Price, (Volume), Support, Resistance, Demand, Supply . . .

[bracke]

The volume in and of itself would not imply a fall. Vol reflects only the number of shares/contracts traded. Demand pushes price, but the series of lower highs suggested that demand was insufficient to push price (if volume had been higher, one could assume a greater selling pressure).

Notice also that the bars get smaller and smaller, suggesting that equilibrium is being reached. At that point, you figure the probability of an upside breakout or a downside breakdown.

Given the soft demand and the increasing resistance, the line of least resistance is most likely down. However, one must also be prepared to fade his own setup and take the long side if that turns out to be necessary (most traders will allow themselves to be stopped out, get depressed about being wrong, and never consider the criteria for taking the opposite side).

Thank you for your explanation

The chart at approx 11.00 shows vol rising and the price falling., would this have suggested a good time to go short ?.

Regards

bracke

 

[dbphoenix]

Thank you for your explanation

The chart at approx 11.00 shows vol rising and the price falling., would this have suggested a good time to go short ?.

Regards

bracke

Depends on what you select as the trigger, the entry point, and the stop, then on the results of your tests of the setup.

 

[bracke]

Depends on what you select as the trigger, the entry point, and the stop, then on the results of your tests of the setup.

Bearing in mind the title of this thread,it suggets that support/resistance would provide the answers

Regards

bracke

 

[dbphoenix]

Bearing in mind the title of this thread,it suggets that support/resistance would provide the answers

Regards

bracke

Since S/R represent the levels at which one is most likely to find a trade, that's part of it. But you have to decide if you're going to enter more or less at random, at the break of the TL, at a break of the bottom of the bar, at a break of the swing low, etc, where you're going to place your stop, how much risk you're willing to assume, whether or not you're going to use a conditional stop or a time stop, etc. IOW, there's a lot more to it than just "go short at R".

 

[TheBramble]

There's a great link somewhere (I will dig it up) which describes a loser-trader 'hunting' a range and placing trades at completely the 'wrong' times in relation to Support & Resistance.

Free part of a 'pay for the final section' manual by a Pablo Montenegro. Does anyone else remember which other thread this came up in?

Particularly relevant to this line of thought.

Got it...

www.precisefutures.com/free_doc/doc_1.php

There isn't a thing out inept friend here hasn't done that I haven't done. I real laugh of recognition at so many points.

 

[bracke]

Since S/R represent the levels at which one is most likely to find a trade, that's part of it. But you have to decide if you're going to enter more or less at random, at the break of the TL, at a break of the bottom of the bar, at a break of the swing low, etc, where you're going to place your stop, how much risk you're willing to assume, whether or not you're going to use a conditional stop or a time stop, etc. IOW, there's a lot more to it than just "go short at R".

I currently use Moving Averages and Pivot Points to assist in ascertaing Entry & Exit and S/R.

My aim is eventually to trade using price and volume and these would determine the entry of the trade and the exit. Whether I will ever attain my aim is another matter

What is IOW ?

Regards

bracke

 

[dbphoenix]

I currently use Moving Averages and Pivot Points to assist in ascertaing Entry & Exit and S/R.

My aim is eventually to trade using price and volume and these would determine the entry of the trade and the exit. Whether I will ever attain my aim is another matter

What is IOW ?

Regards

bracke

What evidence do you have that MAs provide S/R? How are you defining "pivot points"?

 

[bracke]

What evidence do you have that MAs provide S/R? How are you defining "pivot points"?

I don't use MA'S to provide S/R but to assist my entry and exit points when I think S/R has been reached.

Pivot Points as per the formula that gives a Pivot and R1, R2, R3 AND S1, S2, S3.

Regards

bracke

 

[dbphoenix]

I don't use MA'S to provide S/R but to assist my entry and exit points when I think S/R has been reached.

Pivot Points as per the formula that gives a Pivot and R1, R2, R3 AND S1, S2, S3.

Regards

bracke

And what evidence do you have that these PPs provide S/R? Is there any reason to believe that a substantial number of trades have taken place at these levels over time?

 

[bracke]

And what evidence do you have that these PPs provide S/R? Is there any reason to believe that a substantial number of trades have taken place at these levels over time?

You are taking me to task here.

I do not have any hard, firm evidence that pivot support and resistance levels do actually provide good s/r levels. But neither do I have evidence that any other indicator does either.

I have not been trading long and needed something to set s/r levels. Since I have been using them and in conjunction with ma's they have proved useful and my success level has improved considerably ( not difficult as it was not very good before ) My net points are plus.

As I said earlier I would like to trade without all indicators but I am a long way from doing that.

If you have suggestions how I might otherwise trade I am more than willing to read them. I keep an open mind on trading strategies and methods

Regards

bracke

 

[dbphoenix]

You are taking me to task here.

Not really. But it's important to focus on what Magee calls the "territory" -- the reality -- rather than the map, i.e., our representation of that territory. The territory is prices paid. Our maps are our representations of it: MAs, Fib ratios, MACD, patterns, etc.

