resistance is not futile...but assessing its potential might be...

splashy

Well-known member
368 67
The more i trade, the more i disregard indicators in favour of everything price action can tell me except i want to speak its lingo better. Sometimes i see good profits head off into the sunset when i've had a good signal that i chose not to pursue because of some s/r that i have drawn onto my chart. So maybe i'm overdoing it, being a little overcautious or just plain misstaken - no one gets it right every time but...hence, what makes effective resistance or support?

I've trawled through some of the older threads and had a little insight but i'm fed up trawling and anyway, there is probably a different profile of members here now that may hopefully add other stuff.

stuff like:
1) If a line of support has been hit 5 times and is about to be hit for a 6th, do you think to yourself "its bounced 5 times so it'll probably bounce a 6th", or do you think "its been attacked 5 times, its more likely to break now than last time". In other words, does it get stronger or weaker with repeated attacks as the pressure builds.

2) If a trendline has been pierced, resistance becomes support and vice versa. But if it has been pierced 2 or 3 times without the pa pausing for breath and then the pa gravitates back to the line again and bounces off it , how strong is it now? Stronger or weaker than if it had never been pierced?

3) If a resistance level came from a double top from a year ago, how valid is it now? As valid as it was then? Does time add to its potential for problem, detract from it or have no effect?

4) When a line of support with 5 touches makes confluence with falling trendline with 5 touches, all other things being equal, which is stronger? I know its usually continuation but hypothetically disregard momentum for a moment. Which is stronger?

5) When should you trade through round numbers and when not?

6) How would you trade shallow/steep trendlines? differently?

Also, interested in
7) Do fibs provide reliable resistance/support levels?

8) Do pivots provide reliable resistance/support levels?

9) Can s/r be measured or quantified in the same way that an indicator might measure trend strentgh etc.

I know what the answers will be to some of these but i'm interested anyway and i hope i'll be surprised. :clap:
 

VielGeld

Experienced member
1,421 179
There are two "objective" measures I have observed so far in the market:

1) Support/resistance.

2) Mean reversion.

If trading were to be likened to a science, then these two are the basis I would look at, similar to how Physicist would prefer to start from elementary particles.

The "art" of trading kicks in when assessing their impact on price. From observation and experience, you can come to tell where and how price will behave. Take notes, experiment, etc. i consider myself as a scientist when studying the market.

For anything else, I flip a coin like Hare.
 
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DionysusToast

Legendary member
5,963 1,499
Resistance means 1 of 2 things - sell-side liquidity above or lack of buyers as you move up to a certain price.

Either way it means prices are fair for sellers and unfair for buyers.

People can add more sell-side liquidity above or it gets eaten with buy market orders.

So does resistance get weaker as it gets hit? Yes - UNLESS people have a reason to add more sell side liquidity at that point. But is it really getting hit or are buyers nuts shrinking @ that point?

What motivates people to buy or sell up there?
 

Lee Shepherd

Senior member
2,164 572
Hello Splashy,

Everything you have highlighted is fantastic trading and most widely used. Unfortunately you're not going to like my answer as it leaves it as open as it is to profit from trading itself and will simply not provide you with (maybe) the simple answer/solution you were hoping for.

In short, all the questions above can and should be answered like this:

It depends on other instruments/indicators/fundamentals you are using.

It needs to be broken down and analysed each in more detail, it wont be done in a post on a forum.

Lee
 

puppetmaster

Junior member
15 5
The "art" of trading kicks in when assessing their impact on price. From observation and experience, you can come to tell where and how price will behave. Take notes, experiment, etc. i consider myself as a scientist when studying the market.

I think it begins as a science and evolves into an art. You could come up with answers for all the above questions but at the end of a frantic day when everything has moved twice its adr, it might not count for anything and thats when it becomes an art, knowing when the rules don't apply anymore. S/r then takes on more relevance or less depending on the stretch.
 
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splashy

Well-known member
368 67
Hello Splashy,

Everything you have highlighted is fantastic trading and most widely used. Unfortunately you're not going to like my answer as it leaves it as open as it is to profit from trading itself and will simply not provide you with (maybe) the simple answer/solution you were hoping for.

In short, all the questions above can and should be answered like this:

It depends on other instruments/indicators/fundamentals you are using.

It needs to be broken down and analysed each in more detail, it wont be done in a post on a forum.

Lee

Thanks Lee,
if it sounds like i'm looking a magic formula, i'm not. Obviously there isn't one but the thought processes behind some areas of s/r etc differ to mine and i guess i'd like to understand how others think about these things.

On the other hand, simple would be great, wouldn't it? :clap:
 
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hwsteele

Experienced member
1,227 181
Two things I would like to add are the following:

1:Scaling your charts where price and time are a constant ratio
and
2:Making charts by hand

will change the way you see the market(most likely) and when you draw things on those charts(trend lines, support and resistance) they will tend to fit the market better.

This does not directly address the questions you asked but will give a new way to see things(if you don't already do 1 and 2) that will help you come to your own answers.(which are the only ones that really matter)
 

splashy

Well-known member
368 67
Two things I would like to add are the following:

1:Scaling your charts where price and time are a constant ratio
and
2:Making charts by hand

will change the way you see the market(most likely) and when you draw things on those charts(trend lines, support and resistance) they will tend to fit the market better.

