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Questions for those who trade with S/R lines

  • #1
  • First Post: Nov 12, 2010 8:10am Nov 12, 2010 8:10am
I'm asking this those who trade S/R lines not S/R zones because precision is important to me as i use tight stop loss.

1. Let's say, price falling down and it hits strong support line (h4 support but you trade m1, m5), and you wanna go long there, do you just jump in a trade on that line with tight SL (like catching a falling knife having a confidence on h4 support) or you wait for some kind of confirmation?

2. According to your own experience, does better support or resistance line provide candle close or candle's spike?

3. If i trade m1, m5 chart should i rather watch h1 candle close to determinate support and resistance or m15, m30 charts candle close?
  • #2
  • Nov 12, 2010 8:22am Nov 12, 2010 8:22am
I use the candle wicks also, not just the candle close.

I examine 5min, 15min, and 1 HR time frames for support/resistance,
and enter on the 1 minute time frame.

If price went so far before (length of the candle wick), it can move
that far again, even if the candle close was different.

Many of my entries are about 2 pips from the candle "wick" extreme,
though I obviously miss many trades because price doesn't always go that far.

I hope I understood what you were asking, perhaps it will help you.
  • #3
  • Nov 12, 2010 10:35am Nov 12, 2010 10:35am
when you see s/r as fixed lines instead of areas where you watch price behaviour, then you're a perfect target for stop hunters

... how can you know its a reliable s or r when you dont allow for multiple test?

s/r exist on any timeframe, though the higher the timeframe the more orders will back you up, watch price action on the lower timeframe, if the lower trend turns you can still enter with a small stop, if it doesn't the s/r wasnt any good (at that moment), better to wait for a turn, maybe the market doesnt agree with your s/r lines
Invincibility lies in the defence, the possibility of victory in the attack
  • #4
  • Nov 12, 2010 11:04am Nov 12, 2010 11:04am
I found that there are no lines. There are zones. They can be as narrow as 1 pip. In this case you can call them "lines". But price can cross the "line" by 2, 7 or 21 pips and what? If your stops are tighter than a hen's butt, well, good luck. You'll need it especially with volatile currencies like the pound.

Quoting fx111
I'm asking this those who trade S/R lines not S/R zones because precision is important to me as i use tight stop loss.
forget about tomorrow, just steal away into the night
  • #5
  • Nov 12, 2010 1:01pm Nov 12, 2010 1:01pm
Quoting fx111
I'm asking this those who trade S/R lines not S/R zones because precision is important to me as i use tight stop loss.

1. Let's say, price falling down and it hits strong support line (h4 support but you trade m1, m5), and you wanna go long there, do you just jump in a trade on that line with tight SL (like catching a falling knife having a confidence on h4 support) or you wait for some kind of confirmation?

2. According to your own experience, does better support or resistance line provide candle close or candle's spike?

3. If i trade...
I use candle highs and lows, not closes. I generally look for entries on M15/M30 charts, and prefer lines to zones, because I look for confluences of different S/R types (candle highs/lows; session/daily/weekly highs/lows; M15/M30 climax volume highs/lows; key Fibo retracements; daily pivot levels; round numbers; trendlines), and if I used zones, pretty much the whole chart would become one big overlapping S/R zone.

In certain situations, one of which is a potential flipover following a breakout from congestion, one of the the most recent (M15/M30 highs/lows) is often respected almost to the pip. As a general rule, this works more frequently with the major pairs and during high liquidity times. Another of my favorites is series of equal tops (usually in the Asian session) in a downtrend, which again allows for tighter SLs. Anticipating the possibility of a double top/bottom can make for some tight SLs, and therefore great RR, trades (see also next paragraph).

It's often worthwhile to employ tighter SLs. For example, everything else being equal, a 5 pip SL is going to offer double the RR of a 10 pip SL, no matter what the outcome (but of course you must factor the Bid/Ask spread into the equation). So unless there is > 2x the probability of the SL being hit, it's mathematically worthwhile. Of course you can always use multiple positions with different SLs, to diversify risk of being stopped out, but at the expense of (the averaged) return.

It's my guess that S/R would work even better if it wasn't for the need to maintain triangular equilibrium, e.g. EURUSD x USDJPY = EURJPY. In other words, even if one of the pairs bounces at 'obvious' S/R, then it must take at least one of the others with it, even if the latter is currently in "no man's land". It follows that if two of the pairs reach obvious S/R simultaneously, then it makes sense that the probability of a bounce is even higher. At least that's my current understanding; I'd be very interested to read some veteran traders' views on this.
  • #6
  • Edited Nov 13, 2010 9:31am Nov 12, 2010 4:08pm | Edited Nov 13, 2010 9:31am
Look at the 1hr screenshot below, marked off the obvious near-term imbalances of demand over supply (a fractal swing lo) and supply over demand ( a fractal swing hi) the 'zones' of potential support/resistance created by these previous near-term imbalances occur between the high and the close for a fractal swing hi and the lo and the close for a fractal swing lo....Look at the Hi today on that 1hr gbpusd chart it occurred in a previous 1hr fractal swing hi zone...but this 1hr previous fractal swing hi zone also co-existed as a 4hr previous obvious near-term fractal swing hi zone, making the potential resistance zone potentially stronger.

