Support & Resistance? Why do some work and some not?
- Thread starter iamnewuser911
- Start date
This is all great but none of it has to do with the original purpose of the thread. That being s/r lines drawn on a chart are useful (and my coin flipping graph being a counterpoint). In fact you are helping my argument because your edge is not in reading the chart but cutting losses and letting winners run.
From experience I know that if you are skilled S/R and trendlines can be very useful.
However, it is an art that takes many years of experience to be really good at.
Some new traders try it and think it doesn't work because they do not yet have the skill or experience.
It's a bit like a novice sitting down to the piano trying it and saying
"Piano's don't work"
A concert pianist knows better and doesn't get into the argument - he just plays beautiful melodies.
However, it is an art that takes many years of experience to be really good at.
Some new traders try it and think it doesn't work because they do not yet have the skill or experience.
It's a bit like a novice sitting down to the piano trying it and saying
"Piano's don't work"
A concert pianist knows better and doesn't get into the argument - he just plays beautiful melodies.
What a keystone response. Anyone can pull a sample of data and make assumptions. The stock market isnt a perfectly round, symmetrical coin and never will be.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?).
And the market doesn't turn just because a line on the chart says it is "support" or "resistance".
Edit: "keystone response?" really?
Why do some work and some not?
More than the question of working or not, the proper identification of support and resistance should be of greater concern. I have so often seen what IMHO I feel is one basic misinterpretation of support and resistance that would lead to failed or missed trades.
As in the attached, so many people refer to the lows in a downtrend, B, as support, such as S2, and the highs in an uptrend, A, such as R1, as resistance. The moves to S1 and S2 are completely opposite, with that to S2 being a move in the primary direction and that to S1 being a reaction. Therefore, the moves following S1 and S2 can not be expected perform equally. So for those who employ the 'buy at support and sell at resistance' tactic, treating both S1 and S2 as support will, as the OP questioned, be hit and miss. Also, for example, regarding R1 as resistance, rather than just the last high in the primary direction, may cause hesitation to buy before R1 is penetrated, resulting in a missed trade.
Additionally, using the white line as an example, looking for support at a low in the previous trend, S3, will not have a high probability of success as the forces at work at that price level are the opposite.
While the above is just basic TA, I've seen such misinterpretations so often that I thought I'd give my 2 cents, even though few will agree or be interested.
More than the question of working or not, the proper identification of support and resistance should be of greater concern. I have so often seen what IMHO I feel is one basic misinterpretation of support and resistance that would lead to failed or missed trades.
As in the attached, so many people refer to the lows in a downtrend, B, as support, such as S2, and the highs in an uptrend, A, such as R1, as resistance. The moves to S1 and S2 are completely opposite, with that to S2 being a move in the primary direction and that to S1 being a reaction. Therefore, the moves following S1 and S2 can not be expected perform equally. So for those who employ the 'buy at support and sell at resistance' tactic, treating both S1 and S2 as support will, as the OP questioned, be hit and miss. Also, for example, regarding R1 as resistance, rather than just the last high in the primary direction, may cause hesitation to buy before R1 is penetrated, resulting in a missed trade.
Additionally, using the white line as an example, looking for support at a low in the previous trend, S3, will not have a high probability of success as the forces at work at that price level are the opposite.
While the above is just basic TA, I've seen such misinterpretations so often that I thought I'd give my 2 cents, even though few will agree or be interested.
I am very interested. What I face is that I would buy at previous resistance turn support.
http://prntscr.com/cbcybm
Like this, vice versa for downtrends.
However it feels that it is very inconsistent, it works for weeks, then stops working, retests deeper etc.
http://prntscr.com/cbcytv Common problem for me.
Or price just completely ignores the level and breaks it
I have added a 18 SMA, if price below SMA in an uptrend and is testing previous resistance turn support, I buy.