Trading, decision making is more as important as analysis. Support and Resistance behavioral formations? These levels are so important for any trader. What are the behavioral formations markets follow to get us this levels? I mean you could be waiting for a support level to hold at a straight line trendline, fortunately/unfortunately it could hold at slantly trendline. Key point the support did hold. So the question, is there any behavioral formations support and Resistance levels does follow before their levels holds? This is just critical for me.
I ignore support levels when taking short trades in downtrends and resistance levels when taking long trades in uptrends. As a more practical alternative I use trailing stops: if price pulls back enough to trigger the trailing stop, this is also usually another entry opportunity.
S/r levels are subjective constructs in the sense that price might completely ignore them, especially in trends. Price however is a matter of objective recorded fact, without ambiguity or risk of judgement error.
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I don’t use support and resistance either, but supply and demand which are quite similar. Also when the price approaches such a level, I look on lower timeframes with other smart money concepts what exactly the price is doing and in which direction it is likely to go.
Whether it’s support and resistance levels and/or supply and demand zones mostly depends on the time frames where daily charts are most likely to be a higher probability for S&R zones to be tested, while the lower time frames are more suitable for S/D zones entries/exits.
In other words, S&R have a higher probability of behaving on daily time frames - and it could well be as a market sentiment level when the prices favour both the bulls and the bears when reached. Then there would most likely be a period of consolidation waiting for a breakout. I would mostly support continuation of the long term trend in that case above a reversal out of it, mainly because of market apathy.
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In fact, this is a place where art and mathematics are combined, and it has no specific format. However, by looking at the old prices, we can see at what level the prices are sensitive. Based on these levels, it can determine support and resistance.
One thing which holds me back from using s/r or s&d levels is that they have not been objectively quantified. I’d really love someone to point to a study which sets out the percentage of these levels that are effective. This might also identify what chart conditions they are most and least effective, what the margin for error might be, even whether one of the two approaches is demonstrably better than the other.
What’s holding us back is that traders don’t agree how to identify these levels. So their predictive value has to remain forever anecdotal.
I’d love to be proven wrong.
To me it doesn’t matter how subjectively or accurately I draw them or with what percentage their going to hold. It’s just an area I keep in mind, where the price could react.
For example I’m in a short trade and there is a demand area ahead. I’m aware that the price could react there and even fully turn against me. In addition I wouldn’t place my take profit somewhere just after the demand area. Because if we break through it we’re probably going lower anyways.
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Sure, I follow the principle of these zones, but without evidence of how relevant they are to price, are they not just random markings on a screen?
For example, suppose you identify a demand area which is 30 pips deep and is 150 pips ahead of where price is right now. Without a valid identification for the area you have picked, why not select a random zone which is 20 or 30 or 40 pips deep and which is 96 pips ahead, or 183 pips ahead or a thousand pips ahead? Any price can be called significant if you look far enough back and draw enough lines.
I don’t say these zones do not work, I just say nobody has produced evidence to show they are more reliable than random chance.
A Technical trader doesn’t ignore S&R.
Alright, many people believe this. But there is a range of possible reactions to that belief when in a trade or when considering a trade.
So where is the data?
Thanks for sharing the article… the supply and demand article was a good read… Whereas it didn’t give the go to point I am looking for
Thanks for this point. No evidence!
Art and mathematics?.. This is Economics
Do you have any indicator you use in particular?
I agree with Steve369 I use S/R Day and above for reference
Absolutely not. Indicators are for people who don’t understand the markets. I trade using smart money concepts and wyckoff
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Thanks… So you’re onto naked chart and wyckoff
S&R is not ignored by a technical trader.
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This is a very ignorant & misleading statement. Indicators are a mathematical representation of price action. To me it sounds like you don’t know how indicators work and aren’t aware of pro traders using them
Here’s one: