market makers know that the retail traders will buy/sell at support and resistance. So they let the price drop when you just bought it at resistance and you get wiggled out and before you know it the price is headed back up and MM are buying. So that's one of the reasons why support and resistance will not always work. I think everybody who's trading long enough has experienced this.
suport/resistance-fact or myth
- Thread starter jperl
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Magna
Administrator
bora,
market makers know that the retail traders will buy/sell at support and resistance...So that's one of the reasons why support and resistance will not always work
Part of it depends on what you are using for S/R (price, ma's, BB's, RSI, trendlines, etc.), if it's price everyone (not just the MM's) are looking at pretty much the same thing. If it's other forms of S/R then it would depend on whether you are using standard numbers (i.e., 50ma on a 5min chart) or "proprietary" ones. In any case, like everything else in trading, nothing will always work.
market makers know that the retail traders will buy/sell at support and resistance...So that's one of the reasons why support and resistance will not always work
Part of it depends on what you are using for S/R (price, ma's, BB's, RSI, trendlines, etc.), if it's price everyone (not just the MM's) are looking at pretty much the same thing. If it's other forms of S/R then it would depend on whether you are using standard numbers (i.e., 50ma on a 5min chart) or "proprietary" ones. In any case, like everything else in trading, nothing will always work.
Magna
Administrator
uptik,
I'm sure we've all experienced the fake break...one way to avoid that is to look at a VERY important element ....volume!
Unfortunately most fake breakouts (intraday) are accompanied by a large increase in volume. And then suddenly the volume disappears and the breakout fails. We've all had this happen many times where you're left scratching your head saying, "but the volume was so nice..." Anyway, I no longer tend to jump as quickly just because there's a big volume spike.
I'm sure we've all experienced the fake break...one way to avoid that is to look at a VERY important element ....volume!
Unfortunately most fake breakouts (intraday) are accompanied by a large increase in volume. And then suddenly the volume disappears and the breakout fails. We've all had this happen many times where you're left scratching your head saying, "but the volume was so nice..." Anyway, I no longer tend to jump as quickly just because there's a big volume spike.
<I>I'm sure we've all experienced the fake break...one way to avoid that is to look at a VERY important element ....volume! </I>
I avoid looking at volume altogether when determining whether to play a channel bounce off S/R or a breakout. I make my move based on the technicals and set my stops.
The problem with volume is that for everytime there is confirming volume, there are just as many false confirmations. You can't always be sure if the increased volume is there to sustain the breakout or to support the fade.
Not to mention that by the time you can measure signficant increase in volume to sustain a breakout, it's often too late to jump on the breakout. Now you play the bounce back from the breakout... and you're back to square one.
I avoid looking at volume altogether when determining whether to play a channel bounce off S/R or a breakout. I make my move based on the technicals and set my stops.
The problem with volume is that for everytime there is confirming volume, there are just as many false confirmations. You can't always be sure if the increased volume is there to sustain the breakout or to support the fade.
Not to mention that by the time you can measure signficant increase in volume to sustain a breakout, it's often too late to jump on the breakout. Now you play the bounce back from the breakout... and you're back to square one.
Support & Resistance - fact or myth?
Ummm, neither, in my opinion. There is nothing factual about S&R, and it is most certainly not a mythical phenomenon.
S&R simply provides a context to price behavior, a context based on the clustering of buying and selling. And when you have this context, you make your trade, based on a subjective assessment of the risk:reward ratio and the probabilities associated with risk and reward.
At the end of the day, all techniques / trading strategies serve one purpose: to give context to price behavior. A given strategy and its context will have differering degrees of importance amongst any 2 traders. A successful trader will trade with a strategy that provides a price context that is compatible with his personality. There is no right and there is no wrong ... there is only you and your perceptions.
Ummm, neither, in my opinion. There is nothing factual about S&R, and it is most certainly not a mythical phenomenon.
S&R simply provides a context to price behavior, a context based on the clustering of buying and selling. And when you have this context, you make your trade, based on a subjective assessment of the risk:reward ratio and the probabilities associated with risk and reward.
At the end of the day, all techniques / trading strategies serve one purpose: to give context to price behavior. A given strategy and its context will have differering degrees of importance amongst any 2 traders. A successful trader will trade with a strategy that provides a price context that is compatible with his personality. There is no right and there is no wrong ... there is only you and your perceptions.
"A successful trader will trade with a strategy that provides a price context that is compatible with his personality. There is no right and there is no wrong ... there is only you and your perceptions."
Very well said Candle
Keep up the great posts
PEACE and good trading,
Commisso
Very well said Candle
Keep up the great posts
PEACE and good trading,
Commisso