[s&r levels] And What Do Other People See

[ARTjoMS 10]

Hi there,

 

when a trader puts 200-day SMA indicator on his chart he is probably hoping to see that indicator that market has great respect for, but not all traders see the same exact thing. That is because some are using 40 week SMA, some have 6 trading days in a week... and readings obviously differ.

 

OK-ey, the difference isn't zillion pips, but still... it might be quit important for those who use daily MA's as possible entry/exit signals.

 

This issue is of course also related to trend lines, channels, etc. What I wanted to ask is how do you cope (if you have to) with issues like this? In other words.. do you consider only what you see or also things that others might see?!

 

 

[DbPhoenix 42]

Since this is about S&R, first get rid of all the lines and bands and channels and moving averages and whatever else. Then find those areas where price has reversed and/or where price has changed from trending to ranging or vice-versa. There you will begin to find the S&R that matter. Everything else is in your head, and the market doesn't care what's in your head.

 

Db

[SIUYA 11]

I would agree with DbP -

EVEN WHEN LOOKING AT THE SAME CHART -

what you see and what others will see will be different.

what you do and what others will do will be different.

 

IMHO - so all open to conjecture, argument, flaming, dismissal, alternative ideas.....

 

MAs, channels, trendlines never ever provide support or resistance - all they provide is a guideline, (or a filter maybe) so when people say - it bounced of the MA support i think it is rubbish - as there are multiple MAs, they move and they are lagging and look great when best fit in hindsight -

 

but there is only one price level - it is clear, defined and obvious to everyone, and it is what happens at these levels which is what is important. (remember the only way to make money is being long those things that go up in price, and short those that go down in price- so all you need is a horizontal line )

 

(One thing MAs and trendlines could be used for in their defense is that you can use them as a clear place to define risk as a filter - eg; if the price goes above the 200bar MA then i will be long, below i will be short....but as everyone has seen this feeds the brokers as is at best likely break even ---- but the point remains - it is a clear unambiguous boundary that can help define risk if used consistentently AND it is irrelevant as to what the market is thinking......mind you - when people say I use the 26 day MA as everyone else is using the 24 day MA ---- thats an even bigger joke for idiots to differentiate a failed system to sell........you may as well at least use the one that has the most profitable influence on the market - ie; the one that best reflects why you are trying to use it....in your words - at least use the one the market has respect for.)

 

But as DB says - MAs and support and resistance are not related except in your mind.

[steve46 12]

You're on the right track, asking good questions....now depending on your actions, you may or may not find something useful...

 

If you wish to make a living trading you will discover that current conditions are quite challenging....markets (if we look at futures for example) are strongly dominated by programmed execution.....if you look at the intraday time frame charts, what you tend to see is price moving in tight ranges followed by sudden moves from one level to the next...this is designed to take your money....

 

Accurate identification of S/R levels may provide an edge....however, even if you learn to accurately identify support/resistance levels, you also need to 1.) Trade in a disciplined manner, 2.) Size your position properly and 3.) Manage risk (by limiting losses)...this is especially important given that most amateurs are undercapitalized.

 

These are the issues that each "would be" professional faces....and if you can successfully negotiate them, you might find success. Knowing what I know today, I would simply make them into a "short list" and try to move through them....letting your day to day result direct your actions.....if you are making money, keep moving in that direction...if not....time to review and make the necessary changes....you see?

 

Good luck

Steve

[Raleigh Lee 10]

Just remember this:

 

When we look at a market from the perspective that anything can happen at any time (and that's the proper way to look at it), it's easy to see that every potential trader who is willing to express his or her belief about the future becomes a market variable. On a more personal level, this means that it takes only one other trader, anywhere in the world, to negate the positive potential of your trade. Put another way, it takes only one other trader to negate what you believe about what is high or what is low. That's all, only one!

[BlueHorseshoe 10]

I would agree with DbP -

EVEN WHEN LOOKING AT THE SAME CHART -

what you see and what others will see will be different.

what you do and what others will do will be different.

 

IMHO - so all open to conjecture, argument, flaming, dismissal, alternative ideas.....

