S/R Line

[digitalnomad]

S/R is a hindsight fallacy. It doesn’t exist. The markets simply seek liquidity from one level to the next. A losing trade is a lost coin toss. A winning trade is a won coin toss, or if actively managed a series of won coin tosses. It’s that simple.

Even when a catalyst drives price, the market still seeks countertrend liquidity in the process. No one can quantify the turning points. We can only establish precise mathematical/statistical levels. This is how professional TA is done. You can also mix in some order book dynamics, if desired. Then there is execution, which separates the sheep from the wolves. There are more sheep

 

[_eug_]

S/R is a hindsight fallacy. It doesn’t exist. The markets simply seek liquidity from one level to the next. A losing trade is a lost coin toss. A winning trade is a won coin toss, or if actively managed a series of won coin tosses. It’s that simple.

Even when a catalyst drives price, the market still seeks countertrend liquidity in the process. No one can quantify the turning points. We can only establish precise mathematical/statistical levels. This is how professional TA is done. You can also mix in some order book dynamics, if desired. Then there is execution, which separates the sheep from the wolves. There are more sheep

This is probably true if you go about identifying s/r levels the way they teach you in trading textbooks...

 

[BlueWaterSailor]

This is probably true if you go about identifying s/r levels the way they teach you in trading textbooks...

That seems like a rather odd statement. Are you postulating a world-wide cabal of trading textbook authors who have all agreed to lie to everyone? And not a single one will break ranks and give up the True Deep Sekrit of TA knowledge, even though they'd make TONS of money by doing so? (A book that was proven to result in consistently-positive returns would go like hotcakes for $1k a copy. In fact, you could charge almost anything you wanted.)

Occam's Razor - or Bugs Bunny, take your pick of philosophers - says "I don't think so!"

 

[_eug_]

That seems like a rather odd statement. Are you postulating a world-wide cabal of trading textbook authors who have all agreed to lie to everyone? And not a single one will break ranks and give up the True Deep Sekrit of TA knowledge, even though they'd make TONS of money by doing so? (A book that was proven to result in consistently-positive returns would go like hotcakes for $1k a copy. In fact, you could charge almost anything you wanted.)

Occam's Razor - or Bugs Bunny, take your pick of philosophers - says "I don't think so!"

I just think that all the text books do is regurgitate the same old information. People write books to profit on book sales, it really doesn't matter if what you write is fact or fiction.

When it comes to price levels, even if you figure out how to identify actual liquidity levels in the market that still doesn't guarantee that you will be profitable as that just takes care of one part of the equation... the entry.

 

[schizo]

If price is vertical and time is horizontal, then S/R (as a price level) must be time-based. Hence, time plays an utmost importance.

 

[BlueWaterSailor]

I just think that all the text books do is regurgitate the same old information. People write books to profit on book sales, it really doesn't matter if what you write is fact or fiction.

See, that "profit on book sales" bit is the problem with your idea of "regurgitating the same old information". Go ahead and write a book that does so - shouldn't take you more than a year or five - and try to find a decent publisher that will take you on, given that it is regurgitated information. No? I guess it's not a good route to profit, then.

It's not that the information is regurgitated. It's that, like astrology and trepanning, the basic premise is just a little bit doubtful... at least to people who are interested in harsh things like numbers instead of fuzzy but comforting mythology.

When it comes to price levels, even if you figure out how to identify actual liquidity levels in the market that still doesn't guarantee that you will be profitable as that just takes care of one part of the equation... the entry.

Figuring out "just" the entry is a guaranteed P&L and consistency improvement for someone who didn't understand it before, because it would remove that set of errors from their trading. There is still zero proof that any TA method will do that, either. No matter how much you reduce it or move the gateposts, it just ain't gonna fly.

I'll make it simple: anyone who can show me a TA-based (or, hell, any other) method that will produce a definable, measurable, consistent, and significant increase in profits gets $1000 in cash. Put up $100 (returnable if your system pans out) for my time, and we're off and running. PM me or post here, either one is fine.

(But do note: I'm one of those awful meanies who use actual numbers for comparisons. Comforting warmfuzzies and pie-in-the-sky-by-and-by "if you only study this for ten years, you'll make quazillions of dollars" are not vendable commodities here.)

If TA isn't bullshit, I should be getting a flood of offers - don't you think?

 

[andre.salmeron]

See, that "profit on book sales" bit is the problem with your idea of "regurgitating the same old information". Go ahead and write a book that does so - shouldn't take you more than a year or five - and try to find a decent publisher that will take you on, given that it is regurgitated information. No? I guess it's not a good route to profit, then.

It's not that the information is regurgitated. It's that, like astrology and trepanning, the basic premise is just a little bit doubtful... at least to people who are interested in harsh things like numbers instead of fuzzy but comforting mythology.



Figuring out "just" the entry is a guaranteed P&L and consistency improvement for someone who didn't understand it before, because it would remove that set of errors from their trading. There is still zero proof that any TA method will do that, either. No matter how much you reduce it or move the gateposts, it just ain't gonna fly.

