Support and Resistance zones are overrated

M

me1969

I am trading intraday various kinds of pullback moves after price action has shown momentum. My experience (at least regarding futures) has been that it is quite more important to adapt your stop-loss and your targets to the volatility regime of your time-frame than to observe support and resistance zones.

And here's an interesting vid by Adam Grimes in which he shows how random S/R levels work out: https://www.youtube.com/watch?v=5mPp7_fajvo
http://adamhgrimes.com/blog/randomsrlevels/

What do you think about it?
 
Straw man. Since he doesn't know what support and resistance are, he is able to demonstrate his point. Problem is, his point is irrelevant.

Support and resistance are those levels beyond which traders are unable to find trades. This can be a swing point or it can be the upper and lower limits of a range. If one lets a program find them, they will be wrong and therefore useless. But this doesn't mean that determining these levels oneself is a useless activity.
 
dbphoenix said:
Straw man. Since he doesn't know what support and resistance are, he is able to demonstrate his point. Problem is, his point is irrelevant.

Support and resistance are those levels beyond which traders are unable to find trades. This can be a swing point or it can be the upper and lower limits of a range. If one lets a program find them, they will be wrong and therefore useless. But this doesn't mean that determining these levels oneself is a useless activity.
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I agree. Grimes is strictly a computer trader, it takes years of study to get good at studying charts, more education one has to make ideas of what will work, becomes experience of what will work and then you can try coding by using pivot strength(ie. how many to left/right have lower highs of the pivot high). But what I think most view in S/R, it is an "area" of where price might stop and bounce, you can formulate it as a signal to get in or out, but it still comes down to working on one's Money Management rules at least to me.
 
Funny because I was going to post something similar about how random lines could look like s&r.. So yes it is overrated.. Some gurus on here will disagree with me loudly, but wont tell you how to profit from it. I think real time s&r is better than old s&r.. But I tell you this.. I absolutely hate trendlines as s&r.. They are the worst.. Good luck with that..
 
summed up in one thing.
If your levels of support and resistance perform no better than random levels then you may as well just use random levels.
However, if your levels show to be better guides than random levels then use them.

If you draw them like him as random levels without showing anything, then you will look for PA at those levels as he did.....but that actually proves one thing only - he is looking for the patterns to form at these levels....so of course random price movements will occur at some of these levels.
In real life not history, you are looking at what happens at that point in time....that is what is important.
Support and Resistance are pretty much areas of interest......not brick walls.

No matter how you draw them.
 
Instead of just looking at plain S/R levels, you should focus more on chart patterns that contain them. Such as Ascending and Descending triangles.
 
Handle123 said:
I agree. Grimes is strictly a computer trader, it takes years of study to get good at studying charts....
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Adam Grimes is not a mechanical trader but discretionary. He uses TA and has written a very interesting book about his approach
 
dbphoenix said:
Straw man. Since he doesn't know what support and resistance are, he is able to demonstrate his point. Problem is, his point is irrelevant.

Support and resistance are those levels beyond which traders are unable to find trades. This can be a swing point or it can be the upper and lower limits of a range. If one lets a program find them, they will be wrong and therefore useless. But this doesn't mean that determining these levels oneself is a useless activity.
More...

I don't think his point is irrelevant. He is not saying that it makes no sense to use S/R levels but not to overrate it because most S/R levels are as good or bad as randomly drawn lines on a chart. The more prominent a S/R area is the more relevant it might be because a lot of traders (or machines) could reflect it in their trading.
 
me1969 said:
I don't think his point is irrelevant. He is not saying that it makes no sense to use S/R levels but not to overrate it because most S/R levels are as good or bad as randomly drawn lines on a chart. The more prominent a S/R area is the more relevant it might be because a lot of traders (or machines) could reflect it in their trading.
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That depends on how one defines support and resistance. If one defines them as he does, then of course they are overrated. If one defines them properly, then they are not.

This is not unlike defining "technical analysis" as indicators and patterns then proclaiming that it "doesn't work".

Hence, the "straw man".
 
dbphoenix said:
That depends on how one defines support and resistance. If one defines them as he does, then of course they are overrated. If one defines them properly, then they are not.

This is not unlike defining "technical analysis" as indicators and patterns then proclaiming that it "doesn't work".

Hence, the "straw man".
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I don't think it is a matter of definition. It is about having an edge in the market. And if there is only randomness you have no edge. Here's an interesting link to a game where you can test your ability to tell random from real data: http://arora.ccs.neu.edu/v4/tool/login.jsp?sessionExpired=true
They have found through this experiement that humans can intuitively differentiate between random and non-random data plotted on a chart. Try it out.

In real markets is a lot of randomness - perhaps more than 99% - but if they would be 100% random it would not be possible to gain any edge.

If you want to dig deeper, Adam Grimes offers a course for free (only registration is necessary), and week 2 covers this topic: http://adamhgrimes.com/TAAS/restricted/the-course/week-2-the-problem-of-randomness/

Btw, I am in no way affiliated with him.
 
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