 

MAs, channels, trendlines never ever provide support or resistance - all they provide is a guideline, (or a filter maybe) so when people say - it bounced of the MA support i think it is rubbish - as there are multiple MAs, they move and they are lagging and look great when best fit in hindsight -

 

but there is only one price level - it is clear, defined and obvious to everyone, and it is what happens at these levels which is what is important. (remember the only way to make money is being long those things that go up in price, and short those that go down in price- so all you need is a horizontal line )

 

(One thing MAs and trendlines could be used for in their defense is that you can use them as a clear place to define risk as a filter - eg; if the price goes above the 200bar MA then i will be long, below i will be short....but as everyone has seen this feeds the brokers as is at best likely break even ---- but the point remains - it is a clear unambiguous boundary that can help define risk if used consistentently AND it is irrelevant as to what the market is thinking......mind you - when people say I use the 26 day MA as everyone else is using the 24 day MA ---- thats an even bigger joke for idiots to differentiate a failed system to sell........you may as well at least use the one that has the most profitable influence on the market - ie; the one that best reflects why you are trying to use it....in your words - at least use the one the market has respect for.)

 

But as DB says - MAs and support and resistance are not related except in your mind.

 

In so far as all of the above are just guidelines, I agree with you.

 

However, I think that lumping trendlines and MAs together in the same basket is misguided. An average (or anything similar) is the result of a basic statistical process enacted upon all data. A trendline is the result of a human (or algorithmic) process enacted upon key events within that data. Either may or may not be significant, depending on how you use them, but they shouldn't be treated the same. An MA is a far more general measure than a trendline.

 

Consider the following scenario:

 

You fire a ball bearing down a narrow sided chute (you're a pinball wizard!). As it ricochates of the sides of the chute you connect these points and plot support and resistance trendlines. Every half a second, you also note the ball's spacial location, and you plot an X period average of this. The average will run aproximately down the middle of the chute; the trendlines to the (in this case absolute) extremes.

 

This is a poor example. The closest you'll get to the physically adamant sides of the chute in reality are the limit moves of the market you trade. However, it should illustrate my point . . .

 

A trendline offers a precise location at which buyers ( or sellers ) should step in.

 

An MA offers a generalised location at which price has historically traded.

 

The obvious amateur question is "which is better?" I would suggest that the precision of thge trendline and the vaguery of the MA are directly proportional to the edge that can be found around each.

 

As for a horizontal line vs a diagonal support or resistance line (or as Db would call them, a Supply or Demand line), then that depends on what the market is doing. If a rally is clearly in place then the price at which buyers are willing to trade will naturally be higher than it was X periods before; if the market is rangebound then a horizontal line should be as exact as anything more complicated.

 

What does all of this amount to? An ability to diferentiate between a trending or a consolidating market early in the session might be the difference between profit and loss for many daytraders. And for newer traders, in drastically simplified terms, a tendline should be held accountable almost to the tick, whereas an MA is a far more general measuremenent, and should be given some leeway.

 

BlueHorseshoe

Edited October 10, 2012 by BlueHorseshoe

[ARTjoMS 10]

Since this is about S&R, first get rid of all the lines and bands and channels and moving averages and whatever else. Then find those areas where price has reversed and/or where price has changed from trending to ranging or vice-versa. There you will begin to find the S&R that matter. Everything else is in your head, and the market doesn't care what's in your head.

 

Db

 

Where is that ''do whatever gives you an edge/makes most money..'' attitude gone?

 

I personally find that 200 day SMA often acts like a dynamic support/resistance line and lets say it is my edge that I am aware of.

 

I know there are various ways of how you can define a support/resistance, but from such a respected poster I didn't expect so one-sided opinion like: get rid of this and that and use that and that.

 

"A support level is a price level where the price tends to find support as it is going down. This means the price is more likely to "bounce" off this level rather than break through it. However, once the price has passed this level, by an amount exceeding some noise, it is likely to continue dropping until it finds another support level." - one definition.

 

There is no magic behind stuff like 200 day SMA, trendlines, Fibonacci, round numbers, pivot points, last swing lows etc. except people (or whatever controls the market) look at their charts, see them and then act accordingly.

 

Knowing what others see is an edge.. you like it or not.

 

P.S. I want to remind (as this has gone slightly off topic) my main question: "What I wanted to ask is how do you cope (if you have to) with issues like this?"

 

And the issue was: people inconsistency of drawing/calculating same thing. Be it MA's, horizontal support levels, trendlines, channels, Fibonacci etc.

