When is a support or resistance broken

Discussion in 'Technical Analysis' started by gifropan, Dec 8, 2009.

  1. I once read in a book on trading that if you buy a support and you are stopped out you should not be disappointed. You were not right on this occasion but you must be disciplined to try again. I find that sometimes this leads to buying the the market at the same price a few times and getting stopped out repeatedly. Other times the first attempt may fail but the second time may is successful. The question I have is this: when do you regard a support (or resistance if you are looking to go short) is broken and give up on it and look for another opportunity away from the immediate market conditions.
  2. each situation is different, and there are a ton of variables that come into play.

    Support and resistance is extremely important, but there's no set book of rules to tell you when its going to bounce of support and when its gonna go crashing through. If there were a nice easy set of rules, so many people wouldn't be losing their $.
  3. 1) Ideally, the "re-test" of the support fails and becomes a place to short-sell, a new resistance level.
    2) If you believe support is at "20" on the chart, visually, a market can trade 23-22-21-(touch support at 20)-(bounce up to 21)-(re-test support at 20)-19-(failure?)-20-19-(failure confirmed!)-18-17-16.....in an ideal world. :cool:
  4. Don't think, feel...
  5. praxis35


    This is where the "gut feeling" comes into play. One needs to observe and comfirm through price action, time and sales etc. to compound probabilities. Like you, I got frustrated with the stop outs at SR levels but as I'm building my tape reading skills, I'm finding more confidence on which side to take at a SR level. Still lots of screen time ahead before the 'art' of T&S comes to full fruition.

    Good luck
  6. The market is a little counterintuitive.

    It sounds like you go short at resistance and you go long at support when price moves to either of those places.

    The values may be horizontal lines in your mind or annotated that way on your chart (Think of the many techniques that involve drawing horizontal lines).

    You are playing the entry expecting price to fail to BO of R or S and, instead, return to crossing the range between the two.

    Many people use strategies that count the times R or S is hit when crossing the range and then testing the limit. (Linda Bradford Rashke). You, on the other hand, are a contrarian trader who tries to trade retraces and who gets stopped out when new R's or S's occur.

    Trading trends AND their retraces is more fun.

    Look into contrarian trading so you can use the signals they use for trades to make money.

    Your next problem is the exit on your successful trades. Take the trough of volume as an exit on retraces and keep holding when you have ID'ed, that, on higher numbers of coming to the R or S, you recognize a reversal after you have entered on the contrarian signal.

    For SCT traders, the horizontal R or S line is a line from point 2 to an FTT. Or when VE's occur it is the line from the VE to the end of the move 2 after the VE if the VE is not handled.

    R and S are usually so vague, most traders do not recognize any actions on a LTL (See DBPhoenix for example.).
  7. Nexen


    This is the kind of opportunity that can determine if the person replying has a clue about profitable trading. If your head is big and your ego bigger this is your chance to prove yourself, otherwise, the "eliteness" continues...
  8. No.Heat


    A very good question, an answer that takes years of screen time to fully understand.
    Market enthusiasts and "gurus" alike constantly try to convince their [readers and customers] that
    there is a way to determine the answer to this "end of the rainbow" question but
    in my humble opinion the real truth is, you never know!

    Some will claim support finally fails when support turns resistance and
    this is true but in hindsight. Hindsight can't help us in the present. You could
    be examining the action of price turning support into resistance and before you know
    it a reversal formation formed and confirmed and the area suddenly becomes support
    once again. There are many possibilities, there are rebounds, breaks, failures, breakouts,
    breakout failures, anything can happen. The only think you can do is gamble and react, that is
    choose a side, pick your risk and reward and do your thing. If the scenario changes you got the option to gamble once again, gamble from the reaction.

    Remember, you never know, and the quicker you believe in this, the better.

    There is no holy grail.

    No Heat
  9. speres


    Or...... instead of giving up on a broken support you sell into the weakness???????
  10. praxis35


    Does anyone use a confirmation buy stop or sell stop placed outside a consolidated range on a support or resistance level? Example: ES hitting resistance at 1100 and I'm thinking of going long so I place a buy stop at 1101.25 to enter my trade. If the trend continues and breaks through resistance, my buy stop is hit and trade is executed.

    I briefly experimented with this strategy but had mixed results with it and honestly did not do enough back testing and refinement. Does anyone do anything similar?
    #10     Dec 13, 2009