Support & Resistance? Why do some work and some not?
- Thread starter iamnewuser911
- Start date
Triple tops/bottoms then breakout of 3 or 4th high or low for most part are counter-trend trades.
If you use moving average for trend, they will come up during strong trends but not often. They are like all the other patterns and life in general, some work and some don't , BUT do not get MARRIED to them, give them so much time as in bars to work and if they not your direction, best to get out or often becomes a loss. Make a rule like for a programmer of how far can be considered to be part of the Triple, how many ticks within highs or lows to be considered part of that Triple. Trouble with putting lines any where, you can never test them, some don't believe in testing, and I don't believe in Easter Bunny.
As far as profit, that is where your back testing comes into play, and learn to accept and be happy whatever it is. I found learning to accept was very hard becoming a trader.
If you use moving average for trend, they will come up during strong trends but not often. They are like all the other patterns and life in general, some work and some don't , BUT do not get MARRIED to them, give them so much time as in bars to work and if they not your direction, best to get out or often becomes a loss. Make a rule like for a programmer of how far can be considered to be part of the Triple, how many ticks within highs or lows to be considered part of that Triple. Trouble with putting lines any where, you can never test them, some don't believe in testing, and I don't believe in Easter Bunny.
As far as profit, that is where your back testing comes into play, and learn to accept and be happy whatever it is. I found learning to accept was very hard becoming a trader.
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Correctamundo!
When S/R appear to "work", there is a reason. When they don't, there is also a reason.
When S/R appear to "work", there is a reason. When they don't, there is also a reason.
Correctamundo!
When S/R appear to "work", there is a reason. When they don't, there is also a reason.... in both cases, the "reason" is psychological.
S/R cannot work "all of the time". If they did soon everyone would learn the consistency and nobody would take the other side of the trade. So as a trader, you have to learn to cope with when they work and when they don't. In any case, they are significant trading decision areas.
K.I.S.S., as always.
(Handle snuck a post in while I was typing, so mine didn't get referenced properly... tried to delete earlier post, but wouldn't let me.)
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They also DON'T work because people are looking at the same thing.
No, that's not the reason.
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?).
Support & Resistance will work over and over again. Trading is not only about the entry like many traders think, they are looking for the perfect entry but they will lack trade management and if you have trade management problems you are basically screwed.
The above picture is a great example despite the fact that it is a chart created by tossing a coin you have to be able to read the chart and I think that the resistance level that is drawn on the chart is wrong at least for this chart. Every time you break a new High or Low you basically have a break of Resistance or Support so every time you break resistance you want to go long on the next pull back, during the move up you expect to break a new HH until you a break of a HL and that is a break of Support and basically a trend change. If you have a proper system (trade chart to take the entry) in conjunction with proper trade management you will hit win loss % of 60/40 with no problem this in conjunction with a winn loss ratio of 3/1.
Look at my chart (sorry for the bad drawing skills) and use it as a road map!
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YES, that's has to be the reason to a degree. Too many people trying to outmaneuver each other at the same place. Yes...bigger players also play games at these "levels" when they deem advantageous. The S or R may look like it worked on a chart, but many will be left behind because of all the maneuvering. So, if you are the one left behind...did it work for you?
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Good examples of Head & Shoulder patterns, back testing can aid one in knowing approx. how much profits in various patterns based on many different situations: time of day or night, swing lengths is very important for me as they change depending on time of the day, reports, whether morning was tight, can expect afternoon to be greater. The more you can dream up even the dumbest questions and program them, you have an edge over others who are not back testing.
Learn to accept, I have made it all these years as I eventually learned to ACCEPT, and there is many factors I had to accept, day trading is a tough game of whatever I make is a gift to add to other trading I do, for me it is not homeruns trades, it is grinding out smaller profits. The more consistent you can become, more contracts you have confidence to add on, once you get to 25 lots and grind out few hundred a day per lot, you making one million at end of the year. It is not about golfing by ten o'clock, buying fancy cars or houses, it is about working your rump off and figuring out how to get that plus one tick and not getting out at breakeven which is a losing trade as you have fees.
You work hard on money management and develop rules on the very boring side of trading, but that is where you make or lose money, it is where the chart shows you when not to take trades.
How many wish they could wipe out 2 trades that lose money most days and do it on a consistent basis, would that make a difference end of the day? Often times the charts are telling all but if you can't read the signs....you end up with nickname of Bait.
Learn to accept, I have made it all these years as I eventually learned to ACCEPT, and there is many factors I had to accept, day trading is a tough game of whatever I make is a gift to add to other trading I do, for me it is not homeruns trades, it is grinding out smaller profits. The more consistent you can become, more contracts you have confidence to add on, once you get to 25 lots and grind out few hundred a day per lot, you making one million at end of the year. It is not about golfing by ten o'clock, buying fancy cars or houses, it is about working your rump off and figuring out how to get that plus one tick and not getting out at breakeven which is a losing trade as you have fees.
You work hard on money management and develop rules on the very boring side of trading, but that is where you make or lose money, it is where the chart shows you when not to take trades.
How many wish they could wipe out 2 trades that lose money most days and do it on a consistent basis, would that make a difference end of the day? Often times the charts are telling all but if you can't read the signs....you end up with nickname of Bait.