[Colonel B 10]

In other words.. do you consider only what you see or also things that others might see?!

 

You have to. Or maybe you don't have to but you have a very strong advantage if you do. "Everything else is in your head, and the market doesn't care what's in your head." Actually the market does care what is in your mind under certain circumstances. If the "market" doesn't care then you should care. Why? Because you need to know who is doing what and where they are doing it at. You have an advantage if you can figure out if shorts are trapped or longs are trapped. Why? Because when their stops are hit it moves. If the market has too many short term longs then it can't go up. That is all I look for all day in my trading is who is trapped or who looks like they are getting trapped.

 

I agree with every one else. The sooner you get the MAs off your chart and start using stuff that works the sooner you can start making money.

[DbPhoenix 42]

In so far as all of the above are just guidelines, I agree with you.

 

However, I think that lumping trendlines and MAs together in the same basket is misguided. An average (or anything similar) is the result of a basic statistical process enacted upon all data. A trendline is the result of a human (or algorithmic) process enacted upon key events within that data. Either may or may not be significant, depending on how you use them, but they shouldn't be treated the same. An MA is a far more general measure than a trendline.

 

Consider the following scenario:

 

You fire a ball bearing down a narrow sided chute (you're a pinball wizard!). As it ricochates of the sides of the chute you connect these points and plot support and resistance trendlines. Every half a second, you also note the ball's spacial location, and you plot an X period average of this. The average will run aproximately down the middle of the chute; the trendlines to the (in this case absolute) extremes.

 

This is a poor example. The closest you'll get to the physically adamant sides of the chute in reality are the limit moves of the market you trade. However, it should illustrate my point . . .

 

A trendline offers a precise location at which buyers ( or sellers ) should step in.

 

An MA offers a generalised location at which price has historically traded.

 

The obvious amateur question is "which is better?" I would suggest that the precision of thge trendline and the vaguery of the MA are directly proportional to the edge that can be found around each.

 

As for a horizontal line vs a diagonal support or resistance line (or as Db would call them, a Supply or Demand line), then that depends on what the market is doing. If a rally is clearly in place then the price at which buyers are willing to trade will naturally be higher than it was X periods before; if the market is rangebound then a horizontal line should be as exact as anything more complicated.

 

What does all of this amount to? An ability to diferentiate between a trending or a consolidating market early in the session might be the difference between profit and loss for many daytraders. And for newer traders, in drastically simplified terms, a tendline should be held accountable almost to the tick, whereas an MA is a far more general measuremenent, and should be given some leeway.

 

BlueHorseshoe

 

 

Given the many ways in which a trendline can be drawn, it's hardly precise. And given that it provides neither support nor resistance, there's no particular reason for buyers or sellers to "step in". As for MAs being based on historical data, so are trendlines; otherwise, there wouldn't be anything on which to draw them.

 

And there is of course the matter of MAs being moving trendlines, since they both perform the same function.

 

As for being of help in distinguishing between a trending and ranging market early in the session, the utility of either is questionable since it takes so long to determine whether the market is going to move in one way or the other. Trendlines and MAs are perhaps of more use as exit signals at the level of trend change rather than as entry signals. Or one may just note whether or not price has stopped going up. Or down.

 

Db

[DbPhoenix 42]

Where is that ''do whatever gives you an edge/makes most money..'' attitude gone?

 

I personally find that 200 day SMA often acts like a dynamic support/resistance line and lets say it is my edge that I am aware of.

 

I know there are various ways of how you can define a support/resistance, but from such a respected poster I didn't expect so one-sided opinion like: get rid of this and that and use that and that.

 

"A support level is a price level where the price tends to find support as it is going down. This means the price is more likely to "bounce" off this level rather than break through it. However, once the price has passed this level, by an amount exceeding some noise, it is likely to continue dropping until it finds another support level." - one definition.

 

There is no magic behind stuff like 200 day SMA, trendlines, Fibonacci, round numbers, pivot points, last swing lows etc. except people (or whatever controls the market) look at their charts, see them and then act accordingly.

 

Knowing what others see is an edge.. you like it or not.

 

P.S. I want to remind (as this has gone slightly off topic) my main question: "What I wanted to ask is how do you cope (if you have to) with issues like this?"

