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YTC Price Action Trader (www.ytcpriceactiontrader.com)

  #60 (permalink)

Elite Member
London, UK
 
Futures Experience: Beginner
Platform: NinjaTrader, home-grown Java
Broker/Data: IB/IQFeed
Favorite Futures: EUR/USD
 
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Posts: 1,085 since Dec 2010
Thanks: 471 given, 781 received

Support and resistance / supply and demand

Hi,

resurrecting this thread again because it's exactly the subject I want to discuss.

Using support and resistance based on swing highs and swing lows, after several days trading in a range, I find the S/R levels get really cramped and I start deleting the old, stale levels that didn't generate any price interaction.

Sometimes I'll have 3 levels close together, within 20 pips, and it looks like they are all generating interaction. I keep thinking of these supply and demand zones. And in fact, the YTC PAT ebook says all S/R levels are zones really anyway and not just lines.

But having a strategy for a zone is not the same as having one for a line.

Generally speaking I wait for price to arrive at an S/R level and form a stall / consolidation range, generally 5 to 10 pips. Assuming I am confident about my bias for future trend direction, I'll try to get in at a good price in this range, the better the price the further the stop can be. Then hopefully soon price zooms off in my direction.

Otherwise, I wait for a trigger, e.g. an up/down twins bar formation or a Jap candlestick pattern, and I'll enter when that's complete, or in the worst case if my bias is strong or the RR looks good, I'll put a stop break-out entry order in.

That's all clear to me when the S/R level is a line, but what do I do when it's a zone? It seems to introduce a whole new set of factors to consider. If price has almost penetrated the zone and is stalling at the far edge, then great - but what if it's not? Doesn't that make the whole trade lower probability, if price has to fight further to emerge the other side?

You can discover what your enemy fears most by observing the means he uses to frighten you.
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