Price Action - Buying Support/Selling Resistance

Quote from bearmountain:

Basic Question: What are some of the methods that Price Action traders use to buy Support and Sell Resistance? I am asking about entry methods, so once you determine that price is near a major Resistance, how do you enter a short trade?

I have been using the 3 Bar Reversal method, but find I very often miss trades. As I understand it, one has to wait for the 4th bar to break the low of the 3rd bar by one tick for the setup, then an order is placed in the middle of the 3rd bar. I find very often my orders are not filled.

here is a good screen shot of 3BR Reversal Pattern. Thanks.


http://www.elitetrader.com/vb/attachment.php?s=&postid=1557683
More...


BM,

Apparently my last response in your other PA thread didn’t register – also appears you are at the 50,000 foot view – I maintain you need to get on the ground floor


So allow me to try a different approach and explain...

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When you read an article…, a story…, a book…. Or whatever… Do you read it;

By chapter
By paragraph
By sentence

OR

Word by word

Then put the words together to form sentences – combine the sentences to form paragraphs… the paragraphs to form chapters

Do you use these same words to create images / thoughts/ to discover the meaning and message contained within the article / story/ book…

Do you also use these words to derive the author’s intent for writing the article/ story/ book / whatever – in the first place

=====================================================================================

When you work complex math formulas;

Do you work the formula out – as one complete entity…

Or break out the individual variables, solve the variables, replace the variables in the formula, rewrite the formula, combine like terms – then solve the thing

=====================================================================================

Trading PA is no different -

Yes – the language is different (just as English differs from Math)… But in the end – there is a story – there is meaning – there is intent….

And the means to revealing PA’s story – is the very same means we would use to decipher an article/ a story/ a book... or solve a math formula…


Simply stated

To understand a chart – we must decipher each bar (just as we would with each word in a story, or variable in a formula)… then we would place that bar together with its surrounding bars to form proper context (as we must combine words to form sentences, / or enter the known variables in a formula) – next we place groups of bars into trends (same as placing sentences into paragraphs/ combining like terms in a formula)..

Then piece it all together to derive price’s meaning and intent (same as we would do to grasp the meaning and intent of an author’s article/ story/ book, their reason for writing it… or solving a math formula)…


May I respectfully suggest you get down to ground level and build up… Learn the words (the language of the bars)…, learn to piece the words together…, then learn to decipher what you’ve pieced together so you can grasp the meaning and intent

Hard – yes… Doable – Absolutely…


Right now, imo, you’re trying to learn PA bassackwards – sure it’s a short cut – maybe it can be done… but at what cost ultimately….

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On another note;

Care to estimate how many homonyms exists in the English language

The same is true with bars – they may appear the same…, feel the same…, act the same – but depending upon the context in which they’re found – these bars will have totally different meanings…

Btw – in one formula X = 2…. In another, X = 3.14159265359 …. in another still X = something entirely different…

===================================================================================

Finally my view on S&R

Its bullshit – the only real S & R is the lowest, and highest – price, a stock has ever reached… Even then a stock’s price could easily rise higher… or go belly up (Bear Sterns/ GM)


Everything else is;

A value area (area of great interest to either the Longs…, or the Shorts…, or Both…)
A magnet (magnets have the ability to attract or repel)…
An area of no interest (to either the Longs…, or the Shorts…, and in rare instances Both)

PA identifies these areas, shows how they should be labeled, tells us when there’re likely to come into play… and guides us on how we should play if/ when price gets there….



Think on it – you may come to understand why it important to adopt this distinct definition, and mindset…


Keeping a flexible mind – ensures we maintain the flexibility to go long – or short – at the drop of a hat – solely dependent on what PA tells us to do.

Conversely if we have it set in our mind that price is “at support”…or “at resistance”… then we could very well hesitate – when its in fact time to act.


Furthermore it clarifies our thoughts and allows us to see the reality of PA – the reality of the chart – the actions and intentions our opponents – sans all the bullshit, noise, news, or reasons – they are unnecessary….


Ever heard price has memory – small wonder as to why it does…




Okay I’ve said my piece – I’ll drop it Sir…


Regards

RN
 
Quote from bearmountain:

Basic Question: What are some of the methods that Price Action traders use to buy Support and Sell Resistance? I am asking about entry methods, so once you determine that price is near a major Resistance, how do you enter a short trade?

I have been using the 3 Bar Reversal method, but find I very often miss trades. As I understand it, one has to wait for the 4th bar to break the low of the 3rd bar by one tick for the setup, then an order is placed in the middle of the 3rd bar. I find very often my orders are not filled.

here is a good screen shot of 3BR Reversal Pattern. Thanks.


http://www.elitetrader.com/vb/attachment.php?s=&postid=1557683
More...

bearmountain

Every afternoon in the elevator on the way up from the trading floor. I heard two topics of conversation. Without exception.

"I was up in the AM and gave it all back" and "I knew it was going lower but I wont chase a trade" Some where in the middle is best. I have found even a straight up losing trade can be managed to a small loss or even scratch. My trading mentor taught me and others. One of his rules now mine . "Dont over-analyze or hesitate" Place the trade and manage it. If wrong you can get out. But you'll never be right or profitable unless you make a trade. Taken the correct context. Obviously within the parameters of you methodology.I am similar with the set up you use. Sometime if I get the trigger bar but no third. I take it if confirmed by another indicator that shows a trend reversal or end. Or confirmation by this activity at or near a significant price. Go with the crux of what the indicator signals or displays sometimes not the perfect visual. This is one of the pitfalls of red light green light trading.
 
there is a fundamental problem with getting actionable trading strategies on elitetrader. this is mainly to do with using static charts to illustrate comments. even if u throw a dead cat on a static chart, u r likely to have a comment or two. elitetrader is good about formulating ideas, but it has limitations when it comes to actioanble strategies. u may think u can sit all day and do a 3br with a tight stop. good idea. in practice, most serious profitable traders wont just do that. they locate whatever new idea comes their way within the structure of their existing trading styles. chances are, such structures may include s/r levels.

kept it mind that elitetrader, in large part, is an informercial where established traders with tradingroom come to hook beginning traders
 
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