Indicators are liars! Support and Resistance Trading for the S&P emini

[aamarx]

I am not against support and resistance as I know many traders are looking at these levels,, the problem is because every one is using it so program traders KNOW these levels and data mine them ,, DUAL sided program trades ( zero profit algorithm ) create FAKE liquidity at these important levels to catch those who are waiting for the breach of these levels and trade against them ,, During the OFF LINE period ( before internet ) S/R worked differently to the way it is working Now,,
TA has evolved since the launch of internet ( even though the supply and demand is still the foundation of the market ) YOU HAVE TO EVLOVE too,,
you must have seen the film TERMINATOR.. Machine battles machine,, Intra day trading is the same battle, and is getting more sophisticated.. I think some one on this BB should take the lead and introduce the effect of program trading on IMPORTANT S/R LEVELS and HOW to trade at these levels. I don't profess expertise in this subject , but i have seen how algorithms create fake supply / demand at major S/R to get other programs traders to kick in while they trade against them ,.,

Grey1

Thanks for your message, program trading is an area I have very little knowledge about so cannot really comment there, I hope that the example above of the 22nd of August that Trader333 requested demonstrates the power of S/R trading.

I have recently set up a blog and as a result of many requests from trading buddies and others have set up a newsletter for any people interested in receiving my numbers. Its a pretty amateurish set up, but if you have the time please do check it out.

Support and Resistance Levels for the ES Trader

 

[aamarx]

Hi everyone

Interesting goings on over the weekend!

Please find attached my levels for today.

 

[Grey1]

aamarx

just saw this comment from Alan Farley at the bottom of your post

__________________
"Experienced traders control risk, inexperienced traders chase gains." -Alan Farley




JUST LOVED IT.. GOOD CHOICE,, really well done

Grey1

 

[aamarx]

aamarx

just saw this comment from Alan Farley at the bottom of your post

__________________
"Experienced traders control risk, inexperienced traders chase gains." -Alan Farley




JUST LOVED IT.. GOOD CHOICE,, really well done

Grey1

Thanks Grey

Thats exactly how I try to trade, my primary focus in every trade I take is to get myself into a situation where I am totally risk free. I think about profit 2nd.

Not losing money is the most important thing. Its also Warren Buffets first rule of investing, he copied me

Good trading all.

Thank you once again Grey I hope that my thread is proving of some value, we had a great short from 81.00 this morning using a level from 03/09

 

[Grey1]

Thanks Grey

Not losing money is the most important thing.

100000 % correct,,,, 100% winner's attitude. I am pleased ..


grey1

 

[aamarx]

The 81.00-79.75 area has worked really well this am, providing 2 great set ups so far.

Important thing to note...if an area has been used once already in a day, its odds do become reduced upon later hits of that area. I would only take this area again if I saw a good set up like these last 2 hits at the area.. So please do exercise caution and look for a good set up according to your system.

EDIT: Make that 3 great set ups so far

 

[Vrothdar]

Interesting thread so far. One question though regarding the following quote.

I have marked up som Fibs, I only really pay attention to the 50% fib as it has the highest statistical significance.

What measure tells you (or anybody else) that the 50% level is more significant than others? Is there a reason for it beyond lots of people saying that 50% is important resulting in a lot of people watching that level?

 

[aamarx]

Is there a reason for it beyond lots of people saying that 50% is important resulting in a lot of people watching that level?

For me personally thats the main reason, and also from my own study the 50% retrace has worked best historically.

 

[Vrothdar]

Thanks for clearing that up.

 

[aamarx]

Currently in a short from 81.00, the trade did take some heat with a high at 82. Market pulled down to 1279.75. Which was enough to fill the first 1/3 of my trade. Thus greatly reducing my risk my stop is now at 81.75. Worst case scenario I will take a small loss.

Market has just broken down! woo hooo

Taking profits at 79.00

Before taking this trade I was writing the message below.

Important thing to note...if an area has been used once already in a day, its odds do become reduced upon later hits of that area. I would only take this area again if I saw a good set up like these last 3 hits at the area.. So please do exercise caution and look for a good set up according to your system.

Think of the market as battering ram, and our levels as a big gate that they are trying to knock down, the first couple of attempts at the gates (level) might hold but the more it gets battered the lower its odds of holding become.

 

[Vrothdar]

Think of the market as battering ram, and our levels as a big gate that they are trying to knock down, the first couple of attempts at the gates (level) might hold but the more it gets battered the lower its odds of holding become.

Would you say that this is true in both directions? ie if a resistance level is broken there is a lower chance of it acting as support than there was for the resistance to hold in the first place?

 

[aamarx]

Would you say that this is true in both directions? ie if a resistance level is broken there is a lower chance of it acting as support than there was for the resistance to hold in the first place?

I would say that if a strong resistance level is broken the odds of it working as support is high.

So every time a resistance level is hit, its odds are reduced. Finally the level gets broken and the market flies through. Its almost like resetting that levels strength or rebuilding the gate now as support. And we go through the whole battering ram process all over again.

The reason why S/R works is because of the emotion associated with the level. MOST BUYERS of a market kick in as we hit RESISTANCE now this may sound strange and contradictory. But when the sellers kick in at that level they are left high and dry, hoping and wishing to get of their trade break even. Take a look at volume on the short I just took on a 1 min chart the closer we got to my area the higher number of market participants.

Support and Resistance levels are areas of high emotion, and reactions at these levels are usually violent, the short I just took now is a good example of that.

 

[aamarx]

I entered Long at 69.50, using the 70.25 level with a fairly decent set up. And took a full 5 tick loss on the long. The low was at 67.50

The momentum was huge.

Although the loss is small in comparison to my gains this morning. I feel it is ALWAYS very important to analyse losses and understand why they happened. Many traders try to brush their losses under the carpet. I say embrace your losses! Analyse and dissect your losses.

Join me in Traders Anonymous : )

 

[aamarx]

No fill for me at 65.25, if a level is missed by a tick or 2 and and makes a good move, like what just happened there. Then the odds of it working if it gets hit are reduced.

I didnt have a set up at the markets 2nd attempt at 65.25. This downside pressure is strong,

Now in long at 62.75! first 2/3s filled! Holding

 

[aamarx]

i am now done for the day

P.S did anyone notice how the 70.25 area just became Resistance? We just hit a high at 70.00 made for a nice short.

Remember Past Support Becomes New Resistance!

PSBNR!

 

[hwsteele]

Do you only use price or do you use time also?

 

[aamarx]

Do you only use price or do you use time also?

Price And Time Trading

Is this what you mean? If you mean caluculations based on what "time" I think the market is going to turn then no. I only look at price hitting my level and then look for a set up around that level.

This method greatly reduces the number of trades I take as I only look for set ups at certain high probability price levels.

 

[hwsteele]

I see and how long have you been trading like this?
Has it worked well for you?

 

[aamarx]

Hi everyone

Todays numbers September 9th!

 

[aamarx]

I see and how long have you been trading like this?
Has it worked well for you?

Quite a while now and yes I have been successful.

Success in trading comes from 3 elements I believe, (in order of importance)

1. Trade Management/Risk Minimisation

2. Mechanical Trade entry (i.e. being efficient with your dealing station)

3. And lastly Trade entry

Whenever I have posed this order to other traders its always aroused debate, I believe that the reason why 90% of people fail in this business is because they place Trade entry and Profits top of that order. The few that make it focus on controlling their risk, managing their trade and being mechanically very efficient with their dealing station.

ha ha I went of in a bit of a tangent but I hope you find my thoughts helpful :cheesy: