Practical Application of "Price, (Volume), Support, Resistance, Demand, Supply "

[Remiraz]

Practical Application of "Price, (Volume), Support, Resistance, Demand, Supply "

Dbphoenix has an excellent thread about the use of Price, Volume, Supply/Demand in determining Support/Resistance areas.

This thread will try to use the material posted in that thread to craft a workable discretionary "system" of sorts. Anyone interest in or has any ideas about the application of Dbphoenix's analysis in real trading condition please contribute.

Let me try to get the ball rolling with this partially done ES system. I know a lot of the parts is incomplete and the definitions/steps vague but I'll try to update asap. The key to this system is of course mastering Price-Volume analysis.

I wonder if I can eventually piece together everything to get a complete system?

ES Support/Resistance System *Under Construction*

Basic Rules:

-Trade ONLY the price reaction at Support/Resistance levels.
-Use Price, Volume and Drawing of lines on charts. (Trendlines, Sup/Res etc)
-No trades during Lunch Hour (I'll have to clarify from what time to what time is lunch...)

Price Reactions at Sup/Res:

-Price rebounce after hitting a Sup/Res area.
-Price breakouts from a Sup/Res area.
-Price breakouts from Coils.

Where To Find Reactions:

-Possible Support/Resistance = The Swing Low and High in an up/down trend.
-Old Support/Resistance = Failed test of a Swing Low/High.
-Potential Support/Resistance = Old Support/Resistance Level.
-Coils = Sup/Res keep getting closer and closer to each other.

Actual Trading Overview:

-Support/Resistance bounce : Use Price-Volume analysis when price approaches sup/res levels to determine if the potental sup/res is going to be an actual one, wait for price to actually bounce to confirm analysis, use Price-Volume analysis to confirm the move back to potential sup/res levels.

-Sup/Res Breakouts : Price breaks out of Sup/Res levels. Use Price-Volume analysis to determine if Breakout will follow through. Wait for actual confirmation from price and volume before entering, not entering at the first Candlestick that broke sup/res.

-Coils : If Sup/Res levels move closer and closer into a "coil", wait for a breakout up or down. Use Price-Volume analysis to determine if breakout has any strength

Entry/Exit/StopLoss/TakeProfit:

Style 1 : Scalping Style
-Enter after bounce/breakouts.
-S/L and T/P "scalping style". Take profit fast. Stop loss tight.

Example :
S/L = 1 pt max. Or when Price-Volume analysis does not confirm trade direction. Or S/L at Sup level if that is less than 1 pt awat.
T/P = 1.5 pt. Or when Price-Volume analysis no longer confirm trade direction.

(This is just an example, I know that S/L andT/P depends on the size of the range also. If the distance between Sup and Res is 1.5 pt, its quite hard to T/P 1.5 pt!)

Style 2 : Let Profit Run
-Enter after bounce/breakouts
-T/P = Let profit run. Wait for anaylsis to not confirm current trade direction to exit.
-S/L = At the Sup/Res level from which the price broke out or bounced. Wait for another chance if it happens. Or S/L when Price-Volume analysis no longer confirm trade direction.

 

[sulong]

Remiraz,
If you don't mind a suggestion or two, I'll offer them.
Look around in your charts, and find one that you believe is a picture perfect trade. Draw your s/r zones on it, circle the volume bars and price bars, that alerted you to the trade, mark where you would have entered and placed your stoploss.
Do the same thing on the chart, at the area that alerted you the trade was coming to an end, and also where the trade actually ended. Then post it, here at the beginning of your thread.

Also, make a cheat sheet of your short hand, it's very easy to get lost if you don't have a way to remind your self what your short hand was supposed to mean.
For instance... pdh = previous day high......s = support.....supy = supply, and so on.

