Confused about S/R

Beginner Questions Candlesticks, Chart Patterns, and Price Action
1

I’m trying to learn how to properly draw S/R on my charts, and I have a good feel for it now BUT, when looking at the page from BabyPips (http://s3.amazonaws.com/babypips-media-production/images/2016/05/grade1-support-resistance-examples2.png)

I’m totally confused on the 1st and 3rd “Minor S/R” … if I were to connect the 2, cutting through the previous swing, I’ve got another 4 touch points - why is this a minor, vs a major re-test line … or is it always considered minor when the price has cut through recently?

Seems very subjective for those S/R to predict future action, but hey, I’m new to PA generally speaking …

2

Indeed. Don’t expect anything approaching objectivity on the subject of S/R, and which previous/recent ones are suggestive of future S/R. And if you find anything approaching objectivity on this subject, treat it with caution.

But in general, I think it’s fair to say that “more frequently touched” and “more recent” are both potentially suggestive of future recurrence.

I think probably the general consensus of opinion among price action traders is that as a potential “forecaster”, it’s been detracted from, to some extent, by the price having cut through it recently.

Edited to add: the interpretations of many of these things depend on “knowing your instrument”. Some things “respect” previous/recent S/R more than others. [There are people who deny that, as well, but they’re wrong. :wink: ]

3

My challenge here is that there are many times I’ve drawn these lines, only to have them ignored - and if I draw them all, I may as well just put a sheet of lined paper on my screen - it’s not helpful.

One tip I’d read is that often times, the distance between S/R lines is around 100-200 pips on the daily charts, any tips on distance for the 1Hr? I’m working around 40-80pips - seemed reasonable

How does one get to “know an instrument” … other than experience (bought FT2 to backtest manually like a mad man) … are there other tell tale signs to look for in terms of S/R knowledge?

Edit to add: How does one eliminate the “subjective noise” to better understand the underlying price action, as all things can simply be interpreted (which just leads to more wavering on which signals to take)

4

I hear ya’. :slight_smile:

It’s not what you wanted me to say, doubtless, because it’s not specific at all, but in general, as you gain experience, you’ll probably find that the proportion of the time they’re ignored by prices gradually reduces [I]to some extent[/I], and that you’re never even going to get close to being right all the time.

It may also help you to concentrate on drawing them on higher time-frame charts and carrying them over to the lower time-frame charts on which you’re trading. Yes, this can make them more “remote” (perhaps) but it can also make them more “significant levels” and increase your strike-rate with them. Just a suggestion.

Reading Al Brooks’ books would also help you in this regard. (It’s not easily done: they’re not very well written in terms of style and comprehensibility, but their [U]content[/U] is tremendous.)

Sorry, I can’t help you with that. I don’t “believe in it” any more than I believe in Fibonacci, pivot points, astrology or homeopathy. It’s all pseudo-scientistic mumbo-jumbo to me. If people are somehow going to produce “concrete numbers of pips” like that, as if there were some ostensible objectivity about them, surely they should at least be related to the [B][U]volatility[/U][/B], to have any credence?! (They’re going to vary hugely, from instrument to instrument, as well.)

I meant “by experience” - not really “other than experience”. It’s a question of putting in the hours of screen-time, really. Malcolm Gladwell has written a book about this. Not about trading at all, but about “becoming very good at anything by putting in your 10,000 hours”. Sobering thought.)

Good - I think that’s $200 very well spent. I found it very helpful.

Subjectively! :8:

Edited to add: I really don’t have a quick answer to this, but will (a) be interested to see what others say, and (b) return to the thread tonight, when I have more time, and post again [I][U]if[/U][/I] I think of anything potentially helpful to say. Don’t hold your breath …

5

Haha, the quote from “becoming very good at anything by putting in your 10,000 hours” is from Naked Forex by Nekritin/Peters, half way through … but they are also the ones who stated that in general, strong levels on the daily were 100-200 pips in distance apart. Not meant as a concrete number, but a general idea that if you have more than that - you’ll probably have too many and minor S/R meant for the lower time frames.

I’ll be doing both the trading TF and next TF (1hr and 4hr in this) to test my S/R, and only look at the lower TF if I have too many to see if they are minor.

I wonder if anyone else out there has more tips? https://2ndskiesforex.com - Chris Capre had some good tips on S/R that I liked as well found here: Finding Support and Resistance Levels | 2ndSkiesForex

Not sure if he’s reputable, but he’s well spoken at least lol