S/R - a new perspective ? | Forex Factory

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S/R - a new perspective ?

  • #1
  • First Post: Dec 14, 2015 2:43am Dec 14, 2015 2:43am
During the development of an EA that is supposed to trade S/R lines based on previous Highs and Lows I noticed a strange thing.

The EA is using an indicator I developed (attached), where the indicator identifies and plots historical fractals (high/lows) as S/R lines on the chart extending in the future, where the depth can be controlled via Fractal Depth input.

In the image below GPB/USD Daily (max zoom out) , the indicator was set to depth of 3 (minimum), and 2000 historical bars (almost 8 years).
The white lines are the assumed S/R lines. You will notice that in specif price areas of the chart those lines are very adjacent to each other and filling the price space.

I saw that price is so keen to make NEW highs and lows so it bypasses those known (washed-up) S/R areas
to a virgin area which does not have S/R lines yet.

Attached Image (click to enlarge)
Click to Enlarge Name: GBPUSDDaily.png Size: 68 KB


What do you think ?
Attached File(s)
File Type: ex4 KA_SR.ex4   11 KB | 429 downloads
No guts, no glory
  • #2
  • Dec 14, 2015 5:34am Dec 14, 2015 5:34am
This is a EUR/USD M5 chart with the indicator applied with 5 bar depth.

Attached Image (click to enlarge)
Click to Enlarge Name: EURUSDM5.png Size: 82 KB


Of course I am talking on exact pips here and S/R lines not Levels.

Next I will see how this phenomena can be traded , where entries and exits can be made on fractals formed at virgin areas.
No guts, no glory
  • #3
  • Dec 14, 2015 5:45am Dec 14, 2015 5:45am
Quoting abokwaik
This is a EUR/USD M5 chart with the indicator applied with 5 bar depth. {image} Of course I am talking on exact pips here and S/R lines not Levels. Next I will see how this phenomena can be traded , where entries and exits can be made on fractals formed at virgin areas.
Hi Khalil,

The immediate idea comes into my mind by observing two charts is to fit a mixture of Gaussian distributions, keep N significant peaks (or keep those that are higher than some threshold) and then later trade such significant levels.

Best,
Math
Trading is the hardest way to make easy money...
  • #4
  • Dec 15, 2015 7:32pm Dec 15, 2015 7:32pm
WOW...looking at your screen shots...how does one decide which of those lines is significant? I see price moves through what looks like the majority of lines before stopping and reversing. How does on trade that?
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  • #5
  • Dec 15, 2015 11:59pm Dec 15, 2015 11:59pm
Quoting DonPato
WOW...looking at your screen shots...how does one decide which of those lines is significant? I see price moves through what looks like the majority of lines before stopping and reversing. How does on trade that?
Exactly !

Lets admit it, Market will not give you EASY money, otherwise every one will win which breaches the zero-sum concept.

Most of previous S/R lines will not hold:

  1. Either because they are weak (shallow) with no cluster of stop/limit orders, so they will be easily broken.
  2. Or because they are strong (deep), with huge cluster of stop/limit orders, and in this case price might:

    1. Bounce and Reverse before hitting the line (in case limit orders > stop orders) before the line, so the line is well protected by limit orders, and this will create Higher Lows or Lower Highs
    2. Break and Continue (stop orders > limit orders), the line becomes invalid, and this will create Lower Lows or Higher Highs

  3. Or if there is a balance of stop/limit orders, then price will hit both and consolidate (range) for a while.

No guts, no glory
  • #6
  • Dec 16, 2015 12:34am Dec 16, 2015 12:34am
Khalil,

Your work here reminds me of the SR heatmap indicator that Ronald Raygun developed in this thread (the final version of the .mq4 can be downloaded from post #110). I've attached the .ex4 in case anybody wants to try the indicator, but doesn't have a build 509 compiler. However, I forget exactly how it works now.

David
Attached File(s)
File Type: ex4 RR_Support and Resistance Heat Mapv1.ex4   5 KB | 431 downloads
  • #7
  • Dec 16, 2015 12:36am Dec 16, 2015 12:36am
Interesting.......
  • #8
  • Dec 16, 2015 9:00am Dec 16, 2015 9:00am
Quoting abokwaik
Most of previous S/R lines will not hold: Either because they are weak (shallow) with no cluster of stop/limit orders, so they will be easily broken. Or because they are strong (deep), with huge cluster of stop/limit orders, and in this case price might: ...
So how do you make this into a winning approach? or is this just so you can "see" different areas where price turned before, no matter how far back they go?
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  • #9
  • Dec 16, 2015 5:25pm Dec 16, 2015 5:25pm
anyone else see some type of market profile besides me ?



Attached Image (click to enlarge)
Click to Enlarge Name: bb.png Size: 63 KB
  • #10
  • Dec 17, 2015 12:10am Dec 17, 2015 12:10am
Quoting hanover
Khalil, Your work here reminds me of the SR heatmap indicator that Ronald Raygun developed in this thread (the final version of the .mq4 can be downloaded from post #110). I've attached the .ex4 in case anybody wants to try the indicator, but doesn't have a build 509 compiler. However, I forget exactly how it works now. David {file}
Thanks David,

I took a look at Ronald's thread, this man is brilliant.
When I was looking at highs/lows on a specific time frame, he was looking at Every Price Point.

From a fractal point of view, I can see that every price represent a High or Low at infinite small time frame (e.g. a millisecond).
I will dig deeper in that thread and try to come out with something tradeable.
No guts, no glory
  • #11
  • Dec 17, 2015 12:35am Dec 17, 2015 12:35am
Quoting DonPato
{quote} So how do you make this into a winning approach? or is this just so you can "see" different areas where price turned before, no matter how far back they go?
The initial purpose of the KA_SR indicator was to highlight previous highs and lows which formed fractals of certain depth, back into large number of history bars.
The expected outcome was to get THICK areas of S/R representing high supply/demand which can be tradebale as entry/exit points.

What shown here was the exception !
No guts, no glory
  • #12
  • Dec 17, 2015 12:38am Dec 17, 2015 12:38am
Quoting PrymeTyme
anyone else see some type of market profile besides me ? {image}
mmmh ... could be. Although volume is not taken into the indicator, we know that highs and lows usually have high volumes.
No guts, no glory
  • #13
  • Last Post: Dec 17, 2015 8:42am Dec 17, 2015 8:42am
Quoting abokwaik
The initial purpose of the KA_SR indicator was to highlight previous highs and lows which formed fractals of certain depth, back into large number of history bars. The expected outcome was to get THICK areas of S/R representing high supply/demand which can be tradebale as entry/exit points. What shown here was the exception !
I understood the initial purpose of your experiment, and what you are saying now. But from my point of view there is too much information on your charts and I don't see the advantage. For me it is just noisy clutter that distracts from the real purpose of looking at the chart.

I think you can better pinpoint these areas using some kind of market profile as was mentioned earlier. One that has more relevance with recent conditions. It makes little sense to me to try and trade a support level from 10 or 15 years ago, that was established under completely different circumstances both economic and technical.
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