What makes a reliable S&R? | Forex Factory

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What makes a reliable S&R?

  • #1
  • First Post: May 2, 2012 7:39pm May 2, 2012 7:39pm
Hellooooooooooooooooooooooooo


I have over the couple of years I've been involved in technical trading, realized that you could pretty much fit in an S&R level on every single price on a pair.
E.g, there are highs and lows (both recent and longer term), fibonacci (retracements, extensions, fans), gann (blah blah blah), moving averages and so on..

So, how should this be dealt with? I mean, if one were to apply every S&R level one could find it would cover the screen and it wouldn't really help in your trading at all. So what makes the ones I plot more reliable? Do we have to be lucky? Do we have to assume that there are S&R all over the place that have not plotted?

I just don't get it
  • #2
  • Edited 10:37pm May 2, 2012 10:03pm | Edited 10:37pm
Quoting Finoli
Hellooooooooooooooooooooooooo


I have over the couple of years I've been involved in technical trading, realized that you could pretty much fit in an S&R level on every single price on a pair.
E.g, there are highs and lows (both recent and longer term), fibonacci (retracements, extensions, fans), gann (blah blah blah), moving averages and so on..

So, how should this be dealt with? I mean, if one were to apply every S&R level one could find it would cover the screen and it wouldn't really help in your trading at all. So what makes the ones...
A) Attend to how price action justifies the existence of a line or lines:
Make your own rules from your observations. Some people like to write them down, others simply get the knack of it.
(Mine, right now: lines More PA aligns, the better. Momo sticks, balance repels, trend angles measure. The internal candles of traditional patterns really matter as to direction; and special, groups of, or big patterns deserve extra attention.)

or

B) Cheat --
0,100, a couple other pip lines;
camarilla and other pivot points;
futures volume.
  • #3
  • May 2, 2012 10:26pm May 2, 2012 10:26pm
I use multiple charts with S/R on them. My H1 chart will have the daily pivots on it. My D1 chart will have the weekly pivots on it. The weekly chart has the monthly pivots. And the monthly has the yearly on it. Then I go from there when I plan out my short term and long term trades. The H1 chart, I use a pivot indi, and my other ones, I manually put them in with just adding the hi/lo, divide by 2. That way, depending on what I'm looking at, my screen isn't all cluttered with multtiple S/R numbers and lines.
Time turns trend. - W.D. Gann
  • #4
  • May 3, 2012 11:42am May 3, 2012 11:42am
Quoting Finoli
Hellooooooooooooooooooooooooo


I have over the couple of years I've been involved in technical trading, realized that you could pretty much fit in an S&R level on every single price on a pair.
E.g, there are highs and lows (both recent and longer term), fibonacci (retracements, extensions, fans), gann (blah blah blah), moving averages and so on..

So, how should this be dealt with? I mean, if one were to apply every S&R level one could find it would cover the screen and it wouldn't really help in your trading at all. So what makes the ones...
The larger the timeframe, the more significant the price action S&R levels. All other types of levels are secondary. Just my opinion.
  • #5
  • Last Post: May 3, 2012 2:44pm May 3, 2012 2:44pm
Quoting Finoli
... if one were to apply every S&R level one could find it would cover the screen and it wouldn't really help in your trading at all. So what makes the ones I plot more reliable? Do we have to be lucky? Do we have to assume that there are S&R all over the place that have not plotted? .I just don't get it
I don't use S&R; I use Supply/Demand Delta Zones. Yet, just as with S&R, Supply/Demand Delta Zones are not trade signals in and of themselves. This in my opinion is the flaw in your premise. Reliable S&R does not mean that they must always hold. That is to say, if price is rising towards Resistance, price must hit that level and turn down. Or if price is falling towards Support, price must hit that level and turn up. Pursuit of S&R that meet this definition is a fool's errand.

Reliability should be measured in terms of whether taking a trade signal on or near the defined level (or zone) increases the probability of the trade signal working out, as compared to taking that same signal not on or near a defined level (or zone).

Again this has nothing to do with the level (or zone) holding. A level (or zone) holding matters little if you do not have a method of entry.

Notice something that many people do not want to talk about. You can draw S&R any way you want to. The issues are:

1. Are you drawing them the same way consistently?

Even if your beliefs about S&R are erroneous, constancy is better than randomness.

2. Are your trade signals enhanced in terms of probability of success when taken at the S&R levels?

S&R levels can make bad trade signal methods better, but they can't make horrible trade signals great.

Putting them both together we get even erroneously, but consistently, drawn S&R levels (or zones) can make a trade signal method better. If not in the trades taken, but in the ones not taken. This feeds into an idea shared by many successful traders-not looking for reasons to be in the market but rather reasons to be out of it.
Without VSA, you're playing checkers while the Smart Money plays chess.
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