I'll make it simple: anyone who can show me a TA-based (or, hell, any other) method that will produce a definable, measurable, consistent, and significant increase in profits gets $1000 in cash. Put up $100 (returnable if your system pans out) for my time, and we're off and running. PM me or post here, either one is fine.

(But do note: I'm one of those awful meanies who use actual numbers for comparisons. Comforting warmfuzzies and pie-in-the-sky-by-and-by "if you only study this for ten years, you'll make quazillions of dollars" are not vendable commodities here.)

If TA isn't bullshit, I should be getting a flood of offers - don't you think?

I'm curious (honestly), what approach do you use for your trading?

P.S.: I agree that things are not all as simple as suggested before. Support and resistance make sense, to me, insofar as you consider them as areas that can be used as a reference point for (mainly) major market players. However, I hardly think they'll necessarily coincide with tops and bottoms, but rather with consolidation areas (zones with very high accumulated horizontal volume), simply because that is more likely to indicate an accumulation or distribution area. That being the case, it'd arguably make for an area that'll be "defended" by big market agents. That is simply my take on it, though (I approach markets from a Wyckoffian perspective) and I have no hard, long-term statistical data to back this up hahaha

P.P.S.: I obviously backtested my system (about a year worth of data, manually, from the same market) and it worked/is working well enough for me; however, I recognize that has nothing to do with long term applicability and it's not in the least confirmative of S/R/Other-standard-concepts-of-TA.

 

[Turveyd]

I'm going to write a book, telling others how to get rich and get rich in the process, the book will contain the following words!!

"WRITE A BOOK AND SELL IT!"

Simples!!

Where is my Million $$$$$'s.

 

[BlueWaterSailor]

I'm curious (honestly), what approach do you use for your trading?

While I wait for the millions of eager TA adherents to send me their hundred bucks and teach me to make billions? The most reliable secret method of all. I hesitate to share it here in public, so lean close and I'll whisper it...

(Dice, my friend. I have a pair that came to me from the Roman times, and had been - I have an authentication scroll somewhere around here - touched by Nero himself... they whisper to me. Sometimes even when I'm miles away from them. Amazingly precise in Forex - but only when trading the Roman denarius against the Persian siglos. The volume's been pretty low for some reason...)



A bit more seriously: I'm a short-volatility guy who is trying to lean a bit more into his quant background (once I have the time to clean up my rusty and long-neglected core skills.) For now, I do the wheel plus some ICs and things like that, but I'm always long the market (while keeping my ear to the ground to the best degree I can.) I'm also carefully exploring a bunch of other things including futures, but options are my first love. I keep a journal here, where I detail my wrestling with them.

I do have quite a bit of TA in my background - that is, in fact, how I came into investing in the first place. The guy that taught me the basics is an ex-hedge fund CMT plus a whole bunch of other related abbreviations. 30+ years of experience. So I understand the TA perspective perfectly well, and know the arguments for and against it. That's why I don't believe in it.

I'll caveat it to this extent, though: I think some aspects of it can be useful as an influence in trading (although I don't know to what degree.) Things like extreme highs and lows, standard deviation boundaries, and catching current trends can be of use. Market/volume profile, which, to my mind, doesn't fit the TA mindset - it's based on distribution analysis a lot more than on graphical interpretation - seems to offer a fair amount of benefit. I'm planning on putting a bunch of time into investigating the latter.

But the basic "support and resistance" story? Maybe it used to work in Charles Dow's day, when the market was much smaller and there weren't all these smart, well-heeled arbitrageurs around. But if it ever did, it's deader than the dodo now.

P.S.: I agree that things are not all as simple as suggested before. Support and resistance make sense, to me, insofar as you consider them as areas that can be used as a reference point for (mainly) major market players. However, I hardly think they'll necessarily coincide with tops and bottoms, but rather with consolidation areas (zones with very high accumulated horizontal volume), simply because that is more likely to indicate an accumulation or distribution area. That being the case, it'd arguably make for an area that'll be "defended" by big market agents. That is simply my take on it, though (I approach markets from a Wyckoffian perspective) and I have no hard, long-term statistical data to back this up hahaha

P.P.S.: I obviously backtested my system (about a year worth of data, manually, from the same market) and it worked/is working well enough for me; however, I recognize that has nothing to do with long term applicability and it's not in the least confirmative of S/R/Other-standard-concepts-of-TA.

To my mind, discretionary trading always has an element of art to it - and it is almost never visible to the "artist". It's never "just" S/R (or whatever); there's all this market knowledge/experience/personal history/risk aversion/screen size/lunch quality/girlfriend interaction/etc. STUFF wrapped up in every one of those trades. If the sum total of THAT is positive enough... then I believe you could throw dice and trade well. If your system works well for you, then - please - don't ever let anyone dissuade you from using it.

(Interesting as it would be to do comparisons, traders make money by sticking to what works and not scattering their energies. Let's see, where did I put those knucklebones again?...)

 

[schizo]

I'll make it simple: anyone who can show me a TA-based (or, hell, any other) method that will produce a definable, measurable, consistent, and significant increase in profits gets $1000 in cash. Put up $100 (returnable if your system pans out) for my time, and we're off and running. PM me or post here, either one is fine.

Are you out of your friggin' mind? Why would I want to reveal my secret to you for a chump change?