This does not directly address the questions you asked but will give a new way to see things(if you don't already do 1 and 2) that will help you come to your own answers.(which are the only ones that really matter)

interesting...
re 1) i've occasionally heard of scaling charts with constant ratio but never got around to it. Good thought...
re 2) What do hand drawn charts bring to the table? Is it just a perspective thing? I draw P & F charts by hand but thats mainly out of habit...

thanks
 

splashy

Well-known member
368 67
i guess that what i'm getting at is what other peoples thought processes are when assessing s/r. I have my own set of criteria and they seem to work for me but i've aways been fascinated how we look at the same chart and all see things slightly differently (psychology degree point in case....). It has become a bugbear of mine recently.
Just this morning i saw a trade taken by a good trader and i couldn't work out why but he said he had a line. And sometimes i'll see a trade taken off a line and i'll think 'no chance'. But they think they've got a chance so what are they seeing that i'm not. Doesn't mean that they are right, or wrong, but i want to know why they are thinking what they are thinking, hence the above questions.
I've never really seen these things discussed anywhere by traders. There are some good ones on here so i thought i'd throw it open. It'll either enlighten me, or it won't. :cheesy:

Also, sometimes its easy to slip into a ceratin way of thinking about something that may be unhealthy and something like this makes you think about it again in a new light. Having said that, there is always someone more experienced than me out there and i don't pretend to know all there is to know. :)
 

DionysusToast

Legendary member
5,963 1,499
For me, support or resistance areas aren't great places to enter a trade.

They are quite crowded areas to enter, lots of people are watching them, lots of stops around them, people going short @ resistance, people going long on a breakout. You often see resistance areas pierced, appear to fail and then move in the opposite direction. There is no small amount of manipulation in these areas. Hence, often too crowded.

As you move up to an area you think will hold, you should have an idea on what a likely potential target to the downside is. If there is lots of room to the downside, I think it's better to stand aside and let all the 'line players' have their squabble. Once the result is known, you can take a higher probability short at a worse price on the way down in an area that is way less crowded.
 

PATrader

Junior member
44 2
Think of support and resistances as guides and a lot of your problems would be solved. I re-iterate, they are just guides. They don't just come about and appear on your chart like magic. They are all formed by price action, which ultimately, comes from market behaviour, eg your big boys, invisible hands, herds whatever you want to call it. Therefore, when you see price near these areas, its still the candles that you will be looking out for, whether they want to reverse or break through at these levels. Hence, in a sense, there is really no such thing as strong or weak supports or resistances. All depends on the market behaviour.
 

wackypete2

Legendary member
10,229 2,054
Think of support and resistances as guides and a lot of your problems would be solved. I re-iterate, they are just guides. They don't just come about and appear on your chart like magic. They are all formed by price action, which ultimately, comes from market behaviour, eg your big boys, invisible hands, herds whatever you want to call it. Therefore, when you see price near these areas, its still the candles that you will be looking out for, whether they want to reverse or break through at these levels. Hence, in a sense, there is really no such thing as strong or weak supports or resistances. All depends on the market behaviour.

I'll disagree with you on the part I highlighted. Weak S/R area would be where there was minimal action from the larger players. In effect the retail contingent has determined these areas. Sometimes they are easy to spot where you have S/R zones with minimal volume, and sometimes they are difficult to spot, especially with forex where volume is tick based.

Peter
 

PATrader

Junior member
44 2
I'll disagree with you on the part I highlighted. Weak S/R area would be where there was minimal action from the larger players. In effect the retail contingent has determined these areas. Sometimes they are easy to spot where you have S/R zones with minimal volume, and sometimes they are difficult to spot, especially with forex where volume is tick based.

Peter

Well, maybe I should clarify my point. I do agree with what you said above. What I meant is, if the big boys wanted to move price past these S/R zones/levels, they could. Or else why would we see higher and higher prices that breaks strong resistances or lower and lower prices that breaks strong support? Hence, in that sense, the "no such thing"... I hope that makes sense. hmm..
 

wackypete2

Legendary member
10,229 2,054
For me, support or resistance areas aren't great places to enter a trade.

They are quite crowded areas to enter, lots of people are watching them, lots of stops around them, people going short @ resistance, people going long on a breakout. You often see resistance areas pierced, appear to fail and then move in the opposite direction. There is no small amount of manipulation in these areas. Hence, often too crowded.

As you move up to an area you think will hold, you should have an idea on what a likely potential target to the downside is. If there is lots of room to the downside, I think it's better to stand aside and let all the 'line players' have their squabble. Once the result is known, you can take a higher probability short at a worse price on the way down in an area that is way less crowded.

These are the area I like to play round in for exactly the reasons you stated. Often you can spot the manipulation such as a quick spike up/down and then reverse. That's the time to get in - when everyone else just got washed out.

Peter
 

DionysusToast

Legendary member
5,963 1,499
These are the area I like to play round in for exactly the reasons you stated. Often you can spot the manipulation such as a quick spike up/down and then reverse. That's the time to get in - when everyone else just got washed out.

Peter

Makes a lot of sense to me. Much more sense than buying/selling the lines themselves. Still - it takes balls to take those sorts of trades, or maybe not they work out more often that a simple play off the line.

It's sort of like moving up the food chain a few levels!
 
 
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