Trading off suport and resistance with Price Action, Is it really possible??? | Forex Factory

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Trading off suport and resistance with Price Action, Is it really possible???

  • #1
  • First Post: Mar 21, 2007 3:51pm Mar 21, 2007 3:51pm
Hello all traders,

I have been trading for quite a while now with various systems, a coupel cost me a bomb and the rest i made and backtested myself .

I, like everyone at some point have been sucked into the search for the Grail, switching from system to system every week, I know know there is no such thing as the grail nor does there need to be to make consistant money in this game however I have found one thing I feel is a must for any method of trading... You need to risk a little and get alot, or in forex talk.. have great risk-reward ratio.

I have read all of the james16 thread and have always admired those who claim to trade naked , I have tried several times with no success.

-----------------

What I am thinking about doing is only trading support/resistance and trend lines. Here is my theory,, if I locate a strong trend line or s/r that has been touched at least 2 times when price comes to test it again if i place order with a small stop just behind the trend line my risk is very little, sometimes as small as 10 pips but my reward is large therefore even if i only get 50% wins i will still be way ahead.

Is there anyone here trading like this??

Do any of you (consistant traders) trade only with trend lines or s/r?

If so what technique do you use to enter/exit the market?

Maybe I have it the wrong way around and would be better trading trend line breaks and waiting for the retest?

Is what I am saying even possile?

Looking forward to reading some interesting posts.

Cheers
  • #2
  • Mar 21, 2007 4:19pm Mar 21, 2007 4:19pm
Quoting Someone
Hello all traders,

I have been trading for quite a while now with various systems, a coupel cost me a bomb and the rest i made and backtested myself .

I, like everyone at some point have been sucked into the search for the Grail, switching from system to system every week, I know know there is no such thing as the grail nor does there need to be to make consistant money in this game however I have found one thing I feel is a must for any method of trading... You need to risk a little and get alot, or in forex talk.. have great risk-reward ratio.

I have read all of the james16 thread and have always admired those who claim to trade naked , I have tried several times with no success.

-----------------

What I am thinking about doing is only trading support/resistance and trend lines. Here is my theory,, if I locate a strong trend line or s/r that has been touched at least 2 times when price comes to test it again if i place order with a small stop just behind the trend line my risk is very little, sometimes as small as 10 pips but my reward is large therefore even if i only get 50% wins i will still be way ahead.

Is there anyone here trading like this??

Do any of you (consistant traders) trade only with trend lines or s/r?

If so what technique do you use to enter/exit the market?

Maybe I have it the wrong way around and would be better trading trend line breaks and waiting for the retest?

Is what I am saying even possile?

Looking forward to reading some interesting posts.

Cheers
i have to say, trading with s/r is the best way to trade. S/R also helps you figure out where people put their stops so you can stay away from the herd. I don't believe in trendlines because i think it's just a pattern that people see by connecting s/r.

marking the highs and lows and watch the price action around that that's basically my trading method

The banks don't care about indicators. They want to know where was the last point they got screwed or profited from..
  • #3
  • Mar 21, 2007 4:25pm Mar 21, 2007 4:25pm
Hi "Someone"... welcome to the factory.

I tweaked an indicator that originaly showed daily Hi/Low lines and data. What i did was add what is called "Harmonic Beat" lines. I've posted details elsewhere, but basicaly the HB Theory goes that a "Beat" is 60pips in the currency market (the guy that came up with this has traded utilizing this data for over 15 years).

I tweaked the original indicator to paint HB lines each 1/8th of a beat or 15 pips and resetting at the end of each Daily bar's close. During Wednesday's news announcements i took profits when the price reacted at near the HB lines. I was watching 1m, 15m, and 60m charts. I was watching the 1m chart for stalls near the lines and it was freaky how the price would tag a line to the pip and stall, retrace to a nearby HB, then go onward and tag another HB line. I've been trading now utilizing this theory for S/R areas since late 2005.

