Best Thread Support & Resistance Explained

[robster970]

re: Support & Resistance Explained

Aren't S&R basically increased depth of limit & stop orders at known levels that essentially provide liquidity?

What maintains them as either S/R is whether value traders or main market particpants consume the available liquidity when they believe the levels provide an opportunity to profit from the mispricing of the security.

S/R breaks down when the security is not mispriced and basically a trend continues.

This is all most likely for fundamental/macroeconic reasons and has bugger all to do with technical trading.

The levels have memory because participants know there is liquidity at these levels.

 

[Scotty2Cues]

re: Support & Resistance Explained

That's a great resource Scotty. Also I think your mention of correlation is important too. I think trying to trade most of the major fx pairs without an eye on the S&P500 is pointless.

Ive read different opinions about correlation such as USD/CAD is correlated with oil and others say not to place too much importance on it. I suppose it depends on style of trading, maybe more relevant to position traders. Also not sure how important it would be when looking at S&R levels.

Maybe one reason eur/gbp has some correlation with FTSE is because eu/gbp doesnt have nowhere near the volume as eu/usd or gbp/us.

Would be interested to look at S&P500 versus the EU/USD and GBP/USD.

Yes it is great resource

 

[Scotty2Cues]

re: Support & Resistance Explained

S&R in action. Look at Eur/usd. LOTS of S&R at 1.3800 in the past. Just hit 1.3800 and again acted as resistance. Im looking for this to break the 1.38 level and then turn into support

 

[scose-no-doubt]

re: Support & Resistance Explained

Aren't S&R basically increased depth of limit & stop orders at known levels that essentially provide liquidity?

What maintains them as either S/R is whether value traders or main market particpants consume the available liquidity when they believe the levels provide an opportunity to profit from the mispricing of the security.

S/R breaks down when the security is not mispriced and basically a trend continues.

This is all most likely for fundamental/macroeconic reasons and has bugger all to do with technical trading.

The levels have memory because participants know there is liquidity at these levels.

Don't be stupid Rob. Price isn't a real world transaction or a function of value as perceived by market makers! It's simply like a tadpole bobbing about your screen and it bounces around these invisible lines on your charts. If you can catch these lines before they disappear or you can make loadsa money.

 

[bbmac]

re: Support & Resistance Explained

S&R in action. Look at Eur/usd. LOTS of S&R at 1.3800 in the past. Just hit 1.3800 and again acted as resistance. Im looking for this to break the 1.38 level and then turn into support

You can see the previous weekly swing hi (=previous resistance = potential resistance) zone along with the 1.618% fib ext of the a-b that has seen supply in that eurusd market...

 

[bbmac]

re: Support & Resistance Explained

The discussion about why supp/res works sometime and not others is simply that sometimes 'the market' respects potential supp/res factors, sometimes it doesn't...it is probably that simple. Ie in the case of a trend sometimes the trend pulls back to an obvious rbs/sbr level and the buy the dip/sell the rally participants come in there, sometimes they do not.

Confluence of potential supp/res factors is obviously important because there is more chance that more market participants will be looking at the same things.
If you trade this way, either your edge sets-up or it doesn't....I often have pre-identified potential supp/res that price arrives @ but no edge, in which case I do not trade from it.

G/L

 

[bbmac]

re: Support & Resistance Explained

Re point in my post above...look at the 1hr gbpusd chart today, asian session sees a 5780 lo and a run up to 5718, the subsequent run down creating a 1hr previous fractal swing hi zone at point a that when tested at point b finds supply again...selling down to the previous 1hr swing hi zone confluence with the 61.8% of the 566=8-5872 move. (point c)..where demand came in...Did we know ahead of time that the market would react in this way at either of these 2 pre-identified potential res/supp zones...No...all we have is our trading edge, it either sets-up or it doesn't and all that tells us is that there is historically a greater probability of one thing happening over the other, ie bounce over break.

G/L



Addition to post: Personally I was not around to catch the reversal from point b, but one of the repeating set-ups that make up my trading edge did develop @ 0838am at point c...it is posted below (a bullish divergence based set-up on the 1min trigger.) As someone else pointed out in this thread, very often we see a reaction at supp/res even if it doesn't hold in the longer term..

 

[bbmac]

addendum to post above

re 1hr gbpusd above, Why are some potential supp/res factors respoected by the market ?

price sells down to a current intraday lo at point c of 5746 (61.8% 5668-5872) and the subsequent 1st leg of the pullback reaches 5805-point d...where it encounters supply and makes a triple bottom on 5min at 5769-point e off that 5805 pullback Hi...that 5769 being 61,8% of the said 5746-5805 (point c-d)...Why did price base here and use such a base for a lift to a current 5836 Hi in the 2nd leg of the pullback off current 5746 intraday lo.?..Was it because the 1hr/4hr pinbar players came in,? or was it that the 61.8% was fresh in the mind following the support found at current intraday lo being 61.8% 5668-5872...We don't know is the answer, all we know is that there was or was not a trading edge present to get involved with the market at @ potential support factor in the overall price action context of the then market on the t/f's of interest.

