Indicators are liars! Support and Resistance Trading for the S&P emini

[xburbx]

Possible lightbulb that I need ESR to confirm. I went back through the thread and pulled up some of trades ESR noted as great setups. Here is what I found.

1. Price approaches S/R line outside of BB as a long solid candle but does not cross. Can be within 2 points of line.

2. The immediate next candle has it's high/low price reach just before the prior candle or the same level , but DOES NOT cross the high/low extreme of the prior candle.

3. Place entry at or near level of the long solid candle from #1 above for 3rd candle in the mix.

*Even on the trades that the 3rd candle went through the line, it was usually not stopped out because it was only over by around 2 ticks.*

I noticed this approach works almost anywhere that is at an extreme from the 20MA on the BB but it looks like chances of success are increased in response to the S/R lines when the setup is near it. There were a few instances when it didnt work when it wasnt near the S/R line. "Dynamic S/R"? I'm attaching a picture of one of the setups mentioned earlier in the thread.

I could be way off and perhaps just noticed a pattern by accident.

**EDIT : In the picture the 3rd candle didnt come out correct in when I made the image. Look close to see the top where it opened. It didnt open as low as it looks.

 

[cunparis]

Quote from xburbx:

Possible lightbulb that I need ESR to confirm. I went back through the thread and pulled up some of trades ESR noted as great setups. Here is what I found.

This is a very good observation about the element that has been missing for me: Price action.

I've tried programming this strategy but I could not get the results positive. I think the reason is because price action is an important part of it, and that's hard to program.

What's interesting in your example is that after the big bar the next bar forms a harami hanging man pattern. Both are indicating reversals, and when combined together it's an even stronger indication that a reversal is taking place.

I'm currently reading a book on pivot points and candlesticks A Complete Guide to Technical Trading Tactics: How to Profit Using Pivot Points, Candlesticks & Other Indicators and his technique is to combine pivots & candlesticks.

I've previously read Nison's Japanese Candlestick Charting Techniques and I really liked the book but I found too many examples where the candlestick patterns didn't do anything.

Now in the first book I see how he combines two and this makes a lot of sense for me. Candlesticks are a way of interpreting price action and I now suspect that the PA concept is very important for this technique even if people aren't using candlesticks consciously.

So I'm now working on this. Thanks for posting your observation, it makes things clearer for me too.

PS: The first book I mentioned, he uses the calculated "floor" pivots. I think these are also useful simply because so many people use them. But I think the "real" (observed) pivots have more importance. I woudln't really recommend the book for someone who has already been trading futures, but for someone new it's not bad. The Nison book is excellent and has really helped me understand what's going on between buyers & sellers.

 

[johnpinochet]

Quote from xburbx:

Possible lightbulb that I need ESR to confirm. I went back through the thread and pulled up some of trades ESR noted as great setups. Here is what I found.

1. Price approaches S/R line outside of BB as a long solid candle but does not cross. Can be within 2 points of line.

2. The immediate next candle has it's high/low price reach just before the prior candle or the same level , but DOES NOT cross the high/low extreme of the prior candle.

3. Place entry at or near level of the long solid candle from #1 above for 3rd candle in the mix.

*Even on the trades that the 3rd candle went through the line, it was usually not stopped out because it was only over by around 2 ticks.*

I noticed this approach works almost anywhere that is at an extreme from the 20MA on the BB but it looks like chances of success are increased in response to the S/R lines when the setup is near it. There were a few instances when it didnt work when it wasnt near the S/R line. "Dynamic S/R"? I'm attaching a picture of one of the setups mentioned earlier in the thread.

I could be way off and perhaps just noticed a pattern by accident.

**EDIT : In the picture the 3rd candle didnt come out correct in when I made the image. Look close to see the top where it opened. It didnt open as low as it looks.

If I'm not mistaken, your red arrow also shows a very classic short trade set-up mentioned by Trader Vic in his famous book. It looks like a 2B sell to me.

 

[ESResistance]

Hi everyone

Please find attached todays levels. The S/R numbers are in the black column, the MP, Pivots, Fibs, Simple Moving Averages and Summary Numbers are for confluence and information.

Always remember to use the numbers as a guideline for potential areas of high probability plays.

Always use a set up based upon your system to enter a trade
.
Good trading all

P.S. I am using a data source that is not my normal source. In the past the data from this source has been inaccurate so cannot be totally sure. Normal service will resume when I return to London.

 

[Preacher Man]

Quote from ESResistance:

Hi everyone

Please find attached todays levels. The S/R numbers are in the black column, the MP, Pivots, Fibs, Simple Moving Averages and Summary Numbers are for confluence and information.

Always remember to use the numbers as a guideline for potential areas of high probability plays.

Always use a set up based upon your system to enter a trade
.
Good trading all

P.S. I am using a data source that is not my normal source. In the past the data from this source has been inaccurate so cannot be totally sure. Normal service will resume when I return to London.

Goodonya ESR, your dedication is to be commended!

So... is this trip to Vegas business or pleasure? Are you at the traders expo?

Have fun either way,
Preach.

 

[Preacher Man]

Quote from ESResistance:

P.S. I am using a data source that is not my normal source. In the past the data from this source has been inaccurate so cannot be totally sure. Normal service will resume when I return to London.

Looks good to me mate.

FWIW, I've attached my own worksheet... obviously my S/R levels are personally picked, but all the other figures look right. Strangely enough, I always have my 'close' 1 tick different to yours, but all other figures always match

As for the layout, it's obviously blatantly stolen... but why re-invent the wheel? If it ain't broke, don't fix it..!

Oh, and there are a couple of extra things in there that I have found to be useful: I mix classic and woodie pivots; and I have a section that I fill in intraday so that I have a record of these changes.

Catchya,
Preach.

 

[JSSPMK]

I have a bit of an issue with the title of the thread, for it to be valid one has to suggest that support & resistance based trading carries no risk or is the 'Holy Grail'. But in my experience no matter what entry/exit system is being used (from the ones that I've seen) it is the money management skills that make an unprofitable trader a profitable one. Support & resistance 'lie' just as indicators do. Otherwise a nice thread.

 

[bbqbbq]

hey does anybody know where I can find free Market Profile data, like daily POC VAH and VAL? Also for this S&R type trading are weekly and monthly Market Profile S&R also usefull?

also the way MP is used am I right that you use them just ass an added Support and Resistance to make confluence with your price pivots for higher probability trades?

 

[Preacher Man]

Quote from JSSPMK:

I have a bit of an issue with the title of the thread, for it to be valid one has to suggest that support & resistance based trading carries no risk or is the 'Holy Grail'. But in my experience no matter what entry/exit system is being used (from the ones that I've seen) it is the money management skills that make an unprofitable trader a profitable one. Support & resistance 'lie' just as indicators do. Otherwise a nice thread.

G'day JSSPMK

Not necessarily..... for the title to be valid, S/R could actually be included in the statement, "Indicators are liars". It just so happens that, based on experience, the contributors to this thread (including the OP) have found that S/R levels 'lie' less than most other indicators.

Your point about money management being the real key is absolutely spot-on... in fact, Dr Van Thrap gives an illustration of completely random entries being profitable with skillful money management.

In the absence of the OP (currently in Vegas), I have taken the liberty of quoting him to give a more complete explanation of his point:

Quote from ESResistance

Hey everyone had someone ask why I think Indicators are useless so I thought it might be worth sharing my thoughts with all of you.

I dont think Indicators are useless, indicators can add value if used appropriately. Let me give an analogy of my thinking towards indicators. You're about to go out to a dinner party and are getting dressed, now the CORE of your outfit, will be your suit, shirt, socks, underwear and shoes. These core elements are what make up your attire for the evening and are all pretty important for you to wear as these are the things people will look at most. As an ACCESSORY you happen to wear some cuff links, just to complete the look.

In my method I believe that Support and Resistance in confluence with pivots, MP and fibs is your CORE as these are the things people will look at most. And that Indicators should be the ACCESSORY just to "complete the look".

Now you wouldnt go to a dinner party just wearing cuff links now would you?!

Catchya m8
Preach.

 

[Preacher Man]

Quote from bbqbbq:

hey does anybody know where I can find free Market Profile data, like daily POC VAH and VAL? Also for this S&R type trading are weekly and monthly Market Profile S&R also usefull?

also the way MP is used am I right that you use them just ass an added Support and Resistance to make confluence with your price pivots for higher probability trades?

G'day Barbeque x2

Here's the best (IMHO) market profile site: http://www.mypivots.com/forum/topic.asp?TOPIC_ID=3319&whichpage=4 The rest of this site is worth looking through - there's a lot of excellent stuff there.

There is a way to merge daily MP figures to give longer range MP, but I haven't used this.

As far as your question about how to use the MP figures, you're exactly right - Market Profile is widely used and therefore these figures will often provide strong S/R levels.

Preach