Support and Resistance

Discussion in 'Trading' started by Joe Ross, Dec 21, 2009.

  1. One week ago I received a couple of emails questioning whether or not I believe in support and resistance. In fact, one subscriber said if I didn't believe in support and resistance, then I couldn't possibly believe in trend! Why? Because in all cases the situation ends.

    Here's what I believe: The trend is your friend until the end. The swing is the thing until it goes "ding."

    What is support and what is resistance? Are those not simply convenient terms to describe an area of fair value? Prices bounce off of those areas of so-called support and they bounce off of areas of so-called resistance. Why? Because temporarily no one is willing to sell for less than "support" and no one is willing to pay more than "resistance." "Support" and "resistance" are equally as mythological as "trend." Why do I say that?

    Every market is in a trading range between the highest price it ever achieved (resistance) and the lowest price it ever reached (support). So what is all that stuff in-between? Can we call the junk in between "support" and "resistance?" What are trends and swings? Are they not simply connectors connecting the temporary areas of fair value? So-called support areas fail to support, are broken, and are connected to a lower fair value area by a swing or trend. So-called resistance areas fail to resist, are broken, and are connected to a higher fair value area by a swing or trend.

    Trend lines and swing lines are also broken, and lead to areas of fair value, where prices chop sideways for awhile. So, what's the bottom line of all this clap-trap about support, resistance, swings, and trends?

    As far as I'm concerned, the only thing that counts is whether or not you have found a way to make money from any of this. If you are able to make money when prices bounce off of so-called support and resistance, then congratulations, you have probably made it as a trader. If you have found a way to make money from trends or swings, or have found a way to make money from broken trend or swing lines, then you deserve praise and are well on your way, or have already succeeded as a trader. The rest is just a mincing of words -- semantics. Support, resistance, trend, swing -- all are nothing more than ways to identify what prices appear to be doing. Any one of them can see the beginning of the end with the next price bar. If you tell me prices are at support, I will probably know what you mean. That is all the word "support" is good for! If you tell me prices are at "resistance," I will probably know what you mean.

    Do I believe in support, resistance, trends, and swings? The answer is no! I do not believe in any of it. What I do believe, most of the time, are the numbers on the statement of my trading account. If they are getting bigger, then I am winning, unless, of course, the broker's back-office has made an accounting error, giving me your winning trade or, Heaven forbid, one of your losing trades.
  2. ding.

    I don't know what it means, but it seems appropriate.
  3. Beautifully stated . . .

    It's totally understandable why you don't believe in Support & Resistance Joe, you still use time based charting. Consistent support and resistance can't be read on time or tick based charting.
    After 50 years I won't want to do any more research either.
    Hey, you are profitable so who cares, right?
    Merry Christmas.
  4. If in all cases the situation ends, then why is trend any more worth "believing in" than S and R?

    I see trends as the by-product of S and R either holding or not holding. It all starts with the S or R though.
  5. I was looking at about +50 charts on twitter for the Emini ES and I quickly noticed many different traders keying in on similar key price areas.

    Further, I notice that there were different names and opinions for the same key price areas.

    Simply, it doesn't matter what we call it (fib, s/r, candlesticks, tops/bottoms, pivot et cetera)'s the same price action. In addition, I saw someone discussing a particular price (no chart) as a key area to remember because it was a particular trading day Existing Home Sales dramatically change and he doesn't believe in support/resistance. Oddly, it was the same price area that TA folks was watching as a s/r level.

    Therefore, you may not believe in support/resistance nor believe in something called a trend. However, you may find value in a particular price area that's the same as those that do believe in support/resistance or trend.

    Folks just prefer labeling the price action to keep conversation focus.

  6. Gee, you folks are blowing away the smoke and breaking the mirrows that sustain a lot of folks on ET..........Keep it up!!!!
  7. . Ummmm don't be a complete dumb shit. Yes you can. Its time to come back to reality
  8. :D
  9. paper-trade mirrors and pot-smoke induced fantasy? thats 98% of sustained ET
  10. Please explain to everyone how a consistent fixed point can be created using bars that are inconsistent and constantly varying in size?

    Once you tackle that then explain to everyone how you solve a math problem where the elements of that specific math problem are in a constant state of change.
    #10     Dec 22, 2009