 

[Remiraz]

Remiraz,
If you don't mind a suggestion or two, I'll offer them.
Look around in your charts, and find one that you believe is a picture perfect trade. Draw your s/r zones on it, circle the volume bars and price bars, that alerted you to the trade, mark where you would have entered and placed your stoploss.
Do the same thing on the chart, at the area that alerted you the trade was coming to an end, and also where the trade actually ended. Then post it, here at the beginning of your thread.

Also, make a cheat sheet of your short hand, it's very easy to get lost if you don't have a way to remind your self what your short hand was supposed to mean.
For instance... pdh = previous day high......s = support.....supy = supply, and so on.

Thanks a lot dude. Of course I don't mind suggestions.

 

[dbphoenix]

One other suggestion:

Put some more thought into what you mean by "support" and "resistance". S/R can be major or it can be relatively trivial. One can even call the top and bottom of a tick bar "S/R". If what you're calling S/R are only 1 or 2 points apart, it's unlikely that those levels represent very many trades and therefore important S/R. If so, the idea of S/R really doesn't apply and the value of it is unlikely to help your trades.

 

[Remiraz]

One other suggestion:

Put some more thought into what you mean by "support" and "resistance". S/R can be major or it can be relatively trivial. One can even call the top and bottom of a tick bar "S/R". If what you're calling S/R are only 1 or 2 points apart, it's unlikely that those levels represent very many trades and therefore important S/R. If so, the idea of S/R really doesn't apply and the value of it is unlikely to help your trades.

Thanks dbphoenix,

Yes I'll need somemore screen time before I can come up with a precise definition of Sup/Res that I can use to trade with.
Anyone want to contribute theirs?

dbphoenix, do you believe a person can be profitable trading just sup/res/coils like I outlined above?

 

[sulong]

Remiraz,
Where are those charts?
Are you going to follow through with this? If you are, I'm looking forward to it.

Good luck.

Thanks a lot dude. Of course I don't mind suggestions.

 

[dbphoenix]

Thanks dbphoenix,

Yes I'll need somemore screen time before I can come up with a precise definition of Sup/Res that I can use to trade with.
Anyone want to contribute theirs?

dbphoenix, do you believe a person can be profitable trading just sup/res/coils like I outlined above?

Generally speaking, one can be profitable trading S/R, but since you haven't defined them, I have no idea whether you can or not.

As to contributions, S/R is discussed extensively in the PV thread.

 

[Remiraz]

Remiraz,
Where are those charts?
Are you going to follow through with this? If you are, I'm looking forward to it.

Good luck.

Hi, thanks for the interest.

This thread might just die right now because I am beginning to believe that volume(buying/selling pressure) is a lagging indicator for the index futures I'm learning to trade.
I realised Index futures' supply and demand reacts according to the underlying index, thus making volume analysis rather redundant. (If SPX goes up, buying pressure follows)

Or maybe my understanding of dbphoenix's topic isn't good enough to piece together a working system yet.

I'll do more work about this and see how it goes.

 

[firewalker99]

Hi Remiraz, it's been over a month now, have you been able to dig deeper into the subject?

I hope so, because I'm looking forward to a continuation of this thread. I think you could attract some more comments by putting up a chart.

What time frame are you using to identify support/resistance?

 

[firewalker99]

A couple of questions:

"-Possible Support/Resistance = The Swing Low and High in an up/down trend."
-> on what time frame do you base that trend? are you trading intraday?

"-Old Support/Resistance = Failed test of a Swing Low/High."
-> if you say old, do you mean no longer valid?

"-Potential Support/Resistance = Old Support/Resistance Level."
-> how long ago is "old"? how many times has price reversed in order for you to call it S/R?

"-Coils = Sup/Res keep getting closer and closer to each other."
-> So diagonale trendlines are also S/R to you (depends on your definition of course, some call it supply/demand, other use it to identify resistance)...

 

[PKFFW]

Actually it's been over 2 years by the look of it. Or is something wrong with my date stamp?

 

[firewalker99]

Actually it's been over 2 years by the look of it. Or is something wrong with my date stamp?

Oops, I didn't look at the year lol
must have been staring at this screen for too long