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Support and Resistance

  • #1
  • First Post: Apr 27, 2006 5:38pm Apr 27, 2006 5:38pm
What are considered to be the I guess one would call it the natual support and resistance. I have heard that even whole numbers Example 1.7800. I have also heard that the 25's are also example 1.7825 1.7850 1.7875. Can some clarify this for me.

Thank in advance
Fdisk Please I just want a few pips. Is that too much to ask?
  • #2
  • Apr 28, 2006 12:43am Apr 28, 2006 12:43am
Quoting fdisk
What are considered to be the I guess one would call it the natual support and resistance. I have heard that even whole numbers Example 1.7800. I have also heard that the 25's are also example 1.7825 1.7850 1.7875. Can some clarify this for me.

Thank in advance
fdisk. You keep getting close to the answers and then going away again. Why dou you do that?! There's a universal framework that shows you all the supports and resistances. I've been talking about it for a while, but for many reasons people don't seem to hear. 'It's new, it's unproven (by whom?), it's a scam, it's impossible, let's ignore this one, it's rubbish.....' You know all the reasons....
The framework is there; we just have to work on our frame of mind.
  • #3
  • Apr 28, 2006 3:10am Apr 28, 2006 3:10am
IMHO check what has happened previously at different levels. That is the best clue.

The more times price gets rejected (bounces) off a level, the stronger it becomes.

Check what happened when price got to a certain level, did it bounce quickly, leaving a spike (shadow on a candle).

00 and 50 often cause price to hesitate, if not bounce. So I am always careful of taking a long just below those levels, or a short just above.

The best areas of support / resistance seem to be where there are many contributing reasons, such as currently Cable possible support @:

1.7959 Pivot ===========
1.7958 Fib Support Yesterday's Move
1.7955 Res Becomes Sup

Here you have 3 items, within a 4 pip range, which could cause hesitation or bounce.

Best to think in zone areas rather than pin point an actual single pip price.

It is, of course, also good to place a stop so that it is protected by such a zone. In the above example, you might long at 61 with a stop at 52, depending on your trading system suggesting a long in the first place !

Good trading today to all.
  • #4
  • Apr 28, 2006 7:01am Apr 28, 2006 7:01am
S&R lines, MAs, pivots, & Fibbo's------all can provide support or resistance but are actually pretty meaningless in and of themselves. One can only really see their significance within the context of the big picture. Have a look at the Dow Theory and try and figure out what phase the market is in.
I was here, here I was. Was I here? Yes I was!
  • #5
  • Apr 28, 2006 12:35pm Apr 28, 2006 12:35pm
Guy, guys, guys! Why make life so complicated? I just stick my simple framework on my charts, and the currencies move to them. I don't need to read all these books and try to figure it out. But if you like it complicated, this thread it very impressive.
The framework is there; we just have to work on our frame of mind.
  • #6
  • Apr 28, 2006 7:33pm Apr 28, 2006 7:33pm
Quoting Darkstar
The main support and resistance points come from option placement. It isn't the chart that makes prices turn at those levels it is the defense of options. If you want to find the "natural" support and resistance, find the options. The round numbers and the .50's are big option pips for obvious reasons. Additionally significant swing high and low points make for good placement.

Those levels get targeted because if prices can be run through the option defense it will trigger a large number of stops opening a huge pool of liquidity.

Take a look at todays usd/jpy chart around the 114.00 and 113.80 levels. There were significant options taken at those price points that were sternly defended. The 114.00 was eventually taken out, but there wasn't enough liquidity to soak the bids defending 113.80 because the stops for the defenders of 114.00 were lower.

There are currently significant option positions at 113.80, 113.50, 113.40 and 113.00. If we manage to get back down there this week watch what happens just short of those figures. I imagine it will be very enlightening...
Darkstar - this makes sense to me, but I haven't seen a discussion of this in the context of forex. Can you share how you do this analysis? Is there a site that tracks currency options? Is open interest available on these options? Is there a bias toward long options as in the stock market? Sorry for all the questions, but your post really clicked for me and my mind is racing. TIA.
  • #7
  • Apr 28, 2006 9:45pm Apr 28, 2006 9:45pm
Quoting niceguy777
Guy, guys, guys! Why make life so complicated? I just stick my simple framework on my charts, and the currencies move to them. I don't need to read all these books and try to figure it out. But if you like it complicated, this thread it very impressive.

