apply well to market indexes, because no one trades the index (except through limited index options). Since an index represents a broad cross-sample of many stocks, it cannot possess an individual SR. While an index trading range may appear to be acting in the same manner as that of an individual stock, it is not the same.

...an index cannot exhibit the patterns known to belong to individual stocks.
Since the index is a composite of many stocks, including those with disparate trading ranges and trends, there is a washing effect in the index itself. For many technicians, the index is useless for the purpose of evaluating individual stocks, which is what most investors would be expected to use SR to accomplish."

So have I just been lucky or do other traders employ S/R areas on an index etf??
 

tomorton

Legendary member
7,306 975
I don't have enough faith in s/r lines as a factor in trade decisions on any chart to use them at all. So I suppose for me they are as poor an indicator on an index chart as they are anywhere else. But I would not say they performed worse on the index chart than a stock chart.
 

Similar threads


AdBlock Detected

We get it, advertisements are annoying!

But it's thanks to our sponsors that access to Trade2Win remains free for all. By viewing our ads you help us pay our bills, so please support the site and disable your AdBlocker.

I've Disabled AdBlock