 

And the issue was: people inconsistency of drawing/calculating same thing. Be it MA's, horizontal support levels, trendlines, channels, Fibonacci etc.

 

Your question had to do with S&R levels, not with making money. There are people who make money off of MACD and stochastics. But, again, that wasn't your question.

 

You say that people are inconsistent in drawing/calculating MAs, support levels, trendlines, etc. That is only one reason why lines and circles and boxes and whatever drawn by the trader aren't going to be satisfactory when trying to determine support and resistance. Support is provided when buyers have what is required to retard the downward movement of price, stop it, and reverse its course. The opposite is true for resistance. None of this has anything to do with a line.

 

As for coping with all the dozens of things that traders might have plotted on their charts, you don't. You ignore it. You follow what's happening with price and act accordingly. And you will likely be farther ahead of the pack in doing so as you will be acting while they're still surveying their lines and indicators.

 

Db

[Colonel B 10]

You posted a follow up while I was posting. LOL I personally don't use any of that Fib,MAs, or other types of common stuff. I look for where volume is and what type of trading is going on there. For example a common place to take a trade in the day trading world is the previous days open, high, low, and close. I look to see if there are alot of buyers at or around the previous days high. If there are I get short. I guess you could use a Fib but then you get into the drawing it correctly and its an art argument. The main problem with the Fib with how I trade is that if I had a 53.2 -200 fib there might not be enough volume there for me to take a trade. If that 1.21 gigawatt fib lands on a previous day high or low or a overnight high or low I would believe its the high or low not the fib. This is because I think there are more traders looking that the highs and lows then they are looking at Fibs. You can replace Fib with 1.21 MA or the 52-200 MA as well.

 

That Db guy is an insanely fast typist. He put out 2 posts in the time it took me to put out 1.

:shocked:

Edited October 10, 2012 by Colonel B

[DbPhoenix 42]

We still may not be answering the OP's question, but consider that there are at least a half dozen ways of determining pivot levels alone. Multiply that by every other possible line and band and channel and indicator with all possible settings and intervals and throw in "the book" and the impossibility of staying on top of whatever everybody else is "looking at" becomes clear.

 

Here is an example of a typical trader's chart, believe it or not.

 

 

 

 

 

 

Here is the exact same chart, "naked":

 

 

 

 

 

 

Now who's going to be quickest to jump on this trend?

 

Db

[DbPhoenix 42]

That Db guy is an insanely fast typist. He put out 2 posts in the time it took me to put out 1.

:shocked:

 

Amazing, considering my age

 

Db

[SIUYA 11]

In so far as all of the above are just guidelines, I agree with you.

 

However, I think that lumping trendlines and MAs together in the same basket is misguided. An average (or anything similar) is the result of a basic statistical process enacted upon all data. A trendline is the result of a human (or algorithmic) process enacted upon key events within that data. Either may or may not be significant, depending on how you use them, but they shouldn't be treated the same. An MA is a far more general measure than a trendline.

 

yes they are different, i see your point however.....neither will offer S/R and they are certainly not precise as by their nature they offer a variety of prices, and a variety of ways to represent them. A horizontal line is a singular point.

 

No one is obliged to step in on any of them, however in terms of ambiguity I think about it this way....

the x bar MA has been broken on the upside means the bias might have changed....prices could be lower or higher than they were X bars ago, and also means that X-1, or X+2 MA might or might not have significance.

or

the price level X has been broken on the upside - clear precise and unambiguous.

 

(we are not paid to track and outperform a MA )

 

semantics maybe.....

 

As for Fibs - again another guideline, but i do like that they can give precise horitzontal lines.....and when they coincide with other areas of support as the Col mentions, then great....i will take the mysticism as part of it.

 

...............

getting back to the original posters Q: that has been waylaid....

 

P.S. I want to remind (as this has gone slightly off topic) my main question: "What I wanted to ask is how do you cope (if you have to) with issues like this?"

 

And the issue was: people inconsistency of drawing/calculating same thing. Be it MA's, horizontal support levels, trendlines, channels, Fibonacci etc.

 

Hard to see how a MA can be inconsistent....??

If people are inconsistent in drawing something then what are you going to do apart from put in place some rules/guidelines to draw them to get consistency.....even for horizontal lines......

 

eg; do you place them at areas of support in an uptrend, at areas of previous resistance, both, or somewhere else...?

