As always, the key is understanding the "more often than not" areas and how to capitalize on them.
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Support & Resistance? Why do some work and some not?
- Thread starter iamnewuser911
- Start date
As always, the key is understanding the "more often than not" areas and how to capitalize on them.
I look at areas of volume as well as specific pivots. An example would be AUD finally breaking below .7580 level. There was lots of trade .7580 to .90, then . 7610 to .25. Volume profile. I don't use it directly but just know where the market has spent most of its time. You can eyeball it from the charts as well.
Yea I can see the wicks, people buying at those support levels?I look at areas of volume as well as specific pivots. An example would be AUD finally breaking below .7580 level. There was lots of trade .7580 to .90, then . 7610 to .25. Volume profile. I don't use it directly but just know where the market has spent most of its time. You can eyeball it from the charts as well.
So how did you trade them? Personally looking for a retest on 7580.
How I traded depended on the trend of the day or more specifically how the market opened and responded to price levels. You want to see the London open hold. If not then you've either got chop or a reversal possibility. Sometimes the chop resolves itself going in to NY open, or the market is just waiting for news. I use a 123 pattern for support or resistance, but as previously mentioned, context is everything. You would expect a break in an uptrend without any specific news to find support quickly, so it's scalp only, expecting retracement. You have to be careful not to go to the well too often. I try to let the market tell me, once it has broken, where it wants to settle. This takes time and patience. But I've gotten better at seeing the loss of momentum. In trading as in fencing there are the quick and the dead.
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.
Well put and well illustrated, and you've shown why so many retail traders are always late, even if they are on the correct side of the trade.
L
lovethetrade
Support & Resistance? Why do some work and some not?
Does it really matter if some S/R levels work or not, there's other ways to determine if the market will continue or turnaround. For many, S/R is just a vague point of reference.
Does it really matter if some S/R levels work or not, there's other ways to determine if the market will continue or turnaround. For many, S/R is just a vague point of reference.
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