The funniest thing you have heard on a trading forum?

[brettus]

There is a volume and waterfall effect to add, it's not just simply gunning stops all the time. In that interview DT posted, the guy talks about everyone wanting to buy the bottom but no-one selling the bottom. I'm not sure I totally agree with that as that is the whole basis of greed and fear. When people see support breaking there is going to be a greed factor into selling the break out of the panic move and that also brings in a volume and waterfall effect where stops and limits for that matter are all hit around the same place. Extra volume in a downmove will push through a support quite easily before either buy limits are hit (=BUY), existing shorts are covered (=BUY), or buys at the red line have their stops hit (=SELL).

Example of EU attached. Actually the EU chart is an excellent example of SR working (on the Daily).
To highlight a less liquid pair where the spikes are greater, GU can be checked out.
I would go as far as to say most traders stops are 1, 1.5, 2 pts on the ES so it's no wonder they don;t have much success at SR areas as volatility is going to take that out much of the time.

Hang on, what thread am I on again?

Good S&R on that chart, especially around the 1.3400 level. Hindsight. I think as long as your stop is large enough, there's many buying opportunities there. Risk Reward is good aswell. I actually bought 1.3450.

 

[MajorDutch]

funniest thing I heard on the trading forum are vendors who are 'teaching' people because they want to 'give something back'. I just wish they were a little more honest with people. I am still working on being long term profitable but I know I will never turn to the dark side.

 

[JRP2891]

Why would you think that? It's the number 1 topic in every book ever written about TA trading.

I would wager that if you took every unprofitable trader on the planet, the one thing they would all agree on is that S/R 'works'.

This is one of the reasons there is so much gameplay in those areas.

Agreed, i'd like a bet on that too. A lot of unprofitable traders share the common trait of never being able just to go with price.

 

[trader_dante]

Why would you think that? It's the number 1 topic in every book ever written about TA trading.

I would wager that if you took every unprofitable trader on the planet, the one thing they would all agree on is that S/R 'works'.

This is one of the reasons there is so much gameplay in those areas.

I would disagree on this. I mean, it IS the number one topic but I think the fact that it's the number one topic means a lot of people pass it over.

I think most people think: "if it's that simple, everyone would be doing it..." and so people move on, looking for other techniques, including the notorious indicators.

In all my time on these boards I cannot remember ever having anyone come to me and say "Hey Dante, I've been trading significant s/r levels and losing money hand over fist, can you help me?".

It's always been : "Hey Dante, I've been losing money hand over fist and I don't know why but let me show you the last trade I did...right, this Silver yeah, has been going up for ten days in a row and it looks extremely overbought up here...now yesterday it had a small down day so this morning I've sold the break of yesterdays low with a stop above the high..."

Maybe it's just me but that is my experience.

Now, onto S/R.

Contrary to my post that started all this, I do respect your opinions on S/R and I think you have made some good points but my personal feeling is that you approach the topic from the perspective of a short term trader.

There is nothing wrong with that but let me illustrate my argument with an example.

You trade the ES; so here is an ES chart.

There is a significant s/r pivot at 1295. There is nothing hindsight about this. I had it drawn on weeks ago. It is as clear as day.

Now have a look at chart 2.I know a trader that bought that at 1295 (His reasoning? Price trades into a good level).

The trader in question has made a lot of money from this trade having exited at 1333.

But that's a moot point.

The question I put to you is this.

In your opinion, based on this H1 chart: Did 1295 work as support or did it fail?

Price broke that area by 5 ES points. I will make a wager right now that most short term ES traders will clearly say "Support Failed". I worked with "the professionals" and I can tell you with a good degree of confidence that there is almost zero chance that any one of them would still be in that if you threw them in long at 1295.

So here is the follow up question. What makes the trader in my example profitable by buying these levels? (and let's stay away from, he's not, because he IS)

Is it that his stop is wide enough not to get shaken out if the smaller retail get squeezed? (Incidentally his stop was 7 ES points after spread)

Here's one more example. I've taught people S/R and in the cases where they are not profitable, aside from psychology etc which I believe is next to impossible to teach - the common problem is they are buying every single level looking for a reaction.

Lets move to chart 3. I will make a call of sorts here since the examples have been hindsight.

The purple areas are obvious s/r levels. Agreed?

I personally, would not buy at either of them. Sure, price may react to them but there is only one place I would consider buying that S&P and that is at 1318. And it would have to go lower than 2 or 3 ES points to get me out.

I don't have a Limit Buy there at the moment. I am discretionary and I will watch price if it makes it's way down into the level but the fact remains that is the ONLY level I would buy that at on the immediate downside, no matter what I saw.

The only thing that will change that is new price structure that shifts probabilities and makes you reasses.

So, in light of this new example, how reliable is S/R, despite me calling myself an S/R trader?

If I have no faith in the purple levels and wouldn't touch them with a bargepole, do I have no faith in S/R?

Or is there something more?

One final point: As an S/R trader, I have much more success trading FX than I do the ES.