 

This seems just to revert back to have a plan, a method a style a strategy that is tested - or am i missing something?

[ARTjoMS 10]

Hard to see how a MA can be inconsistent....??

If people are inconsistent in drawing something then what are you going to do apart from put in place some rules/guidelines to draw them to get consistency.....even for horizontal lines......

 

eg; do you place them at areas of support in an uptrend, at areas of previous resistance, both, or somewhere else...?

 

This seems just to revert back to have a plan, a method a style a strategy that is tested - or am i missing something?

 

I tried to explain in OP how people are trying to see the same 200 day MA thing but readings differ... I don't see any great logics behind SMA and 200 days.. but that is what I find have worked as a support/resistance on particular pairs.

 

I am not sure why people here have hard time accepting that MA can work as a support... It is a line, it has previously worked as support.. So on, that it is not horizontal, but dynamic.

 

1) It is likely to bounce off

2) Breakout suggest change in sentiment.

3) After breakout it is often tested.

 

My main concerns were:

1) If people had the same readings of the same thing they might all benefit.

2) Considering what others see might give an edge.

 

Maybe I am trading pure PA... but if I know that market is looking at 50% fibonacci, 200 day sma, pivots etc. And they all come together (confluence) it should give me an edge as to where I can try to enter with very tight sl.

[SIUYA 11]

I tried to explain in OP how people are trying to see the same 200 day MA thing but readings differ... I don't see any great logics behind SMA and 200 days.. but that is what I find have worked as a support/resistance on particular pairs.

 

I am not sure why people here have hard time accepting that MA can work as a support... It is a line, it has previously worked as support.. So on, that it is not horizontal, but dynamic.

 

1) It is likely to bounce off

2) Breakout suggest change in sentiment.

3) After breakout it is often tested.

 

My main concerns were:

1) If people had the same readings of the same thing they might all benefit.

2) Considering what others see might give an edge.

 

Maybe I am trading pure PA... but if I know that market is looking at 50% fibonacci, 200 day sma, pivots etc. And they all come together (confluence) it should give me an edge as to where I can try to enter with very tight sl.

 

On most of your points - i think it would be hard to disagree - if the market is looking at certain levels or inidcators eg; 200bar MA - then yes - it makes perfect sense to follow the ones that everyone else is using.....

 

but here in lies the rub......are they?

 

if everyone is using the 200 bar MA, why then does it cross it then fall back in the first place? Why does it sometimes cross and keep going?

 

The average may give a 'best fit' - but so to would a 10 bar, or 300 bar give a pretty good fit....The reason why the MA seems to provide support and or resistance is because it has to at some stage!

As an average it will always catch up to a trending market and in consolidation will converge to the market price.....but it is the MA that is the average of the prices and not the other way round. It is a guide to past momentum and direction....but if it works for you then great.....

 

Your comment about what others see is an interesting one as no one will see the same thing in real time (hindsight is different of course). Why is it that most professional money managers dont outperform indexes, why is it that when using a simple MA system a computer cant make it profitable (by all general accounts) .....and the other key ingredient is this ---- it not what you or others see its what happens there that is important.

 

This touches at the holy grail hunt - if everyone could see the same thing and acted on it the same way it would be arbitraged away for want of a better description.

[DbPhoenix 42]

I am not sure why people here have hard time accepting that MA can work as a support... It is a line, it has previously worked as support.. So on, that it is not horizontal, but dynamic.

 

1) It is likely to bounce off

2) Breakout suggest change in sentiment.

3) After breakout it is often tested.

 

My main concerns were:

1) If people had the same readings of the same thing they might all benefit.

2) Considering what others see might give an edge.

 

Maybe I am trading pure PA... but if I know that market is looking at 50% fibonacci, 200 day sma, pivots etc. And they all come together (confluence) it should give me an edge as to where I can try to enter with very tight sl.

 

Perhaps people here have a hard time with these premises because they've been through all this before, as have many thousands before them, groping down the same deadends, spending year after year looking for that special line or set of lines that will provide the key. It's all very seductive, the idea that all one has to do is wait for the red line to cross the blue line and he will have his ticket. But it just doesn't work that way.

