Confirmation vs. S/R

Discussion in 'Technical Analysis' started by RocknRide, Oct 28, 2010.

  1. Hey traders,

    One thing that I constantly switch back and forth between is whether to buy/sell right at support or resistance (say at a trendline or pivot point) or to wait for some type of confirmation (such as strong closing bar, candlestick pattern, prior high taken out, etc.).

    So my question is, what works for you?


  2. Depends. Buying right at SR is referred to as "predicting the market". Waiting for confirmation is the best strategy but it can really cut into your P/L so you must switch into different timeframes and tick charts. The trick is tak narrow bar signals that are very reliable. Anything too wide either buy the pullback (have a strategy for this) or patiently wait for the the next signal as there are plenty :). Best is trying to get very low TF signals as well. Next step is once you get the signal do you wait for a confirmation? :). It's a difficult way to trade but is highly recommended :).
  3. Last thing. A entry bar will give you a few things: position size, stop, and an entry. :) your other option is to just buy the level with an extremely close stop which is very lucrative but not as reliable IMO due to forces of trends, etc.
  4. Another of the endless possibilities would be, if you trade multiple contacts, place a buy just before, right at and just past the s/r. Perhaps giving the first entry the largest stop and the last entry the closest. FWIW. :)
  5. I like that. :). I've been known to combine the two for compounding. Your smallest risk comes AT the level but your probability increases with the signal. Limit entry at the level, then add PA signal. For a reliable B/O If you're trying to get "Aces" before the break, take the PA signal with the trend then a stop entry ADD @ the B/O. You're always averaging up and compounding. That's 2 strats there. One for counter trend and on for trending :). If you do R:R analysis this is important because there's a HUGE difference between being precise and reliable compared to sloppy with wide stops. Also remember not to take crap signals. A good signal is one that lands EXACTLY at the level (or has a OHLC on it). If it's half thru the level, then I don't consider that anything to write home about. In addition always take the signal on the proper side of SR. If it blows thru a level look to see which side it consolidates on and then take the signal long or short. But never take a PA signal full size from under support :). Just from my experience though. :cool: hope this helps!
  6. Support/Resistance levels or zones are not trade signals by themselves. Thus, best to wait for a trade signal and such works well for me.

    Thus, it's possible to get a sell signal @ support or buy signal @ support...same for resistance.

    However, if you're identification of support/identification price areas are inadequate...the performance of your trade signals will be poor too. Therefore, test your trade signals alone versus your trade signals @ support/resistance.

    P.S. there are dozens of different types of s/r levels or zones. enough to keep you busy for many years.

  7. Nexen


    I wonder if any of the so called pro traders in ET will release any "nuggets" on this topic.

    Little tricks like this is where real edges are born.

    Good question just not sure if many are willing to share in this department.
  8. Lots of chart examples in here. Rudd - Stock Patterns For Day Trading And Swing Trading.pdf

    Perhaps an idea or two too.
  9. Many have in the past...just got to use ET search to review their past posts although they aren't handling it "all" on a silver platter. Just a few nuggets here n there.

  10. Here's the answer, just not sure if your general ophidiophobia will allow you to objectively digest the nuggets of truth to follow

    The problem with trading "pure price" and "support - resistance" is this: all S/R levels are not created equal. S/R levels on their own don't really mean that much... it's what else is happening around them that validates or negates said zones for entry point effectiveness.

    If trading were mechanically simple as buying or selling S/R breaks and pullbacks, everyone here would be rich. Heck, everyone who ever tried trading would be rich. Right?


    So the answer to this question isn't down the rabbit trail this thread is heading. Dead end. The answers are not how to determine where to enter around any point of S/R on a chart.

    The real answer lies in knowing which way price is likely to go in the first place, then using key S/R levels as confirmation entry points. Once you begin to use S/R zones as places to enter instead of places for "show-me-which-way" decisions, you're on the right path.

    Once you use S/R zones as strategic entry points as part of an overall trading approach, entries sought on breakout = pullback of certain S/R zones and likewise reversal fades of other type S/R zones is the focus

    All S/R zones are not created equal, and they aren't the focus of fixation for any workable method. They are key spots on a chart where to take actions, not where to make decisions.

    But what do I know? The ophidiophobes will dismiss anything I have to share anyway. So take it or leave it as is.
    #10     Nov 7, 2010