What is your simple framework?
Fdisk Please I just want a few pips. Is that too much to ask?
  • #8
  • Apr 28, 2006 11:15pm Apr 28, 2006 11:15pm
Quoting niceguy777
Guy, guys, guys! Why make life so complicated? I just stick my simple framework on my charts, and the currencies move to them. I don't need to read all these books and try to figure it out. But if you like it complicated, this thread it very impressive.
Frameworks are very useful in that they keep one from overtrading but it doesn't mean that they are based on anything real.
I was here, here I was. Was I here? Yes I was!
  • #9
  • Apr 29, 2006 12:32am Apr 29, 2006 12:32am
I like to use 4 hour charts and wait for divergence to form before i even consider support/resistance. You can still get caught out though on even 4 hour charts, Look at the Kiwi/usd. That pair really cained me, but i held it out and waited for the Kiwi to get stronger again. My point is, you can never really know where to call support or resistance, the Kiwi/Usd got taken off even the weekly chart, The Eur/Usd is doing a similar pattern, now working on the daily chart, still not showing any divergence either! i can see 1.27+ next week!
  • #10
  • Edited 2:21am Apr 29, 2006 1:57am | Edited 2:21am
Quoting Darkstar
CoesFX has a phenomenal news service provided by Thompson Financial that ...

...
I hope some of this was helpful. I know it has done amazing things for me…

Good luck!

EDIT: Removed the damn extra line spaces...
Wow. Thanks Darkstar. I appreciate you taking the time to explain this in such detail. Glad to see you made it to dinner in time... This concept really makes sense to me - I trying to absorb the scenarios you described. I'd like to be able to understand well enough to explain it to somebody else. Right now I cannot.

You are describing a way to hitch a ride on the semi rather than get drilled. This kind of stuff has got to be why technical indicators don't always "work". Cause and effect dictates that some tangible thing triggers movement.

Thanks again.
  • #11
  • Apr 29, 2006 5:14am Apr 29, 2006 5:14am
I had a system when I was scalper, I called it big figure strategy,

I traded it on cable,

when market break this round numbers it tends to go further,

good trade: market opens at "middle price" I mean for example at 1.7850

then it crashes and breaks 1.7800, it is sell signal to scalp 20 pips at least(GBPUSD should make 100 pips range as always)

Also I think these round numers are psychological levels, I mean when price changes from 1.7999 to 1.8001 this 8 has psychological influence on traders
kiss the trend
  • #12
  • Apr 29, 2006 5:28am Apr 29, 2006 5:28am
Quoting Darkstar
To deploy this money they need liquidity. So what is really going on isn’t a search for options, it’s a search for liquidity. If/when you understand that concept your understanding of the market will never be the same…
Darkstar: Thank you for the explanation. I, like Jerseydevil20, am trying to wrap my mind around this. Am I close with the following: Big money player will take out the stops below support to accumulate their positon since they cannot just buy at a single point. Using the momentum of these buys (a bounce) they then will push the price up and sell to the stops above resistance, thus liquidating their position.
If this is correct, how does one piggy back on the large player?
I just signed up for a coesfx demo - I want to see what we are talking about.
In trading, there is no bullshit. You either make money or you don't.
  • #13
  • Apr 29, 2006 6:19am Apr 29, 2006 6:19am
Thanks Sterling: Do you mean by 'the second tier', we that trade the 'spot' Forex market. So is Options the 1st tier? I, like many others, every once in a while will have my stop hit just as the market turns around. I have been considering using a wider stop, but this results in my taking a smaller position size to stay within my money managment. So the way to avoid this is to, as you describe
Quote
Watch for a strong pullback (shakeout) close to previous medium strength S/R levels and enter on the bounce.
I need now to work on determining these levels.
This is turning into a very enlightening (for me) thread.

