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I've been watching charts the past week and notice the market does not respect support/resistance and will break through it more often then not. There's got to be a better way to trade and i'm not finding it. Order flow seems to make the most sense right now (i'm not saying it makes sense to me yet, just more sense then trading stuff like support and resistance), but i'm currently looking at charts.
Can you help answer these questions from other members on NexusFi?
The market is currently pretty volatile, not as bad as 2007/2008 before the crash, but still pretty bad. In times like this, most trading methods won't work as well. If you try to apply a method without taking into account the current context of the market, you may be missing something. In my limited experience, when things get like this, it is better to step aside and wait for trading to become somewhat easier.
Sometimes you can see the order flow volume correlate with the support/resistance on charts.
Other times you can see where the real volume of support/resistance and is hidden on the charts.
Everyday and every moment is different. That's just what I learnt and I'm applying to my trading.
For those who have an edge, volatility equals opportunity - So: "If it rains mash, put out your spoon."
If you didn't find an edge yet, it's better to stand aside because chances are that you will be shark bait.
Only problem is that the QE milkmaid hausse is coming to an end sooner or later so that there will be
more volatility ahead presumably.
support and resistance are psychological price levels which are perceived as levels where there would be larger number of buy or sell orders to disrupt the price movement; usually constructed by looking at previous pivots
can you be profitable consistently by blindly trading off these levels - no
can you make better trading decisions and improve your strategy by knowing these levels - yes
I do personally find support and resistance level works better in trading forex than stocks indices.
It is my pleasure to welcome Adam Grimes of Waverly Advisors for a webinar on The Quantitative Discretionary Trader: Art and Science, held on Wednesday, March 18 @ 4:30PM ET on futures.io (formerly BMT).
Bullet points for the webinar include:
- …
So much in markets is complete noise and randomness it's scary. We (people) love to apply meaning and patterns to things where none exist. Throw up a randomly generated price chart and every single person will find patterns and support/resistance all over the place. Are those levels legit? Of course not, they're random. But we see them none the less.
The key to using support and resistance is to correctly read the context of the market and to wait for confirming price action. Trying to trade support/resistance in a mechanical way is doomed to failure just like trading any indicator mechanically does not work.
The reason Adam Grimes is able to say that support/resistance lines are just random lines is because he is evaluating them from a simplistic statistical point of view with no regard for context. Viewing anything in the market in that way will in the long run look like everything is random.
All trading decisions are fundamentally based on support/resistance. People may insist that they do not use support/resistance but they are using it.
If the market is in a trend and a trader decides the move is over and fades the trend he has decided in his mind that the price has reached a support/resistance level.
If the market is in a range and the trader fades the range extremes he is fading support/resistance.
In the end all trading is about is buying at support and selling at resistance no matter what you choose to call it.
This perspective, I think, perhaps rests partly on an assumption, or an expectation, that "previous support and/or resistance" means the same thing as "future support and/or resistance". They're two different things.
It's an observable reality that the proportion of the time that previous support and/or resistance turn into future support and/or resistance is less than 100%, of course. Sometimes, in some markets, as you rightly imply with the words "more often than not", it's less than 50%.
That doesn't, however, invalidate the concepts of "support and resistance" as being significant to identifying collectively profitable trading opportunities.
There's no such thing as certainty regarding the outcome of any individual trade or any specific, short-term price-movement. Fortunately we don't need that: we need only collective probability that (to take a crude and simplistic example) over the course of 100 trades, some number of them will, on average, win $x more money than the remainder of them lose.
Even if previous support and/or resistance influence future support and/or resistance as little as 15% or 20% of the time, it can still be extremely useful toward developing trading methods which predicate that kind of outcome.
For myself, I find support and resistance hugely significant to profitable trading.
What did you think of the market's action yesterday? Have you found any support that held? I think that anyone hoping that support would hold, got burnt a little yesterday.
If you are truly looking for something better, please refer to the last two points in tigertrader's post.
i see a lot of traders quit for the day because they are up money, or were down for the day and got back to break-even
if the market's open then there is always a chance that an opportunity will present itself to …
That gives you quite a bit of insight into his edge, namely when he is right he likes to have size on a trade, and he does not take profits merely because he has them. He likes to ride them for as much as he can get. Now, that is what I call a true edge.
If all you are right to do is find a way to increase your winning %, then you are only looking at one part of the puzzle and missing the big picture. Getting 50 ticks profit on 10 or 20 contracts, can pay for a lot of 10 tick losers on 1 or 2 contracts. Even with a 20% win percentage, you should still make very good money.
