I hope members can bring clarity to my frustrations. I am a new trader, and I'm drawn to trading off Support and Resistance strategies. I've watched what feels like a bazillion YouTube videos on the subject, and to no surprise, some just make more confusion, rather than knowledge. I realize there's no cut-and-dry answers on these questions, but I feel stuck on these points:
- How many ticks constitute a Support & Resistance phenomena? I've watched some videos where, as soon as they get 5 ticks trading in a tight band, they declare that a S/R zone, and then base future trades upon that zone.
- How far back historically? I see some traders, when they identify a S/R, they look back historically for previous action in that zone. Well, if you go back far enough, you can find support for just about anything. What's the use of going back for historic data, when you're actually just guilty of confirmation bias?
- Time break downs? I see how traders start examining month/day/week, and then break it down into smaller segments when they find something interesting. Others just seem to dive into 1 minute / 3 minute / 5 minute charts, and identify S/R zones right from there. I'm confused on what time break down should be used.
-Asking how many ticks is like asking how long is a piece of string? Anyone who declares S/R from a 5 tick consolidation is probably delusional.
-Sure the common idea of S/R is to look back at previous structure swing highs/ lows, relative to the time frame you're looking at. However it's all arbitrary and there's an infinite amount of ways you could potential identify S/R.
-A trader might identify S/R on a higher time frame( eg 1 day) and then have a short term bias to trade in that direction intraday based off a smaller time frame( eg 15min). However another trader who takes a more quantitative approach to the market might believe that S/R on any timeframe is meaningless, and holds no statistical significance- thus has no place in trading.
At the end of the day everyone has their own personal bias that forms their perception of the market. There's not necessarily a right or wrong, it's more about what you believe in and what works for you. Just as some people are atheists and require proof, while other believe in god/s and rely on faith.
The following user says Thank You to Neo1 for this post:
Search for Adam H Grimes on YouTube. You will find a free webinar I guess under the BigMike Trading channel.
Jut watch it to the end!! It is a relatively new video on the channel, and it will explain to you many of your frustrations using this kind of technical analysis...
Successful people will do what unsuccessful people won't or can't do!
Watching YouTube and expecting to learn to trade right is not the right way.
There is a mix of promoters who do not trade, people who paper trade, and very seldom people with practical experience.
As a beginner you might be impressed with their "preaching", in a few years you would think other wise.
Let me give you a helping hand: Charts are like looking at earth from space while you want to get to Switzerland. Now you are asking, should I fly 50 KM to the left or the right to get there? and in reality...who knows?
What I am trying to say is that charts (s/r,fibs, etc) are not a sole tool to predict price. In fact, charts may make you take moves that would trap you against professionals. In my personal opinion you should try and develop a secondary set of tools beyond what the charts provide, which is only the setup.
I hope this helps you in your quest.
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Last edited by mattz; April 6th, 2015 at 12:43 AM.
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At its basic element, support resistance is a red/green bar combination. So, in a new trend, when you get these larger UniRenko bars on your chart, like the 30 tick UniRenko bars, just wait for a red/green or red/green/red to go short, or a green/red or green/red/green to go long. Especially if the turn is at a previous S/R level. S/R levels can be VWAP, Keltner channels, moving averages, or previous price support or resistance.
I sit and draw a boxes around the 30 tick range consolidations and wait for a breakout and then enter in the direction of the breakout. I have been messing around with the UniRenkos and like the 12-18-6 UniRenko because 12-18 is my birthday, lol. These larger UniRenko range bars are great. You can clearly see when the market is ranging, or trending.
If going long in a trend, I always wait for the top of the bar + 3 ticks to get me into the trade. And, I have to have a 30 tick stop loss. If a pattern fails, I can see the wicks and price coming back inside the range box and I can exit before my full stop gets hit. But if you were to use this as a mechanical system, just go back through the chart you are trading, and find a range size that works. It may not be 30 ticks. It could be 20 ticks or 40 ticks.
If the market is ranging, don't do any of this and just draw lines at the top and bottom of the range and get in a reversal at the line.
Right now crude is setting up a potential trend continuation, and the short looks like it would have failed. But I would not have taken this trade short because I don't sell into support. And there is the VWAP 1st deviation band at 49.99, which I don't care what anyone else will tell you, on the first touch, in crude, price will bounce in a high percentage of the time. My rule is don't sell into support and don't buy into resistance. Looks like crude is going to bounce higher here.
The following 2 users say Thank You to jlwade123 for this post:
Could you be more precise in regards to the secondary set of tools as if i follow your logic one could just become good at spotting where these traps form and exploit them without the need to look at anything else except your trading chart.