S/R are found where important buying/selling have taken place, important enough to have turned price. Therefore, the first place to look for S/R are those price points and/or price levels. Anything else is a representation, and that representation may have nothing to do with the reality.

 

[bracke]

Not really. But it's important to focus on what Magee calls the "territory" -- the reality -- rather than the map, i.e., our representation of that territory. The territory is prices paid. Our maps are our representations of it: MAs, Fib ratios, MACD, patterns, etc.

S/R are found where important buying/selling have taken place, important enough to have turned price. Therefore, the first place to look for S/R are those price points and/or price levels. Anything else is a representation, and that representation may have nothing to do with the reality.

I fully agree with your first paragraph.

It seems to me that Indicators are often self fulfilling. Large numbers of traders operate to them and low and behold they often occur.

Your second paragraph

What is considered 'important buying and selling' and how do I find them. Are you able to give me examples please. ( My turn to ask the questions ) I appreciate your time and attention.

Regards

bracke

 

[dbphoenix]

What is considered 'important buying and selling' and how do I find them. Are you able to give me examples please.

Important support and resistance levels can be found at those levels or zones in which a relatively large number of trades took place. These trades need not have occurred on only one occasion. In a base, for example, when "big money" is accumulating shares, these trades take place over an extended period of time over a narrow range of prices. Therefore, all told, many trades have taken place even though volume has been low.

Many trades can also occur in a broader range over a period of time which may be shorter or longer than an accumulative base. For example, if a given level is hit repeatedly and price is "supported" there by professional buying, that level becomes strong support, even though the number of shares traded during any one occurrence are not impressive.

Ditto all of this for resistance. There will be a level at which shares or contracts or whatever are repeatedly sold, though the reasons for the sales may be difficult if not impossible to determine. These sales can take place in a "zone of distribution" (see the Demand pdf posted at the beginning of the thread). Or they can take place over time when a particular level is repeatedly tested.

Support and resistance, then, can be found in a swing point or the top or bottom of a reaction, but it is highly unlikely that the support or resistance found there will be important as it doesn't represent enough previous trades. In other words, there just aren't enough traders who care about it to make it important.

For the same reason, whatever support and resistance seem to be found with indicators or trendlines are most likely coincidental since these other lines don't represent previous trading activity. In fact, they're constantly moving.

The term "law of reciprocity" or "principle of reciprocity" is sometimes applied to the tendency of support to become resistance when it's penetrated, or vice-versa. However, "law" and "principle" are a bit high-toned to apply to this concept. There is nothing absolute about S/R. In fact, S/R can be quite soft. For example, if a given level is tested repeatedly as support, those holders who bought there may eventually begin to become concerned over these tests and over the fact that whatever they bought isn't going anywhere. Some of them may decide to sell some of all of whatever they bought if and when another test occurs. In this way, support fails.

Even "failure", however, may not be as important as first thought. S/R isn't, and need not be, rigid. In fact, it is quite flexible. A level or line can be penetrated to what seems to be an intolerable degree, but if price rebounds to that level or line and finds S/R there yet again, then that level or line can become even "stronger" (more impotant) than it was before, which is why it's better to think in terms of S/R "zones" than of specific prices.

S/R may, in fact, be too soft for some traders to fool with. However, if one understands that correctly-drawn S/R lines represent levels or zones in which a large number of trades took place, and that one can expect important action to take place at important S/R, he can then avoid wasting his time on relatively trivial trades and prepare himself to take advantage of more potentially profitable opportunities.

As for examples, look over the last two charts I posted and find what you consider to be "important" S/R.

 

[bracke]

Important support and resistance levels can be found at those levels or zones in which a relatively large number of trades took place. These trades need not have occurred on only one occasion. In a base, for example, when "big money" is accumulating shares, these trades take place over an extended period of time over a narrow range of prices. Therefore, all told, many trades have taken place even though volume has been low.

Many trades can also occur in a broader range over a period of time which may be shorter or longer than an accumulative base. For example, if a given level is hit repeatedly and price is "supported" there by professional buying, that level becomes strong support, even though the number of shares traded during any one occurrence are not impressive.

Ditto all of this for resistance. There will be a level at which shares or contracts or whatever are repeatedly sold, though the reasons for the sales may be difficult if not impossible to determine. These sales can take place in a "zone of distribution" (see the Demand pdf posted at the beginning of the thread). Or they can take place over time when a particular level is repeatedly tested.

Support and resistance, then, can be found in a swing point or the top or bottom of a reaction, but it is highly unlikely that the support or resistance found there will be important as it doesn't represent enough previous trades. In other words, there just aren't enough traders who care about it to make it important.

For the same reason, whatever support and resistance seem to be found with indicators or trendlines are most likely coincidental since these other lines don't represent previous trading activity. In fact, they're constantly moving.

