Trading Ranges, Support, and Resistance

But1Sell2,

Can you explain in detail?
More than 80 percent of all probes above resistance or below support will fail. Waiting 1 or 2 bars on a breakout is not enough activity to act as filter and new support or resistance must be established prior to entry.
 
More than 80 percent of all probes above resistance or below support will fail.
Not sure if this is completely accurate, but it explains why buying support and selling resistance will usually work. The skill comes in taking profits and managing your exit if the trade goes against you.
 
Not sure if this is completely accurate, but it explains why buying support and selling resistance will usually work. The skill comes in taking profits and managing your exit if the trade goes against you.
Correct. However, the small number of breakouts/breakdowns that succeed if held and managed properly will more than make up for the opportunities lost by not "range" trading.
 
One must realize as well that most people will be wrong is assigning proper weight to different support and resistance areas.
 
So you would rather go for a 20% percent chance of winning instead of 80%?
Yes. Because I will have less activity and less commissions. In addition I wil have less chance to make mistakes on trades because the activity will be less. I know from experience that properly managed trend trades yield greater profits even though the win rate is lower.
 
1. You may be interested in Trading By Price. It's based on Wyckoff's work and I found it invaluable.

2. Book? No. However, there is an excellent thread on applying Wyckoff's approach *here*. That approach was largely about determining the line of least resistance, the balance and shifts in balance between buying pressure and selling pressure, trends and ranges and trading each to the best result.

3. No. Support (the level at which buyers find value) and resistance (the level at which buyers decline to pay the ask) imply ranging. Ranging and trending are two different states (fortunately they're the only two states you have to worry about). Some consider moves between support and resistance to be trends, but this pretty much defeats the purpose of using the term "trend" in the first place. A large part of the confusion lies in the failure of the trader to decide upon his frame of reference. An intraday trader, for example, may be trading ranges and trends and breakouts and reversals that aren't even visible to someone trading an hourly chart, much less a daily chart. Does that mean that those trading ranges, etc, don't exist? Technically, they do. Practically, they don't, not if the trader in question doesn't even see them.

Using the NQ as an example, it ranged from July 2015 for nearly a year and a half, until the election, and the range was nearly a thousand points wide. Was this trending? No. Was it not worth trading simply because is was ranging? Someone using monthly charts might argue that it was not. Someone using daily charts would be salivating at the prospect.

It will be important for you to decide whom you want to trade with. Nearly all daytraders divide their day into segments: 1m, 5m, 15m, etc. If you want to trade with 5m people, for example, you'll have to pay special attention to 5m charts so that you know what they're looking at and trading. If you want to scalp, you will again have to pay special attention to what they're looking at and trading. And if you happen to be looking at a point or level that scalpers and 5m people and 15m people and daily people are all looking at simultaneously, be prepared for a hell of a move given the number of people who will be trading alongside you.
Great post Icranston. Thanks for the links too.

CM
 
1. Can you please recommend a good book/reference on price action and trading ranges (support and resistance)?

2. Can you please recommend a good book/reference on how to sell resistance and buy supports?

3. Is selling resistance and buying supports considered counter trend trading? I am not sure I understand the difference.

Trading for a Living - Elder
 
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