How do you determine whether a s/r level will hold or not

hi, babypippers:
I’ve been trading with price action. I have a question that’s been bothering me for a while. Here it goes:

'When price is moving into a s/r level, is there any way to predict whether this level will hold or break?'

I believe this question is important in setting profit targets, etc. And I welcome any feedback from all you guys. THX in advance!

Shuo

The short answer is the more times it bounced previously the better the chances it will hold. It’s one of those predictions when you get it right, you’re a genius :cool: and when you get it wrong, you’re not. :smiley: I believe (that doesn’t make it a fact, it’s an opinion), that you should consider as much relevant information you can when you’re deciding Support and Resistance. The problem comes when you have to decide how much is enough and what’s your approach. I draw mine according to bounces and breaks, some Tech indicators such as Money Flow Index, Volume and Heiken Ashi candles.

Here’s how I approach it.
If price is approaching a very obvious support level, there is absolutely no way any retail trader can tell if it “will hold” or not.
Sometimes it will, sometimes it won’t.
Bottom line is to ensure you’re not over-leveraged and your trading plan is being followed.

The whole concept of how many times a level has been tested and the ability to use that info to predict whether or not S/R will “hold” is arguable.
I’ve seen it argued for both sides, in that some feel the more times a level is tested, the less likely it is to hold and others with the opposite viewpoint.

In my experience, I hold the former to be true- more times than not.
That’s the problem with new traders- they want everything to be very black and white and are fearful of uncertainty.
I feel that the more times a level is tested, the more orders which are stacked up there are eaten away.
Obviously, I use price action, volume and a few other indicators to confirm whether or not this is the case.

1 Like

Great answers already on the thread, but I’ll add another point from my experience. Knowing that whether the probability is high or low that an S&R level will break/hold requires understanding the market drivers and upcoming catalysts, as well as observing th price behavior around those areas to improve your odds of making the right decision on direction and proper trade management plan. You can play the market on just price action, you’ll just have a smaller edge, but it could be made up with solid trade management.

You have the right answer on your question bellow from FOREXunlimited. Read it and try to understand it, it is telling you everything you need to know.

Hi to the OP…

This article sums it up nicely:
Interpreting Support And Resistance Zones

Volume is also a tremendous tool: swells in
trading volume around a demand/supply
zone can be a sign of how strong or weak
it is…zones are better than precise lines, or
rather, lines should be a guideline price, with
flexibility of even up to +/- 30 pips…'Fake-outs’
are common, so just because price brakes above/ below
a significant level by two pips, or even twelve, if
there is no volume/weight behind that breakout
it could be false. This is why knowing fewer pairs more intimately, in terms of volume and price behaviour around significant levels (in terms of how many pips they drive over or below a level without actually breaking it) can give you a better idea as to where to set stops, e.g. how widely or tightly above/below a level, rather than handling a large amount of pairs in your trading rota…at least at the beginning of your career…

Cheers.

Gracias amigo

+1 on that one. I would also add that with experience you and your strategy get better at judging this. You should always rely on several signals before entering a trade which does not mean you will be 100% profitable, but it should improve your results if applied properly.