Support and Resistance on Indices

Discussion in 'Trading' started by AFX, Sep 21, 2011.

  1. AFX



    It is my first post here. Coming from the Forex arena and having much success trading longer term time frames but not so much day trading I decided to expand my horizons and based off of a conversation I had with a daytrader friend of mine a while back I decided to take a look at the above.

    I have been watching quietly on the sidelines for the past few weeks, just trying to get an idea as to how price reacts to levels and I am quite amazed to see that price really does respect support and resistance levels. At least to an extent.

    So from what I have seen, assuming you get the correct price action at these levels, so being patient and waiting for the ideal setups, it seems you can have quite a good level of success trading bounces. This is a little new to me as I am a trend trader at heart, but from what I have seen, you will get a much better strike rate and find more consistency trading bounces.

    Am I correct in my analysis or have I missed the point completely? Maybe the recent conditions are exceptional?

    I am not saying I am not going to back test heavily, but I would be interested to get some experienced views in any case just to make sure I am not barking up the wrong tree.

    My other question is... should I be using the price ladder and T&S to support my trade or is that overcomplicating it? Up until now I have literally been watching just the charts with absolutely nothing else.

    I look forward to your thoughts and comments.


  2. I notice the very same in index futures, specifically the ES. But instead of trading bounces (which I find rather speculative), I trade its breaks and set a stop to the most recent spike created prior to the break. I find the trends to be very smooth and straightforward in the ES.

    In my journal I am illustrating those S&R levels that form in the one hour time frame all the time and have significant meaning to subsequent trading sessions. Perhaps you can point out the actual levels you meant where one can expect bounces, also how to spot them?
  3. danielc1


    You can find the support by just looking at a chart, but I have also find that looking at Market Profile Value high area's and low's or point of controle's of previous day's to be excellent points of support and resistance.
  4. Feivi18



    Are there any sites that give you the MP numbers on a daily basis? I couldn't find any.

  5. danielc1


    For what I know so far, you have to have a subscription to some data feed or broker that offers Market Profile. Sierra chart, esignal, marketdelta are some that offers market profile.
  6. wrbtrader


    Hey Vince,

    You can continue being a trend trader while trading support or resistance levels. Simply, don't make the newbie mistake of thinking buying support or selling resistance implies counter-trend trading. It can also be used for trading with the trend.

    Also, the issue isn't if it's simple or complicated. The issue is if it works or doesn't work. Therefore, use whatever fits well with your trend trading approach.
  7. Pivot points are one of my favorite indicators to help time my entries and exits. TC2000 lets me throw in support/resist lines, but also puts bars on the side that represent the buy/sell volume for that particular price level. This makes it a little easier to see where the bounces are going to fall based on where the heavy selling is taking place.

    I don't like to trade strictly on pivots, but if I've got a bullish looking stock hovering around a support line and all of a sudden I've got indicators lighting up, like the Bollinger Bands bandwidth flanges up or something, there's a good chance it will at least make it to the resistance level above it. I think to a certain extent they're a self-fulfilling prophecy like fib retracements are; enough people use them as indicators to the point where you can anticipate buys and sells.

    Using this morning's S&P 1 minute chart as an example, we're sort of bouncing around between an R1@1145.11 and Pivot@1133.24.