Quoting SterlingTDR
In other markets you'd use volume to give you a clue. We don't have access to that in the second tier and this is why retail forex is pretty tough. Consider this; markets are either trending or consolidating. Consolidation (accumulation or distribution) is where the battle lines are being drawn up. Positions by the big players are being built "on the quiet" in anticipation of the breakout. The market moves up and down as a result of this until whoever is in control has acquired enough to justify the risk of forcing the breakout/breakdown. Since you are a betting man you'd bet that the trend would continue. Watch for a strong pullback (shakeout) close to previous medium strength S/R levels and enter on the bounce.
In trading, there is no bullshit. You either make money or you don't.
  • #14
  • Apr 29, 2006 6:30am Apr 29, 2006 6:30am
Quoting mrgreen
Thanks Sterling: Do you mean by 'the second tier', we that trade the 'spot' Forex market. I, like many others, every once in a while will have my stop hit just as the market turns around. I have been considering using a wider stop, but this results in my taking a smaller position size to stay within my money managment. So the way to avoid this is to, as you describe I need now to work on determining these levels.
This is turning into a very enlightening (for me) thread.
Mr. Green, governments, banks and institutions etc are first tier, trading with/against each other and this is called the interbank market. We are second tier, traders either trading against a retail market maker or using an ECN.

In my opinion your stop should be placed at a technical level which would indicate that you are wrong in your assumptions, whereby your trade becomes invalid and then there is absolutely no point hanging onto the position. If that stop is too far away, to in terms of risk managment, then you should skip that particular trade and wait for one more suitable.
I was here, here I was. Was I here? Yes I was!
  • #15
  • Apr 29, 2006 7:24am Apr 29, 2006 7:24am
Thanks Sterling, I did not know that. I am embarking on a major review of my trade rules with the premise that everything I know is incorrect. My S/R and stop levels that I am using as "an assumption of being wrong" (I like the way that is phrased) are oft times wrong I believe this is caused by my lack of understanding of the basics. The summer reading season has begun for me. And a new to me way of determining these level as outlined by Darkstar interests me.

Quoting SterlingTDR
Mr. Green, governments, banks and institutions etc are first tier, trading with/against each other and this is called the interbank market. We are second tier, traders either trading against a retail market maker or using an ECN.

In my opinion your stop should be placed at a technical level which would indicate that you are wrong in your assumptions, whereby your trade becomes invalid and then there is absolutely no point hanging onto the position. If that stop is too far away, to in terms of risk managment, then you should skip that particular trade and wait for one more suitable.
In trading, there is no bullshit. You either make money or you don't.
  • #16
  • Apr 29, 2006 11:34am Apr 29, 2006 11:34am
Quoting fdisk
What is your simple framework?
Hi fdisk. It's something I discovered, and a lot of people in this forum are using it now. It's based on the Fibonacci sequence, and it shows the framework that the currencies move within - often with startling accuracy.

I think you'd like it.
The framework is there; we just have to work on our frame of mind.
  • #17
  • Apr 29, 2006 11:36am Apr 29, 2006 11:36am
Quoting SterlingTDR
Frameworks are very useful in that they keep one from overtrading but it doesn't mean that they are based on anything real.
Ouch! And I thought you were a nice person!

No, it doesn't but you really need to know what you're talking about!
The framework is there; we just have to work on our frame of mind.
  • #18
  • Apr 29, 2006 11:45am Apr 29, 2006 11:45am
Quoting niceguy777
Hi fdisk. It's something I discovered, and a lot of people in this forum are using it now. It's based on the Fibonacci sequence, and it shows the framework that the currencies move within - often with startling accuracy.

I think you'd like it.
Man,do you think you promote your book a little to much?
  • #19
  • Apr 29, 2006 12:11pm Apr 29, 2006 12:11pm
Quoting Alex
Man,do you think you promote your book a little to much?
Nah, not half enough. But actually, and I'm sure you'll find this hard to believe, I'm trying to help people out here. The book happens to be the most efficient way of doing that.

The thing is, it's a lot simpler to read the book than play all these silly guessing games. I can't reproduce the whole thing here, and I went to a lot of trouble producing it. There are plenty of people trying to express a point of view about what they believe are good ways to trade, and I'm simply doing the same, in a slightly different way that I feel is more useful for them.
The framework is there; we just have to work on our frame of mind.
  • #20
  • Apr 29, 2006 12:12pm Apr 29, 2006 12:12pm
Quoting Darkstar
I love Fibonacci levels. All those juicy retail stops to blow through.
Until you've seen this though, you just don't know what Fibonacci is capable of! Believe me, it's different!

This is hard work. I'll shut up now.
The framework is there; we just have to work on our frame of mind.
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