Trading Support and Resistance
- Thread starter DEM
- Start date
"The Market Makers Edge..." A good book discussing how market makers/specialists orient their trading based on prices relative to the previous days' high low and close, and current days open. Very interesting viewpoint from an experienced market maker.
http://www.amazon.com/exec/obidos/A...56764/sr=2-1/ref=sr_8_3_1/102-6429925-7303346
http://www.amazon.com/exec/obidos/A...56764/sr=2-1/ref=sr_8_3_1/102-6429925-7303346
Now, if that trade were to fail and breakout to the upside, would the successful traders here reverse their position even though it's going against the trend in the longer term time frame?
when a market is consolidating sideways, all breakouts are fakes (by definition).
If you only trade this way you are chopped to death.
in trending markets, you can still play support and resistance but always on a retrace.
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Hello Neo from Neo (Neo_hr actually) !
I agree with you on the subjest but thats what has been bugging me lately, HOW DO u KNOW TRENDING vs. TRADING (RANGE)?
OK, MAs but they obviously lag. Is it possible to just enter the market with buy stops (either way) on sides of S/R lines?
THX guys, and TRADE WELL!
Alex_Neo_Matrix_Dude
If you only trade this way you are chopped to death.
in trending markets, you can still play support and resistance but always on a retrace.
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Hello Neo from Neo (Neo_hr actually) !I agree with you on the subjest but thats what has been bugging me lately, HOW DO u KNOW TRENDING vs. TRADING (RANGE)?
OK, MAs but they obviously lag. Is it possible to just enter the market with buy stops (either way) on sides of S/R lines?
THX guys, and TRADE WELL!
Alex_Neo_Matrix_Dude
when a market is consolidating sideways, all breakouts are fakes (by definition).
well, not really. if that were true once a stock is consolidating, it can never trend. eventually there will be a true breakout which will end the consolidation, thus making not all breakouts while consolidating fake. lol does this make sense?
well, not really. if that were true once a stock is consolidating, it can never trend. eventually there will be a true breakout which will end the consolidation, thus making not all breakouts while consolidating fake. lol does this make sense?
I put buy and sell stops on both sides of a consolidation. If you put them far enough away from the high and low of the channel, you'll be rewarded when it does breakout because it usually moves for a big gain. Without stops there is no hope of catching a fast move (early at least). I prefer stops on oversold/overbought stocks however.
Magna
Administrator
ddefina,
I put buy and sell stops on both sides of a consolidation...I prefer stops on oversold/overbought stocks however.
Seems like the second comment doesn't quite correlate with the first. Meaning, if it's oversold then you'd want a buy-stop (only) above the channel, and if it's overbought then you'd want a sell-stop (only) below the channel. Otherwise, why care whether the stock is oversold/overbought before placing your entrance stop(s)?
I put buy and sell stops on both sides of a consolidation...I prefer stops on oversold/overbought stocks however.
Seems like the second comment doesn't quite correlate with the first. Meaning, if it's oversold then you'd want a buy-stop (only) above the channel, and if it's overbought then you'd want a sell-stop (only) below the channel. Otherwise, why care whether the stock is oversold/overbought before placing your entrance stop(s)?
When a stock is consolidating, I don't know if its overbought/oversold so I place stops on both sides. But stocks that aren't consolidating, I try to determine if they're overbought/oversold by their % movement too far in one direction.
Here's an example of a consolidation trade from a few days ago:
back at satan,
yes, in a sideways, all breakouts are fake but one !
I know you were joking, but just to make it clear for everyone, this is why trading all breakouts in a sideways can really kill you. a sideways consolidation can last much longer than you think (the worst everybody knows now is the dow jones industrial.. for 2 years I think and the break out was down ! the same happens in much smaller time frames of course, since the market is fractal).
and back to neo (the one from croatia),
knowing when the market is trending or not is an holy grail. because if you know that soon enough, you always know when to increase size and when to get out.
so the answer is not simple.
the more lag or delay you accept, the simpler the answer is. Just set a MA on a chart. the line will tell you if the market is going up, down or sideways. to be accurate the MA parameter must be big enough, the bigger, the bigger delay you get (vicious circle). But still, you can know easily what is the market condition.
In another thread I mentioned that I prefer trader vic's definition of trending (derived from dow theory). there is still some lag, but somehow, it removes the subjectivity of selecting parameters to the indicator (it is back to price and time only, no indicators, and that's good).
in my systems trading, I use other ways to detect sideways and trending without much lag at all. so there are ways. but that's a bit proprietary.
keep it simple. trader vic's approach is very accurate but not everyone likes it. Moving Average approach is very quick although lagging a bit. You NEED to know in what mode the market is. whatever you type of trading. even scalping I had bad experiences ignoring the current condition (and scalping is the less influenced by higher time frames conditions).
neo
yes, in a sideways, all breakouts are fake but one !
I know you were joking, but just to make it clear for everyone, this is why trading all breakouts in a sideways can really kill you. a sideways consolidation can last much longer than you think (the worst everybody knows now is the dow jones industrial.. for 2 years I think and the break out was down ! the same happens in much smaller time frames of course, since the market is fractal).
and back to neo (the one from croatia),
knowing when the market is trending or not is an holy grail. because if you know that soon enough, you always know when to increase size and when to get out.
so the answer is not simple.
the more lag or delay you accept, the simpler the answer is. Just set a MA on a chart. the line will tell you if the market is going up, down or sideways. to be accurate the MA parameter must be big enough, the bigger, the bigger delay you get (vicious circle). But still, you can know easily what is the market condition.
In another thread I mentioned that I prefer trader vic's definition of trending (derived from dow theory). there is still some lag, but somehow, it removes the subjectivity of selecting parameters to the indicator (it is back to price and time only, no indicators, and that's good).
in my systems trading, I use other ways to detect sideways and trending without much lag at all. so there are ways. but that's a bit proprietary.
keep it simple. trader vic's approach is very accurate but not everyone likes it. Moving Average approach is very quick although lagging a bit. You NEED to know in what mode the market is. whatever you type of trading. even scalping I had bad experiences ignoring the current condition (and scalping is the less influenced by higher time frames conditions).
neo