What rule can I use to enter this trade?

Discussion in 'Trading' started by BillySimas, Jul 15, 2015.

  1. If I want to buy when it bounces off a support level, what data can I use to quantify how far above and below that support level I'd still consider that support level to be valid? There is bound to be some margin above and below that level where it would still make sense to enter. What is a logical way to calculate this margin? Some function of the daily range maybe? I need an objective way to calculate these levels before the market actually reaches the support level.
     
  2. xioxxio

    xioxxio

  3. I don't know if this helps, but if you study candlestick patterns, you can use a reversal candlestick pattern that is bouncing off a support or resistance level as an entry signal. Typically the entry point would be on the close of that candlestick.
     
  4. wrbtrader

    wrbtrader

    Probably best if you just post some charts considering there's dozens and dozens types of s/r levels and probably +1000 trade signals to use when price action reaches s/r levels.

    You counter-trend trading or trend trading ?

    For example, price action is in a down trend and then it reaches one of your support levels and you're looking for a bounce off the support...that's a forum of counter-trend trading.

    In contrast, price action is in an up trend and then it retraces "a little" (still in an up trend) to one of your support levels and you're looking for a bounce off the support to continue the uptrend...that's a forum of trend trading.

    Years back someone documented +50 ways of designated s/r levels. Regardless, there's no specific margin (objective calculation) that will fit all types of different s/r levels. Simply, what works well with one particular type of s/r level may not work well at all with all the other types of s/r levels.

    Besides, most s/r levels are actually involved as price zones. For example, pretend your support line drawn in the sand is 13.50

    In reality, that 13.50 may be part of a price zone (area) like 13.58 - 13.46 but you don't know that because you're fixated on one single like @ 13.50

    My point, you should look at s/r as a zone (area) of prices. Thus, when price action enters that Zone regardless if it touches the 13.50 level or not. I've seen such done by indicators (on charts) posted at Tradestation forum and Ninjatrader forum. I'm not sure if its something free that's included in the software or if someone freely shared something they designed that works in Tradestation and Ninjatrader.

    Yet, that may not be something you're interested in because you have your own type of way to calculate a s/r level that's probably different than others. Thus, you need to find a way to convert your s/r levels into s/r zones.