Is S/R more reliable on some markets than others? If I take a trade in the USD/JPY (for example) off S/R, the majority of the time, I barely go offside. If I do so in the ES, I do often get squeezed a little before it comes good.

So, "is price action and S/R, really price action and S/R" regardless of the market?

All serious questions. I'm enjoying the thread.

 

[DashRiprock]

Hang on let me get this straight:

You drew a line at 1295

it went to 1295
(and you edited your post... first off it def said " accelerated" into levels - which is an interesting point to discuss, but I think/assume you said sold into the level first)

someone bought at 1295

it went to 1290.25, then it went to make various new highs.

You have drawn other lines, some of which are important and some are not. The important one, at 1318, you will either buy it or not buy it if it ever gets that far.

Have I missed something?

 

[trader_dante]

Hang on let me get this straight:

You drew a line at 1295

it went to 1295
(and you edited your post... first off it def said " accelerated" into levels - which is an interesting point to discuss, but I think/assume you said sold into the level first)

someone bought at 1295

it went to 1290.25, then it went to make various new highs.

You have drawn other lines, some of which are important and some are not. The important one, at 1318, you will either buy it or not buy it if it ever gets that far.

Have I missed something?

lol Dash, what's that, a synopsis for those that couldn't be bothered to read the post?

Yes, I changed accelerated to traded because I'm trying to discuss S/R not price action. But it is an interesting point to get onto.

No you haven't missed anything.

I guess, really, the whole post could be summarised with the single question: Did that S/R at 1295 work or fail?

 

[DashRiprock]

it's like the readers digest version

For the question "did the s/r work at 1295 or not?", well to be honest I don't think that either the question or any answer will yield a more fruitful discussion. just go around in roundabouts imho.

But accelerating into 1295, and going into it short, I think could be a good direction to go

 

[DashRiprock]

btw when i said " direction to go" i meant like a good route for the topic, only after did i realise it was a bit of a pun. it was an accidental pun.

 

[brettus]

it's like the readers digest version

For the question "did the s/r work at 1295 or not?", well to be honest I don't think that either the question or any answer will yield a more fruitful discussion. just go around in roundabouts imho.

But accelerating into 1295, and going into it short, I think could be a good direction to go

You mean short into the the support level when it gets close. Seen a few guys do this. Mainly in fx where say the highs in audusd are 20 points away, they would buy expecting it to at least test the highs.

 

[DashRiprock]

You mean short into the the support level when it gets close. Seen a few guys do this. Mainly in fx where say the highs in audusd are 20 points away, they would buy expecting it to at least test the highs.

notwithstanding my pun, yeah.

right you've played monopoly eh? Monopoly is basically a game of starting from go and going around in a circle.

what "support and resistance" (levels) are is basically lost of different "GO" squares on the monopoly board. If this is your way of trading, what your plan is is to get to a "GO" square, and start your way around and go far enough to make your 2 hundred pounds. What I mean is, when it gets to one of these levels you get another go and start to plan your way around the monopoly board; its like a fresh start, a base square to build your view from.

Now what I'm sayin about these acceleration bits is that sometimes the sh!t hits the fan or sometimes you get caught in jail or whatever... but when everyone else is rushing to get to a GO square again you can hop along and collect your 200 pounds, no matter what the next round of the board has in store for you.

edit; about going beyond the highs... its just me but I have more faith in a high that has been broken than a high that hasn't. Maybe its a bit like squeezing a giant zit on your forhead? messy and painful but once its out the way you can concentrate. While its still there its just lookin at you.

 

[DashRiprock]

and sort of on a related note here is an example of what a zit looks like. i would at least wait to pop the zit over the highs in the blue oblong.

 

[DionysusToast]

The question I put to you is this.

In your opinion, based on this H1 chart: Did 1295 work as support or did it fail?

Price broke that area by 5 ES points. I will make a wager right now that most short term ES traders will clearly say "Support Failed". I worked with "the professionals" and I can tell you with a good degree of confidence that there is almost zero chance that any one of them would still be in that if you threw them in long at 1295.

So here is the follow up question. What makes the trader in my example profitable by buying these levels? (and let's stay away from, he's not, because he IS)

Is it that his stop is wide enough not to get shaken out if the smaller retail get squeezed? (Incidentally his stop was 7 ES points after spread)

Tom - what you see at 1295 is obviously a probe down.

Now - let's look at the most stupid thing ever written on this site, according to you.

I think it's necessary to give an explanation of why clear support & resistance won't make you money. No matter how you play it, if you play it in an objective (rules based) manner.

1295 is a terrible place to have a limit order to go long regardless of the price action that preceeds it (AKA discretion).

Now, because of the way it hit that price - with a LOT of people chasing the trade on the way down, you have a lot of late shorts chasing that price action down. This type of extended move bodes well for a move up because we know that the late shorts are creating liquidity above in the area where they will puke. That's a huge puke zone created on the way down. Still, you can clearly see that price oscillated around the level taking people out before it resolved.