G/L

 

[arabianights]

re: Support & Resistance Explained

Forex is primarily real trading, not speculation:

Take a wee look at http://www.ft.com/ftfm/forex-investing-oct-10

Anyhow, "take a look at" charts are not really anything about anything in this context. They maybe useful in demonstrating how to trade but they aren't an argument.

 

[bbmac]

re: Support & Resistance Explained

The whole argument/discussion about support/resistance can be summed up thus:

There are areas and factors on a price chart that have historically seen imbalances of demand/supply or supply/demand, and have historically proven to be turning points in the market. I refer of course to previouis price pivots and other factors such as fibs/trendlines.

Sometimes the market respects these areas/factors if price tests again, sometimes it doesn't...and it is price action's behaviour leading up to and around them that can (along with some other technical tools if one chooses to use them) tell us which outcome has the greater probability.

It is that simple.

 

[scose-no-doubt]

re: Support & Resistance Explained

Sometimes the market respects these areas/factors if price tests again, sometimes it doesn't...

Sometimes the ball on a roulette wheel lands on a red number, sometimes it doesn't.

 

[bbmac]

re: Support & Resistance Explained

Sometimes the ball on a roulette wheel land on a red number, sometimes it doesn't.

It absolutey does, but unlike that scenario, (not counting the house edge of the 0 or on some wheels the additional double 0 there is theorteically an equal probability of each outcome and ahead of the outcome you have no other factors that can tell you what the geater probability is...unlike a hi probability trading edge that may or may not set-up around pre-identifies potential supp/res factors...this can weight the probability of a successful outcome in your favour. In that scenario too you also have an equal r:r that cannot be altered and even dutching or martingale (doubling) actually decreases the r:r ratio..Personally I prefer better odds than 50:50 with an unlimited upside.

To ignore potential support/resistance in any market on the basis that sometimes it holds sometimes it doesn't is surely to ignore one of the consequences of the very factors that drive a market, ie demand and supply and their imbalances ?...and the very imbalance can cause price to break or bounce from it.

G/L

 

[bbmac]

re: Support & Resistance Explained

Returning to gbpusd, with a strongly bullish intraday sentiment resulting from the current intraday low described in previous posts. (5746,) Price powers though all the potential 1hr resistance factors (some minor reactions at most) and reaches a previous 1hr/4hr swing hi zone..(red zone circled above) also confluence of the daily R1 pivot @ the Hi...So I was not surprised to see some more sustained selling here...

My point is about confluence - making for a potentially stronger supp/res zone....these being the highest in probability of a tradable bounce from an imbalance of supply/demand as opposed to a break resulting from a continued imbalance of demand/supply, even if in this case -the potential resistance zone ultimately breaks to the upside.

G/L

 

[SanMiguel]

re: Support & Resistance Explained

The top blue line has made pretty good trading for me recently:

 

[arabianights]

re: Support & Resistance Explained

I just actually _read_ this thread, it's comical how much incorrect information within.

I'm not even going to bother arguing with the incorrect opinions in it, but there are so many facts that are wrong... it's hilarious.

 

[scose-no-doubt]

re: Support & Resistance Explained

I just actually _read_ this thread, it's comical how much incorrect information within.

I'm not even going to bother arguing with the incorrect opinions in it, but there are so many facts that are wrong... it's hilarious.

Why don't you add some value instead of fanning the flames tw@

Where's GammaJammer when you need him eh?

 

[arabianights]

re: Support & Resistance Explained

Why bother? When some stuff is just WRONG it clearly demonstrates that the person hasn't understood what they read (assuming they read it in first place), so they just need to go read it again, not my job to hold people's hands...

I given up on helping people tbh. Turns out it's a waste of time.

 

[SanMiguel]

re: Support & Resistance Explained

Why bother? When some stuff is just WRONG it clearly demonstrates that the person hasn't understood what they read (assuming they read it in first place), so they just need to go read it again, not my job to hold people's hands...

I given up on helping people tbh. Turns out it's a waste of time.

TBF, this forum is infinitely more knowledgeable than some others I know - spend a day on Babypips, you'll see what I mean. Haha

 

[scose-no-doubt]

re: Support & Resistance Explained

Why bother? When some stuff is just WRONG it clearly demonstrates that the person hasn't understood what they read (assuming they read it in first place), so they just need to go read it again, not my job to hold people's hands...

I given up on helping people tbh. Turns out it's a waste of time.

Don't say that, love.

 

[Shakone]

re: Support & Resistance Explained

Forex is primarily real trading, not speculation:

Take a wee look at http://www.ft.com/ftfm/forex-investing-oct-10

Anyhow, "take a look at" charts are not really anything about anything in this context. They maybe useful in demonstrating how to trade but they aren't an argument.

Just out of interest, do you have any %'s for that, breaking it down into commercial, speculative...