Support & Resistance? Why do some work and some not?

I

iamnewuser911

They work because people are looking at the same thing.

1) http://prntscr.com/c9tk0y

2) http://prntscr.com/c9tkbj

3) http://prntscr.com/c9tl5z

4) http://prntscr.com/c9tlhl

5) http://prntscr.com/c9tltm

6) http://prntscr.com/c9tmao

Some rules I figure out

1) Price must breakout (momentum!), not drift from below and above the resistance/support point.

2) When price pulls back, it must "drift" and not plunge/spike. (However I find that price that pullsback SLIGHTLY faster than the breakout also work sometime)

3) Trend is important, never try to sell the first break of support retest in an uptrend, wait for an established trend.

4) Don't trade SR within a consolidation, preferably trade the extremes.

5) Don't trade pullbacks that look like new formed support or resistance. (Price should breakout, close near the lows/highs of candle then "drift" back into support turn resistance vice versa.)

6) Don't trade pullbacks that just bounced off resistance/support.

7) Obvious swing points count as SR only!


What do you guys think?
 
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Unfortunately, you will find that support/resistance is in the eye of the beholder. I am afraid you are curve fitting with the rules you are outlining trying to make sense of the data. For example, looking at the chart below you would think you have obvious points where you can draw lines and trade off of. However, this chart was generated by flipping a coin and is not a real stock. There is a great article somewhere about putting random lines on a chart and trading with them (google Grimes perhaps?).
coin-toss-simple-chart.png
 
Dolemite said:
Unfortunately, you will find that support/resistance is in the eye of the beholder. I am afraid you are curve fitting with the rules you are outlining trying to make sense of the data. For example, looking at the chart below you would think you have obvious points where you can draw lines and trade off of. However, this chart was generated by flipping a coin and is not a real stock. There is a great article somewhere about putting random lines on a chart and trading with them (google Grimes perhaps?).
coin-toss-simple-chart.png
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http://prntscr.com/c9tz9z

http://prntscr.com/c9tzn7

Some of them? I see them like that.

Which rules do you see as curve fitting?
 
Dolemite said:
You did get the part where I said that the chart I posted is based on coin flips right?
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Yea I know, but honestly think price will turn there if that was a real chart because other people are looking at the same obvious lines.

So which rules am I curve fitting?
 
ktm said:
It's voodoo. Tarot cards. You see what you want to see.
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Correct. If you would review these charts in 30, 60 and 120 days, you will end up each time with different lines. If three people draw lines you probably have three times different results.

First thing you need is something that will produce each time the same result. In 30, 60 and 120 days the result should be exactly the same. If not you cannot use it is you are never sure about the outcome.
Something like 1+1=2. This result will always be 2. No interpretation possible.
 
iamnewuser911 said:
They work because people are looking at the same thing.
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It depends what you mean by "looking".

They actually worked better, by many accounts, before people were so widely "looking" - and Dr. Alexander Elder spends quite a bit of the first part of his book Trading For A Living answering your original question.


iamnewuser911 said:
never try to sell the first break of support retest in an uptrend, wait for an established trend.
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You keep scattering words like "never" and "must" throughout your observations, which really detracts from the fact that some of them do contain some truth, backfitted though they are.


iamnewuser911 said:
What do you guys think?
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I think there's quite a lot of woolly thinking around, about the subject. Specifically, many people have made the mistake of conceptualising "support" and "resistance" as collective entities, rather than mentally dividing them into "previous S/R" and "future S/R". From my own observations of the charts from which I trade, myself, the main factors which determine the ever-complicated probability of previous S/R turning into future S/R are (i) the number of "touches" and (ii) how recent they were (but there are plenty of other factors, too). It's fundamental to me to think of all these things as probability functions. Just my perspective ...
 
ktm said:
It's voodoo. Tarot cards. You see what you want to see.
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what one sees depends of his definition of the trend, and of support resistance

if definition is voodoo, then its tarot cards
if definition is legit, then one got a working method :)
 
Xela said:
It depends what you mean by "looking".

They actually worked better, by many accounts, before people were so widely "looking" - and Dr. Alexander Elder spends quite a bit of the first part of his book Trading For A Living answering your original question.





You keep scattering words like "never" and "must" throughout your observations, which really detracts from the fact that some of them do contain some truth, backfitted though they are.





I think there's quite a lot of woolly thinking around, about the subject. Specifically, many people have made the mistake of conceptualising "support" and "resistance" as collective entities, rather than mentally dividing them into "previous S/R" and "future S/R". From my own observations of the charts from which I trade, myself, the main factors which determine the ever-complicated probability of previous S/R turning into future S/R are (i) the number of "touches" and (ii) how recent they were (but there are plenty of other factors, too). It's fundamental to me to think of all these things as probability functions. Just my perspective ...
More...

Can you post some charts of trades you took or something? I want to see if I see differently and ask questions etc.
 
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