Even though we had that big rush down, I'd want to know what was going on in the markets. If, for instance Goldman Sachs announced they'd exchanged all their holdings for a handful of magic beans that morning, I'd expect a continued move down.

Hence: Subjectivity (or the most stupid thing you ever read) vs objectivity

I'd personally not get in at that point as there are simply too many other people figthing it out there and any bet on the result of that fight is a gamble. You have a lot of liquidity above AND below.

Now - you have a friend that enters into S/R with very wide stops and I presume very wide targets or maybe his targets aren't so wide. A bit hard to tell. You mention that most retailers and professionals would not do the same thing but this special guy does. Fair enough but is this the same guy that quite often goes 'all in' perchance? If so - we don't yet know the impact of changed market conditions on that particular persons style.

Certainly, it appears that you yourself don't trade this way, so one would presume that you aren't convinced either. You certainly could afford to trade this way - anyone could as you can lower the costs through SB/CFD trading.

Would this special guy NOT enter a trade if price fell 1 tick short of his level and then moved up? How do we justify entering on probes through a point of 'resistance' and not a shortfall of 1 tick? Is support a 'line in the sand' and not a general area to be observed?

Why would there actually be any difference between a shortfall and an overshoot, other that they hit a line which was drawn objectively?

I'd say that what makes your trader profitable is that the ES is fairly tame right now and not an objective, rules based approach to trading S/R.

 

[DionysusToast]

So if i was to buy at 350p, i would expect it come back to 350p before bouncing, if it goes to 353p and rallys 20p, i would consider that i missed the entry, so i would pull my order. If it fell below 340p i would consider myself wrong, even i thought it was trading into more support, because if it goes to 340p, theres a good chance it falls to 310p. Target would be 390p.

I don't need a massive win ratio on this, but i expect to be right 50% of the time at least.

I do believe that banks go chasing for liquidity, because that's the only way they can make real money, but it takes alot to make it worthwhile. Theres a cost gunning for stops, moving the price there. In the FX market it takes more than 100mio to move the market 10 ticks, if you're gunning for stops 50 points away, you're talking over a yard of buying or selling to get the price there and the stops have to be worthwhile, because there's no point moving the price 50 points if when you go to get out of it you move the price back 50 points.

Here's the thing....

What if banks don't need to chase liquidity? What if the cost is zero?

Banks are paid on a per trade basis to PROVIDE liquidity. In a one directional market, it is liquidity providers mostly on the other side of your trade. These people can and do feel pain when that happens but they can and do recoup their losses. You can see this in the price action.

There is a presumption that liquidity must be chased. Why is is that we don't presume that liquidity will attract traders and that not chasing at all is needed?

In a fruit market, would shoppers not be attracted to the cheaper stalls? If PC World announced $50 i7 laptops - would the place not be swamped with buyers?

Why is it that in physical markets, cheap goods attract shoppers but in financial markets it's an evil bank doing a stop run?

 

[wackypete2]

You guys sure don't make trading fun.

Peter

 

[DionysusToast]

But accelerating into 1295, and going into it short, I think could be a good direction to go

And here's me going long into that acceleration...

At least we know who's on the other side now...

 

[brettus]

Here's the thing....

What if banks don't need to chase liquidity? What if the cost is zero?

Banks are paid on a per trade basis to PROVIDE liquidity. In a one directional market, it is liquidity providers mostly on the other side of your trade. These people can and do feel pain when that happens but they can and do recoup their losses. You can see this in the price action.

There is a presumption that liquidity must be chased. Why is is that we don't presume that liquidity will attract traders and that not chasing at all is needed?

In a fruit market, would shoppers not be attracted to the cheaper stalls? If PC World announced $50 i7 laptops - would the place not be swamped with buyers?

Why is it that in physical markets, cheap goods attract shoppers but in financial markets it's an evil bank doing a stop run?

Yea. They do chase short term support and resistence stops. All these are valid points, which is why i prefer to trade support and resistence in new york hours. I think a good ATR distance away from S&R on the day it gets there always helps it hold.

You can draw so many lines on a chart and call it S&R, but not all will work.

 

[tim3]

Not sure if its been said before but one thing that always makes me laugh is when people say I am long AND short at the same time (on the same instrument) and the point of that is?

 

[Black Swan]

Not sure if its been said before but one thing that always makes me laugh is when people say I am long AND short at the same time (on the same instrument) and the point of that is?

Go away, dyor, and have a long hard think about the reasons why and perhaps you'll change your mind on finding that (hedging in that manner) laughable..

 

[tim3]

Go away, dyor, and have a long hard think about the reasons why and perhaps you'll change your mind on finding that (hedging in that manner) laughable..

Was on an index daytrading thread.
Can't really see the point myself as one cancels out the other.

 

[SanMiguel]

Yea. They do chase short term support and resistence stops. All these are valid points, which is why i prefer to trade support and resistence in new york hours. I think a good ATR distance away from S&R on the day it gets there always helps it hold.

You can draw so many lines on a chart and call it S&R, but not all will work.

Gold is a good example like EU, what do they have in common at the moment?
Uptrends.