Ideally if working off potential 1hr (+) support/resisatnce you should seek a 15min set-up/trigger and a 15min candle will give you more information than say a 1min or 5min trigger as to the most likely sceranrio at the potential support/resistance-ie break or bounce, but if you want to get in sooner say on a 1min or 5min set-up/trigger then my advice would be to seek the confluence of as many potential support/resistance factors as you can as in respect of price inforamtion your early entry is not as optimal in terms of the information referred to above that is contained in a 15min set-up/candle.

Personally I use mainly 1min or 5min (and sometimes 15min set-ups/price triggers) at 1hr (+) potential support/resistance/sbr/rbs zones but also look for the confluence of other tech factors to compensate for the limited info favailable from price derived from a 1min or 5min entry, these include proprietary repeating patterns comprised of oscillator divergence, certain fracatl geometry and band deviation, as well as the confluence of such from a higher t/f (+) from that used as the trigger.

Confluence is the key to finding the highest probability trading opportunities...both the confluence of potential support/resistance factors such as near-term obvious fractal swing hi/lo's as well as relevant fibs and trend lines.


http://www.easy-upload.net/fichiers/z.20101113159.gif

Now look at the low of the day on same gbpusd 1hr chart below, you can see that price tested the close of the candles that made up the 1hr fractal swing lo zone leading down to wednesday's low (unlike the hi of the day that tested toward the hi's (wicks) of the candles that made up the previous fractal swing hi zone on 1hr/4hr in screenshot above.) This 1hr zone co-existed with a 4hr fractal swing lo zone also... Of course the low of the day became a previous fractal swing lo zone in it's own right on 1hr and this was also a fractal swing lo on 4hr, and is shown on chart above.

So these previous near-term obvious fractal swing hi/lo's are zones rather than lines...and price may or may not find resistance/rbs or support/sbr in them either at the close of the candles making up the zone or toward the wick hi/lo's of the candles that make up the fractal swing. It is up to you decide where a trigger develops and on what t/f, or not if it does not.

http://www.easy-upload.net/fichiers/z.2010111318287.gif

Quoting fx111
I'm asking this those who trade S/R lines not S/R zones because precision is important to me as i use tight stop loss.

1. Let's say, price falling down and it hits strong support line (h4 support but you trade m1, m5), and you wanna go long there, do you just jump in a trade on that line with tight SL (like catching a falling knife having a confidence on h4 support) or you wait for some kind of confirmation?

2. According to your own experience, does better support or resistance line provide candle close or candle's spike?

3. If i trade m1,...
ex member
  • #7
  • Nov 13, 2010 1:42pm Nov 13, 2010 1:42pm
Quoting bbmac
Confluence is the key to finding the highest probability trading opportunities...both the confluence of potential support/resistance factors such as near-term obvious fractal swing hi/lo's as well as relevant fibs and trend lines.
Looks like we think similarly.

S.I.G.
  • #8
  • Nov 14, 2010 9:39am Nov 14, 2010 9:39am
Thanx, your answers are very helpful to me.
No one answer on 1. question, do you wait a confirmation or just jump in trade when price comes to S/R line?
I think horizontal S/R are more reliable then trend lines. Sometimes it confuses me which one is more valid when talking about candle close, h4, h1, m30, m15, because sometimes they differ.
I'm not sure how frequent is this - but i noticed in an uptrend price is more likely to bounce from candle close, and in a downtrend price is more likely to bounce from candle spike. What do you think?
btw. i always measure for how much pips price spikes S/R and i noticed it is usually 5, 10, or 15 pips (on eur/usd), sometimes even more, but more often approximately 10 pips.
  • #9
  • Nov 14, 2010 10:08am Nov 14, 2010 10:08am
I generally do not wait for "confirmation", as I have decided ahead of time what my entry point will be. I do sit with my finger on "the button" ready to close if I do not get the reaction that I expect.

I do not use trendlines any longer (I tried earlier this year).

As for bounces, I think it depends on volatility, overall strength of longer term trend, liquidity (volume - which is mostly hidden to us), etc.

I wouldn't drive yourself crazy trying to determine the average bounce in EUR/USD off of support and resistance.
Track your trades and make sure your winners are at least paying for your losers.
  • #10
  • Nov 15, 2010 6:56am Nov 15, 2010 6:56am
Quoting fx111
I'm asking this those who trade S/R lines not S/R zones because precision is important to me as i use tight stop loss.

1. Let's say, price falling down and it hits strong support line (h4 support but you trade m1, m5), and you wanna go long there, do you just jump in a trade on that line with tight SL (like catching a falling knife having a confidence on h4 support) or you wait for some kind of confirmation?

2. According to your own experience, does better support or resistance line provide candle close or candle's spike?

3. If i trade...
1. If u trade h4 TF...never zoom in lesser then h1. U will get wrong picture. Setup charts need to be app 4x longer then trigger charts.
H4>H1
H1>M15
M15>M5
M5>M1

WEEKLY>DAILY. Use setup charts for analysis and trigger charts for entries. If u follow the trend u need additional confirmation as for example a confluence near s/r lines ( fibos, tls,round numbers..)

