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Support and resistance trading

  • #1
  • First Post: Feb 9, 2019 1:09pm Feb 9, 2019 1:09pm
Hello. I realized that the most effective trading method is buy/sell at breakout of resistances/supports. It's a method that works most of the times if a trend indicator is used in addiction. And that's the point, "most" of the times not "all", because sometimes price breaks support/resistance but a little, and doesn't continue along the trend. So I'm wondering: how to know currently when the price breaks a support/resistance but turns back and doesn't continue? Is there a way for you? I know "all" is impossible but I would like to improve this method...any opinion is appreciated. Thank you
  • #2
  • Feb 11, 2019 6:43am Feb 11, 2019 6:43am
That is what is called a fake breakout... I am new to this myself but based on research I did and books I read, the only way you can really make sure that it really is an actual breakout is to validate it with Volume. Considering that the S&R or channels are correctly drawn, it will take some effort from the market to surpass those levels. And that effort will show in volumes..
  • #3
  • Feb 11, 2019 9:00am Feb 11, 2019 9:00am
ebeckers
indicator copyright
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File Type: ex4 SupportResistance (2) (1).ex4   39 KB | 935 downloads
  • #4
  • Feb 11, 2019 9:32am Feb 11, 2019 9:32am
Traditionally as you probably know resistance is the previous swing high and support is the previous swing low, lets say you have a swing up and then a correction down and your waiting for the previous swing high (resistance) to break for you trade , you need to look to you left starting from the current swing low, work your way up marking all the previous swing highs , this will tell you two things , first have we already broken any previous downtrend and second where are the next resistances.there may also be confluence of breaking the old downtrend with your resistance break out.

the reverse for shorts

btw there is no application of volume in forex unlike stocks where only a set of amount of shares in a stock exist.


i hope this helps
Follow The Markets Structure - Patience and Discipline
  • #5
  • Feb 11, 2019 10:20am Feb 11, 2019 10:20am
Good points mate! It is important to wait for validation, perhaps using a simple rule like a setup for taking a trade at the location. Wait for a role flip e.g. on an hourly or daily closing basis, depending on your trading time frame and trading style.

Trade safe and prosper.

KP

Quoting pipfarm
Traditionally as you probably know resistance is the previous swing high and support is the previous swing low... btw there is no application of volume in forex unlike stocks where only a set of amount of shares in a stock exist. i hope this helps
Do your homework, follow the footprints of smart money
  • #6
  • Feb 13, 2019 8:06pm Feb 13, 2019 8:06pm
I usually wait for a confirmation of the breakout then if I'm confident about the trade I enter. It is all about probabilities. You never know if the breakout is fake or not that is why you need a stop loss to minimize your losses and use a trailing stop loss, target, or whatever trend following indicator you like to maximize your profits.
  • #7
  • Feb 13, 2019 10:01pm Feb 13, 2019 10:01pm
I know a lot of people are totally against indicators and I have no desire in getting into a debate on whether they work or not. That being said, I can tell you that I DO use them and find them extremely useful. On my chart I use Bollinger Bands (including the mid-BB), the 5EMA and the 10EMA. Now, I seldom use those indicators for anything but a visual representation of minor support/resistance levels (the major support/resistance areas can just be eyeballed). With those on a chart, and using the other time frames together, for me it is pretty easy to see where the next support/resistance level will be, which helps me to place my TP and to save a few pips when opening a trade (like if I'm looking on a 30m chart and it looks good to go up, but the 5m chart shows it going down to lower BB, I'll wait until the 5m chart plays out and then get into the trade). When you see Daily candles ending (and the next one often reversing) out in the middle of nowhere, you can bet it is butting up against one of those indicators on another time frame!

They may not help you decide IF you get into a trade, but they can help you decide WHEN to get in (and out) of one!