 

If you're making a good living out of trading off MAs, great. If you're not, but you've thoroughly defined and backtested and forwardtested your premise and the stats from your realtime trading are consistent with those from your back- and forwardtesting, then by all means pursue it. But if none of this reflects your reality, I suggest you save yourself five years and begin looking at exactly why price trends, why it ranges, why it goes up and down. Granted these questions are so simple they seem almost insulting. Yet few traders can provide an explanation that isn't intended to sell somebody something.

 

Or, like most traders, you can continue to throw virgins into the volcano. That, in its own way, can also be fun.

 

Db

[TheNegotiator 13]

OP - The nature of trading is that it's not exact. This is why people lose money when backtest and curvefit then go live with a strategy. You have to account for possible inaccuracy and you probably already do. Think about it. Do you use a 1 or 2 tick stop? I doubt it. But actually, because different traders look at the same thing differently, have different objectives and timeframes and work with different sized accounts, the market still provides opportunity to make money. If we all looked at the same thing in the same way, it would be about the fastest and the biggest and the most agile.

 

(remember the only way to make money is being long those things that go up in price, and short those that go down in price- so all you need is a horizontal line )

 

You need time too and therefore vertical. Time allows you to see how strong a reaction was at your level

 

Anyway MACD, Fib, MA, Stoch, RSI, CCI blah blah blah. They all DO WORK. They do exactly what they are meant to do (unless you have a really shitty platform!). It's not indicators that don't work it's the trader. Reminded me of a scene in Happy Gilmore. Skip to 57 seconds if you can't be bothered to watch it all and read Mr Larson's tea-shirt.

 

[ame=http://www.youtube.com/watch?v=eX-YjciFn4E]Shooter Mcgavin Hits Ball Off of Big Guys Foot - YouTube[/ame]

[BlueHorseshoe 10]

Given the many ways in which a trendline can be drawn, it's hardly precise.

 

That seems to me to be like saying "given the many ways one can fire a laser at the moon, it's hardly precise". The point is that once you decide in which way to fire the laser or draw the trendline, then it is very precise. The line might have no value for trading, but it's precise. An average isn't - it's just an average, a neat way of generalising what's happened.

 

And given that it provides neither support nor resistance, there's no particular reason for buyers or sellers to "step in".

 

If you want to buy a hell of a lot of something, like an institution might, then you might have a fixed price at which you're prepared to purchase it. You could have a buy limit at that price level. If you buy some, and then the market rallies away from your fixed level and you decide that it isn't coming back, then you might adjust the fixed level at which you're prepared to buy. If the market heads north again, you may decide to adjust again. Each rally away from your entry being roughly equal in price and time, the chances are that your second adjustment will be similar to your first. That means that I can connect your first and second prices levels and project forward to estimate your third - if you want to buy the market again, this is where you are most likely to do so.

 

Of course, maybe they don't want to buy any more and the level has become meaningless. And obviously the market involves far more than one large institutional participant. So the point of the line isn't to give buyers or seller a "reason" to step in - they'll have their own reasons - the point is to locate the price level where they are most likely to do so. Whether or not they are then present at this level should tell you something about supply and demand.

 

You use diagonal trendlines (supply and demand lines) on your own charts - what function do you feel that they perform? You don't use MAs - why not? How do you think that the two differ?

 

Thanks

 

BlueHorseshoe

[DbPhoenix 42]

You use diagonal trendlines (supply and demand lines) on your own charts - what function do you feel that they perform? You don't use MAs - why not? How do you think that the two differ?

 

As I've said many times, trendlines and supply/demand lines have jobs to do and they do them well, the job of the first being to show the existence and direction and slope of trend -- if there is one -- and the jobs of the latter to show those points at which demand or supply gains the upper hand. But I also point out that the jobs of each have nothing to do with support or resistance. They do their jobs well, but nothing more.

 

I don't use MAs because they have no purpose. If one can't tell whether price is moving up or down or sideways without an MA, he should find some other line of work.

 

Db

[BlueHorseshoe 10]

 

I am not sure why people here have hard time accepting that MA can work as a support...

 

It's very simple. Let's consider where the euro might find support next Tuesday. I can look at a couple of identical historical lows, join them together, point my horizontal line into the future, and tell you where that line will be on Tuesday. Or, I can look at a couple of non-identical historical lows that I feel are significant, join them together, point my diagonal line into the future, and tell you where that line will be on Tuesday. Ditto a fib line. Ditto a monthly pivot.

