Support and resistance are the backbone of any trading asset. And behavioral S n R are often seen in volatile market because they follow they represent the psychological levels on chart.
I know that indicators are a mathematical representation and obviously I know how they work since I tried using them in the beginning as well. There is also a chance of becoming successfull using indicators. After all itâs about discipline and probabilities.
Where Iâm coming from is:
The institutions and banks are moving the markets and understanding what they do and seeing their traces in the markets, gives a higher reliability than following indicators that plot prices from the past and canât enough take into account what is currently happening. Plus different indicators, different signals.
In the end, weâre all trying to find tools that increase our chances of winning trades and many roads may lead to success. One answer doesnât have to go for all and above I was only stating my answer because I was asked about it.
Sometimes you can use them to identify the historic chart pattern to see if you can apply for the current one, along with some indicators like SMA and RSI.
My opinion, and I could be very wrong about this, is that most of us donât use the indicators as intended by their creators or leading proponents.
Thatâs a well made and very rational argument IMO. I am genuinely asking the following out of curiosity because I know nothing of Smart Money/Wyckoff: how do you determine how they behave by looking at chart data?
I assumed that you looked at historical data on the left, as do indicators. Am I wrong?
Youâre right. Itâs still a different feeling though. Smart money and wyckoff try to explain what happened in the market, what the banks are currently doing and where the market might react with higher probabilities than indicators, which can be seen in the stop loss sizes and risk to reward ratios.
With indicators I feel more lost in the market. The indicator has a mathematical calculation with some probability. It still seems random to me since youâre not trying as much to understand the market and simply trade itâs signals.
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Very true. Iâm also guilty of this. Rely on it solely as a crutch without a greater understanding or context of why the prices move the way they do. Backtesting and tweaking the parameters against currency pairs I think should give a greater understanding of what market conditions warrant what parameters but I havenât done gone to this extent yet, so canât confirm for sure.
Itâs a valid argument and thanks for confirming that bit about Wyckoff and Smart money concepts.
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As for support and resistance behavioral formations, I can say that you have to set not levels, but zones. Zones determine the possible levels of support or resistance, while just levels donât make the whole picture so clear for traders. As for the fomartions, then you should just watch for the charts and check the trend line, if the trend line is supposed to be positive for you, for example, bullihs one, then you should wait until the price touches the zone of resistance several time until it breaks it up. The same thing is with bearish graphic and support zones.