{quote} Hi Deal, I have been following this thread for months and have noticed that the price levels you give are very spot on. Could you please share the method to calculate these price levels? Is there a volatility formula and lookback period that you specifically use? Thank you.
People follow this concepts in my view the wrong way.
Is not the lookback period that matter, is the tf they are trading at, that specific time related with average price and prior close.
Think a little, average price how many times bounce price? Then how many times a close do it also?
Now ask why this two prices are not in agreement? At the end of the day they should.
So the diference between this two make not a level but a zone as average and following how much price can be away from this average and the probabilities of return is what make the levels be high probability. Starting that 1 deviation is 68%, 2 about 95 and 3 about 97%.
Then what is the closest level that price need to be averaged? Is where the probabilities come in. Price don't need to comeback to the mean, but the probabilities of average the actual price in the prior level are very very high.
I am not saying that people who follow last 5 days or 14 days average don't have sucess. If we think a little 5 days average they are trading basically the weekly candle and to me make me more sense than 14 days because this one not respect any tipical tf.
Monthly average and weekly for day trading are more consistent despite my opinion, less trades but more precise monthly as limit orders...
As i said before here in the forum before, a day rarely close 3 levels of monthly above or below price.
And the best average to do this is obvious related to volume aka VWAP.
No matter deviations i use from, it always end beeing respected or tested, this is just one way.
For this month Monthly is in agreement with the close not with daily average movement, so from me will need validation and not limits.
Most likely following weekly instead of monthly...