 

Now, can you tell me where your MA will be next Tuesday?

 

No. That's why it can't provide support - because nobody knows where it will be ahead of time. I can tell you quite clearly - buy at the 50% fib from these two data points next Tuesday. I can't tell you to buy at the 200SMA because the data that will be required to calculate it doesn't exist in advance.

 

None of that should be read as an endorsement of any of the methods above - I'm just highlighting the differences. The first bunch are all linear extrapolations; the MA isn't.

 

BlueHorseshoe

[BlueHorseshoe 10]

the jobs of the latter to show those points at which demand or supply gains the upper hand.

 

When "supply gains the upper hand" at a supply line, then surely price has found support there?

 

It seems mostly a semantic argument, perhaps. Or maybe you're emphasizing the fact that you're not trying to predict price with any of these lines? Predicting price behaviour and predicting the levels at which we need to pay close attention to price behaviour in real time, however, are two different things in my opinion.

 

BlueHorseshoe

[ARTjoMS 10]

Here is a simple entry rules that aims to capture main moves and avoid choppy market.

 

Rules:

enter long if...

after daily close above all 200 day period SMA's: (daily 200 + 5 trading days; daily 200 + sundays including; 40 week + mon-fri; 40 week + sun-fri)

You can find: 2 candles in a row that both are fully outside of SMA's and closes above all previous bars. (I didn't want to score choppy market... I tried to get less trades, not necessarily profit optimized.)

 

enter short when opposite conditions are met.

 

Stop loss = close below (above) highest (lowest) SMA. (There are also other sensible options)

 

Take profite = look on charts and decide yourself

I will provide exit as "close between any lines" and also give max pips possible.

 

Only EUR/USD pair; manual testing; 1st trade on 2005.05.06.

 

Exit max pips possible:

530 986

254 687

2600 3280

1000 2329

(it went like +2329 then back to SMA, but no close above any line, then +2213 when finally stopped out at +1000)

-218 (there was no trade as per rules in one broker, but needed to get some losers too)

434 1230

entry was already 535 pips above highest SMA

672 2100

-237 250

-530 660 (taken 440 pips above highest MA)

-329 (no trade per one broker... on has doji other has candle that has like 10 times smaller body than previous)

-210 758 (taken 700 pipsabove SMA, other broker showed much faster entry)

-161 280

-180 (last 2 trades would be one in other broker: 780 1615) I consider worst case.

-589 434 (taken 440 below SMA, same doji thing.. no real entry)

898 1680 (trade taken 600 below SMA other broker showed entry 270 pips faster)

 

2 traders a year... I guess this is not for scalpers.. certainly not for scalpers.

 

Raw data though, interpret and use as you like... if you are interested then check yourself and preferably on different pairs.

[DbPhoenix 42]

When "supply gains the upper hand" at a supply line, then surely price has found support there?

 

It seems mostly a semantic argument, perhaps. Or maybe you're emphasizing the fact that you're not trying to predict price with any of these lines? Predicting price behaviour and predicting the levels at which we need to pay close attention to price behaviour in real time, however, are two different things in my opinion.

 

BlueHorseshoe

 

No, if supply gains the upper hand at a given point or level, then it is overwhelming demand. In other words, resistance.

 

No, they have nothing to do with prediction.

 

Yes, predicting price behavior and predicting the levels at which we need to pay close attention to price behavior in real time are two different things. Trying to predict price behavior is a rather fruitless enterprise (just watch the on-site vendors).

 

In order to avoid hijacking this thread further, though, I'll point out that I have threads on trends, trading ranges, and support and resistance. Those who are interested can investigate them. Those who aren't needn't suffer through unasked-for edification.

 

Db

[wrbtrader 10]

 

My main concerns were:

1) If people had the same readings of the same thing they might all benefit.

2) Considering what others see might give an edge.

 

Maybe I am trading pure PA... but if I know that market is looking at 50% fibonacci, 200 day sma, pivots etc. And they all come together (confluence) it should give me an edge as to where I can try to enter with very tight sl.

 

It will be impossible for all traders on this planet or most traders on this planet to be using the same readings. To do such implies we would all need to use the same data vendor, same time frames and so on.

 

Simply, we would have no individuality and that's a contradiction to trading, markets and capitalism itself.

Edited October 11, 2012 by wrbtrader