The .ex4 file of the indicator is available for all to use. I'm not releasing the non compiled version as i've got to much blood, sweat, and tears into this one. Here it is for any to test out:

http://www.accrete.com/fx-mirror/mt4...DSRBeatsPR.ex4

There is noting to do but put it on your chart and i will usually just have it show on the 60m and below charts. Today i was placing my Stops on the other side of whatever HB line was 30pips away from the stall areas and it worked great. There were no moving averages or anything on the charts. Just price and the S/R HB lines with the other daily O/H/L/C/Median lines the indicator shows.

Cheers,
Thom
  • #4
  • Mar 21, 2007 4:37pm Mar 21, 2007 4:37pm
Thanks for your post Accrete, i will check that out right now.

Please guys and girls keep the posts coming id love to know you opinions.
  • #5
  • Mar 21, 2007 5:30pm Mar 21, 2007 5:30pm
Quoting Someone
Here is my theory,, if I locate a strong trend line or s/r that has been touched at least 2 times when price comes to test it again if i place order with a small stop just behind the trend line my risk is very little, sometimes as small as 10 pips but my reward is large therefore even if i only get 50% wins i will still be way ahead.

Is there anyone here trading like this??
I have already backtested a similar support/resistance idea. I buy when the price touches a specific resistance at least 3 times and then breaks that resistance.

Results after almost 1000 trades? - 810 pips (loss of 810 pips).

Then I did the reverse, I sell instead of buying, results?
+179 pips

As you see, this seemingly logical idea is a losing trading idea both ways, at least in this particular backtest (we can reasonnably assume that the +179 pips is due to chance alone).

Note that this idea of buying a breakout is a losing idea, doing the reverse (fading the breakout) seems to be working "better". As I said before, most brilliant and "logical" trading ideas end up losing big, while counter-intuitive ideas (like fading a breakout) seem to be doing much better, or at least break even.

In your case your system could work IF and only IF you are drawing the "right" trendline all the time, a herculean task to say the least.
  • #6
  • Mar 21, 2007 5:34pm Mar 21, 2007 5:34pm
Interesting, since the last few weeks I've been buying/selling a breakout of a box with pretty okey results. I only have one loss.
But then, I'm extremely discretionary. I don't trade everysingle time that happens. Only when it looks good and I feel good volume and movement.
Lately I've been thinking of fading too. If the fade don't work, close and put the opposite order for the break.

The thing I don't like is the longer timeframe charts. The 1hr or 4hr aren't as clear as 15min. Not sure how to play those.
  • #7
  • Mar 21, 2007 5:54pm Mar 21, 2007 5:54pm
Quoting FXTerminator
I have already backtested a similar support/resistance idea. I buy when the price touches a specific resistance at least 3 times and then breaks that resistance.

Results after almost 1000 trades? - 810 pips (loss of 810 pips).

Then I did the reverse, I sell instead of buying, results?
+179 pips

As you see, this seemingly logical idea is a losing trading idea both ways, at least in this particular backtest (we can reasonnably assume that the +179 pips is due to chance alone).

Note that this idea of buying a breakout is a losing idea, doing the reverse (fading the breakout) seems to be working "better". As I said before, most brilliant and "logical" trading ideas end up losing big, while counter-intuitive ideas (like fading a breakout) seem to be doing much better, or at least break even.

In your case your system could work IF and only IF you are drawing the "right" trendline all the time, a herculean task to say the least.

thanks for your imput, you are right it depends on how i draw the trend lines, its always easy to see the trades after they have bounced off the trend lines...

So far it is looking like this simple idea of trading off trend lines might be a waste of time.
  • #8
  • Mar 21, 2007 7:15pm Mar 21, 2007 7:15pm
Quoting Someone
thanks for your imput, you are right it depends on how i draw the trend lines, its always easy to see the trades after they have bounced off the trend lines...

