Grey1 said:
Support and resistance are HISTORICAL traded levels for HISTORICAL events .. TOMORROW 's levels are unknown to all market participants simply because no one knows how the future events are unfolded ..
Would you still use these levels to stop loss a perfectly correct trade to exit ?
Look at your L2 screen and notice how often gorrilla players ignore these levels ..
Do you know why most of you guys out there ignore your own stop loss levels? Simple ... because you have no faith in these levels ... historical levels are not good enough justification for future performance
grey 1
Unfortunately, one has to call it a day ,at some point, and close a trade. Stops are often used to do this and they are placed at or around the low of the present short term trend. Since lots of traders use the same areas, this causes a shortage of stock and the price goes up.
The mistake, in my view, is that the trade is opened too late, therefore creating too big a distance from the logical spot to close a losing trade . The trader places his stop at the very limit of risk that he is prepared to take. Big mistake- although, I, too, am a guilty party!
The trader sees the loss piling up and does not feel happy in the SR area because, if it does not hold and his trade turns sour, his loss will be compounded by what he has been taught by the gurus to be a potentially disastrous rise or fall .
Quite often, the closed trade reverses towards a more favourable level and the trader ends up disillusioned.
The experienced traders do not have their stop losses in these areas . They are, in fact, opening their trades there. Their idea is that the expected move will either be sustained or will fail and drift back towards their entry point. In many cases, they do not hold a trade below their entry point, considering it a failure.
The whole problem is psychological, centred around the greed and fear factor.
Split
