Support and resistance fallacy? | Forex Factory

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Support and resistance fallacy?

  • #1
  • First Post: Apr 26, 2013 2:34pm Apr 26, 2013 2:34pm
I am a commercial member and so can't post in trading discussion but I thought I'd put this idea out there.

Who thinks that support and resistance is largely subjective and good price action at any level can be used to trade successfully?

Who thinks the opposite and that using major support and resistance improves your probability and to what degree?

An interesting one.
  • #2
  • Apr 28, 2013 2:00am Apr 28, 2013 2:00am
Quoting Hugh Briss
I am a commercial member and so can't post in trading discussion but I thought I'd put this idea out there. Who thinks that support and resistance is largely subjective and good price action at any level can be used to trade successfully? Who thinks the opposite and that using major support and resistance improves your probability and to what degree? An interesting one.
I think S/R in confluence with TL breaks and/or retests work well.
Markets I watch seem to behave that way.
It is subjective though on how you draw TL's but that needs Practice.
Looking at the angle of say 4hr or daily candle clusters that are broken, can give you an idea of where price could return to later. If it does, look for PA from there. Fibs big help too. I know quite a few traders don't like the rationale of fibs, but can deny them.
Helps to have a weekly TF perspective first though
Come with me if you want to live....
  • #3
  • Apr 28, 2013 4:12am Apr 28, 2013 4:12am
Quoting Ill-b-back
{quote} I think S/R in confluence with TL breaks and/or retests work well. Markets I watch seem to behave that way. It is subjective though on how you draw TL's but that needs Practice. Looking at the angle of say 4hr or daily candle clusters that are broken, can give you an idea of where price could return to later. If it does, look for PA from there. Fibs big help too. I know quite a few traders don't like the rationale of fibs, but can deny them. Helps to have a weekly TF perspective first though
I'm inclined to believe that a combination of horizontal s/r, trendlines and fibs combined with compelling price action must always give you an edge but you do often see swing points that seem to occur without any particular s/r to speak of. In my brief research it appears that these signals, if taken, wouldn't be much less likely to give a profit than those that appear at strong s/r which makes you think that literally just following price action and trading it correctly would be just as profitable (if not ultimately more so) than waiting for price action at s/r.

Of course the accepted wisdom is to only ever trade at s/r. I'd have to do a lot more back testing to convince myself of this but I thought I'd seek other peoples opinions.
  • #4
  • Last Post: Apr 29, 2013 7:46am Apr 29, 2013 7:46am
Quoting Hugh Briss
{quote} I'm inclined to believe that a combination of horizontal s/r, trendlines and fibs combined with compelling price action must always give you an edge but you do often see swing points that seem to occur without any particular s/r to speak of. In my brief research it appears that these signals, if taken, wouldn't be much less likely to give a profit than those that appear at strong s/r which makes you think that literally just following price action and trading it correctly would be just as profitable (if not ultimately more so) than waiting...
I agree, no free lunches or apparent logic at times.
However, looking at PA location to give hints of swing points encourages me to find a reason for it. I don't do Fundies so that's 1 less thing to think about

I almost invariable find a retest of a previously broken TL (including internal TL's that price has previously danced either side of and has formed a candle open/close boundary.
With regards to support/resistance levels or apparent lack of, you will also likely find a historic price reaction on higher TF's such as daily or weekly but may have to search back even years.

Current GU monthly swing low is one such example going back to 2010, but I also see them much further back at times.
Come with me if you want to live....
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