The term "law of reciprocity" or "principle of reciprocity" is sometimes applied to the tendency of support to become resistance when it's penetrated, or vice-versa. However, "law" and "principle" are a bit high-toned to apply to this concept. There is nothing absolute about S/R. In fact, S/R can be quite soft. For example, if a given level is tested repeatedly as support, those holders who bought there may eventually begin to become concerned over these tests and over the fact that whatever they bought isn't going anywhere. Some of them may decide to sell some of all of whatever they bought if and when another test occurs. In this way, support fails.

Even "failure", however, may not be as important as first thought. S/R isn't, and need not be, rigid. In fact, it is quite flexible. A level or line can be penetrated to what seems to be an intolerable degree, but if price rebounds to that level or line and finds S/R there yet again, then that level or line can become even "stronger" (more impotant) than it was before, which is why it's better to think in terms of S/R "zones" than of specific prices.

S/R may, in fact, be too soft for some traders to fool with. However, if one understands that correctly-drawn S/R lines represent levels or zones in which a large number of trades took place, and that one can expect important action to take place at important S/R, he can then avoid wasting his time on relatively trivial trades and prepare himself to take advantage of more potentially profitable opportunities.

As for examples, look over the last two charts I posted and find what you consider to be "important" S/R.

Thank you for your reply, it is much appreciated.

I tried to take a screen print of your charts and use them but I am unable to get all of the chart on to my reproduced chart, so I will have to try and put into words what I would like to show on the charts.

Chart shown in your post 56

1 Buying support to 1481, volume drops off, price falls away in the absence of buying and sellers come in with large volume to leave price at 1469, Volume falls away and price rises on lower volume buying Support 1469 Resistance 1481.

2 Price drifts sideways on low volume, price starts to rise on an increase of buying volume, then a large volume spike to push the price over the 1481 resistance to 1483. Volume decreases but price holds indicating few sellers and support at 1481.

3 Just before the next large volume spike the volume is low but price moves up, then the largest volume spike of the day takes the price to 1484.5. Volume drops but price holds.

4 Another volume spike takes the price to 1490. Price remains at or about that level.

CONCLUSION

1481 appears to be the support resistance level but I am unable to identify a s/r zone

Chart shown in you post 66

1 Opens with buying volume rising taking price to 1496.

2 Vol declines as does price to 1488

3 Slight increase in vol rises price to 1494.

4 Increase in vol takes price down

5 Vol falls and price rises ( does this indicate that the price wants to stay here ? )

6 Price starts to drop on low volume, volume comes in and price drops further to 1482.

7 Vol drops off and price moves sideways.

8 Increase in vol just after 12.45 pushes price down to 1480.

9 Vol drops off and price rises to 1482.

10 Large drop in price to 1476 on medium vol, vol increases and price holds and then gradually rises on lowish vol.

11 Vol starts to rise and just before 14.45 price drops to 1476, followed by vol spike which pushes price to the candle low of 1474 but candle closes up at 1476 ( it doesn't want to drop further ).

12 Vol increases as does price to 1481 before reversing down to 1474.

CONCLUSION

Surprise, surprise its 1481 again. Heavy vol just before 13.45 to push price down past the 1481 s/r level and failure to break up past 1481 at 15.30

There appears to be some resistance at 1476 but I would not put my hair shirt on it

Again I am not seeing a s/r zone.
That was an interesting exercise which I tried to complete without looking ahead to the eventual outcome. It would be very interesting to do it in real time and check my accuracy.

In the first 2 paragraphs of your post you refer to a large number of trades over a period of time and s/r over a period of time but vol is not high. How does one identify when this is taking place ?


Regards

bracke

 

[dbphoenix]

In the first 2 paragraphs of your post you refer to a large number of trades over a period of time and s/r over a period of time but vol is not high. How does one identify when this is taking place ?

Have you looked over the Demand/Supply file I posted toward the beginning of the thread (also available at my Yahoo site)?

 

[bracke]

Have you looked over the Demand/Supply file I posted toward the beginning of the thread (also available at my Yahoo site)?

Apologies, printed, skimmed but not read which I will do in the next few days

What of my chart analysis and failure to find the zones ?

Regards

bracke

 

[dbphoenix]

What of my chart analysis and failure to find the zones ?

Don't worry about success or failure. There's no end to the study of the dynamics of S/R and buying/selling pressures/waves. It's a process. And since this isn't a quiz, I'd rather leave everything open for now so that anybody who's interested can comment (if no one is, then we'll take another look).

In the meantime, watch the bars form in real time. You get a very different sense of buying/selling pressure than you do by studying volume and price bars in hindsight.

By the way, don't get your head stuck in the trees. Important S/R can be found at the PDH, PDC and PDL, particularly if you open within the PD range. So back off and look at the forest: days, weeks, even months (note that the NDX has been finding S at a line stretching back to last December).

 

[bracke]

Is PD price divergence ? If so don't understand you comment

Regards

bracke

 

[dbphoenix]

Previous Day

 

[bracke]

Just looked at NDX

Support from December at approx 1400, dropped at begin of August to next support at 1300 if that fails next support appears to be 1200.

Regards

bracke