Just my two pips.....
  • #8
  • Feb 15, 2019 10:40am Feb 15, 2019 10:40am
Indicators can only be helpful if the traders knew how to use them, moreover learning the support and resistance simplifies the job of any trader if it is learned properly in my opinion.
  • #9
  • Feb 15, 2019 2:40pm Feb 15, 2019 2:40pm
So avoid a fake breakout is not possible? But I continue searching...
  • #10
  • Feb 15, 2019 3:02pm Feb 15, 2019 3:02pm
Quoting jo24
So avoid a fake breakout is not possible? But I continue searching...
I think false breakouts is just something we have to live with. Dont think it is possible to predict when they will happen as they are quite common, but who knows there might be a way to at least know when the chances are high that price will continue or reverse.
  • #11
  • Feb 16, 2019 2:02am Feb 16, 2019 2:02am
Quoting jo24
So avoid a fake breakout is not possible? But I continue searching...
No, no matter how strong the "candlestick's momentum" or whatever. made a lot of testing. shorter term / higher frequency works better with low volatility but overall I still prefer low frequency , even though it's boring .
  • #12
  • Feb 16, 2019 2:50am Feb 16, 2019 2:50am
Quoting jo24
Hello. I realized that the most effective trading method is buy/sell at breakout of resistances/supports. It's a method that works most of the times if a trend indicator is used in addiction. And that's the point, "most" of the times not "all", because sometimes price breaks support/resistance but a little, and doesn't continue along the trend. So I'm wondering: how to know currently when the price breaks a support/resistance but turns back and doesn't continue? Is there a way for you? I know "all" is impossible but I would like to improve this...
You must consider the fundamentals, the correlation between fx crosses and the market participants that hiding behind a break, but always be prepared for the risk you are going to take and watch the space for the price to move.
Looking for profitable short term trades ...|
  • #13
  • Feb 16, 2019 11:39am Feb 16, 2019 11:39am
Quoting Js3mwtRc
{quote} You must consider the fundamentals, the correlation between fx crosses and the market participants that hiding behind a break, but always be prepared for the risk you are going to take and watch the space for the price to move.
Not necesarily, fundamentals are useful if you invest, but in short term trading, fundamentals are irrelevant compared to the power of technical analysis which, however, can analyze forces of markets since price and volumes contain all informations of the market. You should only be able to make the right system.
  • #14
  • Feb 16, 2019 1:30pm Feb 16, 2019 1:30pm
Fundamentals could be important even in case of daytrading, because fundamental news could cause short but huge price reactions. That is why it is necessary to be aware of what happens in the world. For example, the trader should look through the list of upcoming fundamental events to be prepeared for any scenario.
  • #15
  • Feb 18, 2019 1:52pm Feb 18, 2019 1:52pm
Quoting JCAnderson
Fundamentals could be important even in case of daytrading, because fundamental news could cause short but huge price reactions. That is why it is necessary to be aware of what happens in the world. For example, the trader should look through the list of upcoming fundamental events to be prepeared for any scenario.
I was meaning banks reports, since I don't consider news in forex, but it's my method...you are right news are also fundamentals...
  • #16
  • Feb 25, 2019 1:23am Feb 25, 2019 1:23am
I cannot argue your methodology. As long as it works for you that’s fine and you need to stick to what you are good at. I need also to admit that false breakouts are very natural in trading and even if you choose different strategy there is always risk left.
  • #17
  • Edited 2:15pm Feb 26, 2019 10:21am | Edited 2:15pm
False breakouts can be avoided using cyclical analysis. But the tool used can do a big difference.

I have some ideas to build an excellent indicator, but probably I will be forced to hire a freelancer to do it...
  • #18
  • Last Post: Feb 26, 2019 6:30pm Feb 26, 2019 6:30pm
Trying to "guess" where a trend will start its a fools game and call it as you want it, "swing" trading (lol) support/resistance, breakouts, etc they are not too reliable in the long run..

Of course you could end somwhat positive BUT everysingle trade you place its based on "i guess" kind of aproach.. its better to buy/sell corrections on an already established trend: way more reliable and consistent because you can ALWAYS nail the direction (ok, almost, but how accurate its up to you and whatever tool you are using to measure it in the first place of course) and beyond all the stupid "R:R" hype you can always (almost" will end with a positive trade..


Those "Support and resistance" are just a somewhat possible meanigfull levels to look for wth its going to happen once the price possibly gets there..

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