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

[D70]

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:

There is a book called "Chart Patterns" (I think). They have studied a few of the above and given relevant stats on which work "best". There is also a program out there called 'autochartist", this tries to quantify setups. I'd suggest you read the first and check out the second.

Be careful you're not spending too much time becoming a technical analyst. Trading to make money and drawing lines on charts are two very different things. The first involves foresight, the second involves hindsight.

 

[trendie]

......

The last thing I would say that might give a different perspective on things would be to look for "support and resistance" on the "X" axis of the chart. You may find that you get interesting results.

Thats a whole new thread!

 

[splashy]

There is a book called "Chart Patterns" (I think). They have studied a few of the above and given relevant stats on which work "best". There is also a program out there called 'autochartist", this tries to quantify setups. I'd suggest you read the first and check out the second.

Be careful you're not spending too much time becoming a technical analyst. Trading to make money and drawing lines on charts are two very different things. The first involves foresight, the second involves hindsight.

Thanks D70,
I did a quick check on amazon but obviously the title leaves a lot of room for error.

I don't think there's much danger of me spending too much time becoming a technical analyst - if anything there's a danger i'll go the opposite way. I performed a whimsical experiment on paper a few weeks ago by trading my signals and completely ignoring all s/r and the results really surprised me. I backtested as far as i could and I've continued it up to now and i'm at the point where i'm genuiunely questioning the whole s/r herd mindset. Not questioning the relevance of s/r, just our use of it....sometimes following the herd mentality can be detrimental to ones wealth.:cheesy:

Hence, i wanted to know why people think whatever it is they think...
However, this thread doesn't seem to be heading in that direction so a good book might help. Any chance you can remember the author?

 

[splashy]

The last thing I would say that might give a different perspective on things would be to look for "support and resistance" on the "X" axis of the chart. You may find that you get interesting results.

I'd like to check that out. Can you recommend a book or link?

 

[D70]

Thanks D70,
I did a quick check on amazon but obviously the title leaves a lot of room for error.

I don't think there's much danger of me spending too much time becoming a technical analyst - if anything there's a danger i'll go the opposite way. I performed a whimsical experiment on paper a few weeks ago by trading my signals and completely ignoring all s/r and the results really surprised me. I backtested as far as i could and I've continued it up to now and i'm at the point where i'm genuiunely questioning the whole s/r herd mindset. Not questioning the relevance of s/r, just our use of it....sometimes following the herd mentality can be detrimental to ones wealth.:cheesy:

Hence, i wanted to know why people think whatever it is they think...
However, this thread doesn't seem to be heading in that direction so a good book might help. Any chance you can remember the author?

Written by Bulkowski

 

[hwsteele]

I'd like to check that out. Can you recommend a book or link?

Support and Resistance on the "X" axis would fall into the category of cycles in time.(mostly)
There are many different ways to look at or find them, but a would suggest J M Hurst as a starting point. His book "The Profit Magic of Stock Transaction Timing" is a very good read if I do say so my self. Don't let the title fool you he speaks of math not magic in the book.(same thing if you ask me but then again I am a numbers nerd:cheesy
The only problem with that book is the last time I looked people were asking as much $1,200.00 for it. I believe it is out of print. I bought it some time ago for something like $50.00. Had I known I would have gotten a case of them!

If you would like to push the math about as far as you can go(with out a degree in it) then I would suggest Michael Jenkins "Secret Science of the Stock Market".
I think that is somewhere around $135.00 from his web site.

His math is very interesting and gives interesting results to say the least. His conclusions may not fall into the "norm" but don't let that take away from the tools/methods he explains in the book.