2. Candle spike ( wicks) as those are focal points.

3. If u trade m5 watch m15 or m30
  • #11
  • Nov 15, 2010 9:00am Nov 15, 2010 9:00am
Quoting fx111
Thanx, your answers are very helpful to me.
No one answer on 1. question, do you wait a confirmation or just jump in trade when price comes to S/R line?
I think horizontal S/R are more reliable then trend lines. Sometimes it confuses me which one is more valid when talking about candle close, h4, h1, m30, m15, because sometimes they differ.
I'm not sure how frequent is this - but i noticed in an uptrend price is more likely to bounce from candle close, and in a downtrend price is more likely to bounce from candle spike. What do you...
I always wait for price action confirmation if looking for a bounce against the prevailing immediate price action at pre-identified potential support/resistance, Potential being the key word. Ie only price's behavious around it will tell us what the geater probability is..a bounce or break...without it and unlike the poster above who enters without it, we do not have the market's reaction to it telling us what the greater probability may be.

G/L
ex member
  • #12
  • Nov 15, 2010 3:29pm Nov 15, 2010 3:29pm
Quoting bbmac
I without it and unlike the poster above who enters without it, we do not have the market's reaction to it telling us what the greater probability may be.

G/L
I enter w/o a confirmation? Where did u read that? Thats a complete nonsense.
Confirmation is a confluence of key elements near s/r levels if I trade swings. If I trade breakouts or range the confirmation is BPC pattern or 1-2-3 reversal formation including a momentum run. Do u want more?

Watch and learn
  • #13
  • Nov 15, 2010 3:51pm Nov 15, 2010 3:51pm
My advice would be to read the manual from the no brainer trades thread, because the questions you're asking are in the manual. If you have more time read the first 200 pages of the thread and most question about tradin s&r are answered there.
  • #14
  • Nov 15, 2010 3:59pm Nov 15, 2010 3:59pm
Quoting swingtraderf
My advice would be to read the manual from the no brainer trades thread, because the questions you're asking are in the manual. If you have more time read the first 200 pages of the thread and most question about tradin s&r are answered there.

Second that.

The No Brainer thread has a wealth of info on trading S+R.
  • #15
  • Nov 15, 2010 4:45pm Nov 15, 2010 4:45pm
Quoting fx111
I'm asking this those who trade S/R lines not S/R zones because precision is important to me as i use tight stop loss.

1. Let's say, price falling down and it hits strong support line (h4 support but you trade m1, m5), and you wanna go long there, do you just jump in a trade on that line with tight SL (like catching a falling knife having a confidence on h4 support) or you wait for some kind of confirmation?

2. According to your own experience, does better support or resistance line provide candle close or candle's spike?

3. If i trade m1, m5...
the wick is when the price is not filled , when the price spike it create wick and that's where public chase price.... so basically the wick is less important then the body... the body is when the price is right, people accept that price while wick is not many one accept it
  • #16
  • Nov 16, 2010 1:23am Nov 16, 2010 1:23am
Quoting T@rantula
I enter w/o a confirmation? Where did u read that? Thats a complete nonsense.
Confirmation is a confluence of key elements near s/r levels if I trade swings. If I trade breakouts or range the confirmation is BPC pattern or 1-2-3 reversal formation including a momentum run. Do u want more?

Watch and learn

My post said the 'post above' NOt 'the post immediately above' I was not referring to you.

Watch and learn - Lol
ex member
  • #17
  • Nov 16, 2010 2:26am Nov 16, 2010 2:26am
Quoting bbmac
My post said the 'post above' NOt 'the post immediately above' I was not referring to you.

Watch and learn - Lol
good then. Im sorry for misunderstanding.
  • #18
  • Nov 16, 2010 4:13am Nov 16, 2010 4:13am
Quoting mark333
the wick is when the price is not filled , when the price spike it create wick and that's where public chase price.... so basically the wick is less important then the body... the body is when the price is right, people accept that price while wick is not many one accept it
Mark,
The body is the difference between open and close price, while the wicks are high and low prices.
If you had a stop loss within the wicks your price would certainly be filled.
There could be a lot of activity within the wicks.
  • #19
  • Nov 16, 2010 5:51am Nov 16, 2010 5:51am
Quoting mark333
the wick is when the price is not filled , when the price spike it create wick and that's where public chase price.... so basically the wick is less important then the body... the body is when the price is right, people accept that price while wick is not many one accept it
wrong.

Wicks are MORE important. They are focal points. How do u draw fibs, tls, patterns?
  • #20
  • Nov 16, 2010 10:14am Nov 16, 2010 10:14am
The whole wick is created by rejected price during that single candle time frame. So the entire area between candle high/low & candle body is important.

If there are a whole bunch of candles with long wicks in the same area then I would take the area between the Highest High to the highest close of all the candles as an area of resistance and the area of support to be the lowest low and the lowest close of those candles.
It never gets easier, you just get better
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