So far it is looking like this simple idea of trading off trend lines might be a waste of time.
I would not make that assumption based on a backtest from someone else. All system have a vast array of variables that make them successful or not. The more you trade a setup the better you will understand how it works. What are the best trades, Knowing when a trade is working out or not, your stoploss method etc.
  • #9
  • Mar 21, 2007 7:20pm Mar 21, 2007 7:20pm
Thinking about this further i realized some might wish to backest this idea...the indicator i developed with the help of a fellow trader is the ATM_DOBRO.ex4. What you would do to check out what i was looking at during the FOMC news is place the indicator on a chart and look at the one minute chart, set the baseline to 1.9613 Tues 20th close. Go back any day and place on the close, or even the open of the new day.

Cheers,
Thom
  • #10
  • Mar 21, 2007 7:44pm Mar 21, 2007 7:44pm
Quoting Markj
I would not make that assumption based on a backtest from someone else. All system have a vast array of variables that make them successful or not. The more you trade a setup the better you will understand how it works. What are the best trades, Knowing when a trade is working out or not, your stoploss method etc.
Very true.... as long as I keep the stops small and let my profits run I should some out on top.
  • #11
  • Mar 21, 2007 11:45pm Mar 21, 2007 11:45pm
Quoting Someone
thanks for your imput, you are right it depends on how i draw the trend lines, its always easy to see the trades after they have bounced off the trend lines...

So far it is looking like this simple idea of trading off trend lines might be a waste of time.
No no my friend, I am not saying this at all.

We could all earn some serious pips if you could only draw the right trendline all the time.

In fact I am working on a similar system right now, but dear Lord, the backtesting is so sloooooow, because there are so many ways to draw a trendline.

I will keep you posted but please keep working on your particular system, don't let my backtest distract for even one second.
  • #12
  • Mar 22, 2007 2:23am Mar 22, 2007 2:23am
Very interesting, Accrete, thanks!

Indeed, it would be VERY valuable to have the option to get the lines for the past days too, to visually backtest easily.

Is it possible to change in that way your indicator?
  • #13
  • Mar 22, 2007 2:38am Mar 22, 2007 2:38am
Thanks for everyone's imput.

How would you backtest trendline bounces? I mean we all draw them differently, the only way i can see you could do it is by using rules like demarks lines.

S
  • #14
  • Mar 22, 2007 9:29am Mar 22, 2007 9:29am
I plot the trendlines into 4 Hrs chart, thats seems to be the better filter.
I wait for the price, if the price touch Resis. and back a little i sell, if it breaks @ nice rally then i go long.
Try to put fib. retreacements in previous day until actual day and watch the price moves.
It's not hard and you'll have nice results.
Hope u do well.
No Brain, no Gain.
  • #15
  • Mar 22, 2007 9:35am Mar 22, 2007 9:35am
Quoting FXTerminator
Note that this idea of buying a breakout is a losing idea
Not all breakout systems are losing methods. I know several people who make a living trading breakouts.
  • #16
  • Mar 22, 2007 11:15am Mar 22, 2007 11:15am
Try Mouteki TS and you'll see how often breakouts happens
No Brain, no Gain.
  • #17
  • Mar 22, 2007 11:49am Mar 22, 2007 11:49am
Quoting BGazzoni
Try Mouteki TS and you'll see how often breakouts happens
I actually did a huge amount of back testing on Mouteki but didnt find it very profitable..

Strange how he just didnt finish off showing his system??
  • #18
  • Mar 22, 2007 12:31pm Mar 22, 2007 12:31pm
To explain more about what i am looking at I will post a few charts, this one is of 2 trades I missed on the EURUSD. The green circle's are the entries with a stop of about 10 pips.

The second and the third charts are trades I have taken, the second one I just entered (it took my position while i was uploading the charts)

Let me know what you think.
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  • #19
  • Mar 22, 2007 12:33pm Mar 22, 2007 12:33pm
Trade
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  • #20
  • Mar 22, 2007 12:39pm Mar 22, 2007 12:39pm
It dropped down to my entry as i was uploading the pic, currently +2 pips will bring to b/e at 10 pips.
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