Delete this thread please

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Sorry I think this thread was a mistake. I've requested it to be sent to the Trash Bin. Good luck to everyone.

If this thread is to have any real value, discussion and charts posted must be about the current price and future right hand side. Hindsight discussion is useless for whatever method used. I'm a sceptic and I've given my reasons on the other thread. If the discussion here is open and transparent then it's good for the forum that people can learn from. Let's see if there's any new material that can substantiate reconsideration.

Main reasons of scepticism,

Supply and demand or support resistance uses horizontal lines or zones. This implies a linear market structure plotted from arbitrary selected historical price point. Market has memory related to history where current conditions and market participants are different.

Supply and demand also rely on angular lines. This assumes a constant rate of change of price vs time when no reasons are offered.

Price action based on candle by candle is too subjective that differs in interpretation from one practitioner to another. There is no universal definition or consistency in application.

following with interest

Supply and demand as an economics concept is a description of merging all buyers into a buying power known as demand, and all sellers into a selling power known as supply. It's not "true", "wrong", or "right"; it's just a way of describing market behavior in a composite manner.

Supply and demand as order flow (SS), or believing that at certain horizontal levels institutions/big money leave orders unfulfilled and fill them when price returns is inaccurate. Institutions do not leave orders unfilled for very long. They try to fill them in the pullbacks during the distribution phase. Or they cancel them altogether. Overall, it's healthier to think of the market as a ranging one, and look at how supply and demand are in control in a much more loose/price action/market structure based way. For example, descending and ascending triangles show how supply and demand can be seen in the charts. See the price charts as how the buyers and sellers, or the supply and demand, control the price.

But I believe there is some truth to the order flow concept on a lower timeframe, which is why pinbars and wicks are a key part of price action trading. When price forms wicks then goes back into those wicks on a low timeframe, you can see how price reacts and often forms even more wicks as more orders gets filled.

Support and resistance on non-monthly/non-weekly timeframes in Forex is retail trader nonsense. Humans like to see patterns where there are none, and we react to these areas as if they have any weight. S/R levels on higher timeframes are okay, because these are usually lows and highs of the currency's life, and we know that central banks will step in with monetary policies and institutions will follow suit. S/R also works better in stocks, where retail traders have more weight.

Try creating a random chart on google sheets or excel (or with this site (http://randomfx.net/randomchart.html)). I've done this myself. You'll see all kinds of horizontal support and resistance lines form, and even trendlines. We see patterns that don't exist. It's called Apophenia, and it's a big problem in trading. If you backtest horizontal support and resistance zones you'll see it for yourself. Search on youtube for Adam Grimes' RandomSRLevels video (https://youtu.be/5mPp7_fajvo), wherein he shows how random lines on the chart can look "real" even if they're made up.

But I do believe price levels from other forms of analysis do work. Just not support and resistance lines/zones, because why would institutions, who control the Forex markets, trade them?

Price Action is a great tool for timing entries and exits. They're good for reading the market. But I don't believe a decent strategy can be built off of price action alone, especially if manually and discretionally traded. Humans make mistakes or jump to the wrong conclusions often. A price action strategy traded by a human will have different returns depending on the trader's mood and psychology. I would think that a human managing an algo is much better for a pure price action strategy.

Price movement simply can not occur without S/D, people just draw it incorrectly, those who know how to, won't share (better this way), hence neither would i - - there are many other aspects of price behavior, albeit visible on chart, but unkown to 90% of traders

A good exercise may be to plot the s/r and then find where your trend lines (possible good RR entries) should have been (on a hindsight chart)....

-Completely naked. One time frame. Perhaps it helps make sense of chart and price behavior from a technical standpoint.

So when price makes a structure trying to fall back to the previous s/r area then a trend line market structure forms and breaks....

e.g see attached

Tell me what assumptions I make without sound reasoning and I'll try to clear it up!

I believe the why, or the root cause of the movement is more important that a price chart. It's hard to summarize experience and research into a price chart, but words can do so much better. And a price chart can generate false positives, which I tried to discuss in the post.

But just let me know what you disagree with or think need to be proven after you've read my post clearly.

Great job Winston,
Looking forward to this new thread. Thanks for going to all of the trouble setting it up. I am very much looking forward to all the forthcoming intelligent discussions, gentlemen debates, and advice that will soon appear on this top notch thread. I am very much looking forward to finally getting a handle on FOREX and learning professional trading techniques.

1. The reason usually used to justify why S/R works is that is from traders' psychology. Traders supposedly fear these levels as places where price bounces. But institutions don't think that way. I can give you loads of examples where price charts show failed S/R, because institutions don't fear levels. I don't think there's any point to do it, as everybody already accepts that S/R doesn't work by itself and that it only works with confluence (price action, divergence, etc.). But S/R becomes more important in stocks as retail traders have a larger impact in stocks compared to Forex, so the traders' psychology plays a bigger role. I also believe S/R worked better in the 90s, when institutions were still behaving like retail traders. Now even news releases like the NFP barely affects the price, institutions are definitely trading differently and with algorithms now.

2. Higher timeframes are better for support and resistance because usually these are the highs and lows of the currency. Central banks usually do something if the currency goes to extremes. Off the top of my head, the end of 2016 and the beginning of 2017 was "support" for EUR/USD. In hindsight we know that the ECB was pushing for easing and the Feds decided that there were risks with more increase in the rates. This was happening through November 2016 to April 2017 more or less.



3. A description of Apophenia from its Wikipedia page: "Apophenia is well documented as a rationalization for gambling. Gamblers may imagine that they see patterns in the numbers that appear in lotteries, card games, or roulette wheels. One variation of this is known as the "gambler's fallacy""

Try creating a random chart on google sheets or excel (or with this site (http://randomfx.net/randomchart.html)). I've done this myself. You'll see all kinds of horizontal support and resistance lines form, and even trendlines. We see patterns that don't exist.



Search on youtube for Adam Grimes' RandomSRLevels video (https://www.youtube.com/watch?v=5mPp7_fajvo&feature=youtu.be), wherein he shows how random lines on the chart can look "real" even if they're made up.

Well prove it! That's the whole point of this thread right? I tried to explain my side.

You should explain your claims as well.



Well I was talking about the common retail trader's understanding of S/R. It's kinda unfair to suddenly create your own description.



Or maybe you're seeing false positives? I tried to explain it in the previous post.


As far as I understand you're basically trading S/D or S/R, but saying be cautious and use price action to time or justify entries before entering.

Well what if you just traded price action and removed the S/R element? It might just be the price action and not the S/R that's important to your trading.

Really, the argument about whether S/R trading works is needless. It depends on how the trader identifies and trades it. For me, I look for reaction areas/zones not a line. And to be reliable, they are better identified on at least one time frame higher than your trading time frame. The below chart shows S/R areas/zones on the AUDNZD H4 time frame, each bound by two purple horizontal lines but identified on the D1 time frame. Imo, nobody owes any trader an obligation to prove whether it works unless such a person is promoting a system. Let your pockets decide. And if you are the type that places a limit order and refuses to look for a confirmation or even allow for likelihood of fake outs around S/R zones before entering a trade, you may have to live with the outcome. Will it work 100%? No system or strategy does!

KP

Attached Image (click to enlarge)

Thanks berniefx. The thread was a mistake and I've asked it to be deleted.