Channels is what it is all about. Draw the lines through resistance at the 640, then the line through support from last Thursday. http://finance.yahoo.com/q/bc?s=^DJI&t=5d I also watch to see if the bid or asked is getting whacked in relation to the volume. I also use key reversal times, Often a trend will reverse from 12-1 during lunchtime, and resumes between 1:00 to 1:15. "my mentor has really drilled into me, that trading is actually really easy." This is a concept that Mark Douglas touches on it the disciplined trader. People make trading a lot harder than what it is. The discipline problem comes in because all of our lives we have been told when to do an action from others starting at birth and continuing on in the workplace. But in the market there is no person telling you what to do, when to buy or sell, what to set your stops at so people due to their previous conditioning do not make rational decisions when trading.
Exactly. I made it a lot harder than it was as well. But now I understand so much more than I have ever imagined. So take advantage of all the advice given these past couple of pages and put it to good use... otherwise you could be on the losing end and someone that did do this correctly could be holding what money you should have had.
Also the more times a support area is tested the higher chance it will have of failing and this holds true with testing resistance as well.
And to add on to that... check a daily view of a chart to get really solid idea support and resistance levels. The more they are tested, and the longer that support and resistance level has been around, the stronger it will be, just as Volente said.
http://img393.imageshack.us/img393/1050/snapshot223bz.png After 2 PM are my trades that I made during a live simulation, because I left school early. Before 2PM was a tick replay, and I had been exposed to that data before I replayed the data afterwards. But those trades are very good. I must stress to everyone. Long at Support. Short at Resistance. If I thought there was going to be a breakout, I took half the positions, and a few times it paid off big time. This is not perfect, but this is an example of a pretty good trading day. What do you think Volente? During the earlier hours if I wasn't exposed to the data, it might have been more trickier, but, once Support and Resistance is known, it is fairly easy. So for one more time in this post: Long at Support. Short at Resistance.
While we are on the topic, this was very useful in my learning http://stockcharts.com/education/ChartAnalysis/supportResistance.html
JM Some questions about your buy and sells after 2pm today ... http://img236.imageshack.us/my.php?image=snapshot223quest9ly.gif (first time using imageshack so I hope it works) I have 3 spots there #1 is this your first trade? - what made you not sell when it first hit the blue support? ~10590 - then I see you got the tp 1/2 (meaning you thought it might breakout ie down from here). then you have your TP then your long ... now are you going long as soon as it touches the large blue line? or the min after that? #2 I dont see a resistance line here at these 2 spots but you decide to sell here and rebuy. What made you decide to do this? #3 So even thou it went past your support you bought in thinking it was a fakeout? what made you deicde on this? thanks for the chart btw
Thanks for the questions... made me think about what I did. #1... .... that trade wouldn't have been possible, I don't know what happened there. It should actually be at 14:00, because I got home right around that time and my mentor advised me to sell, because sellers were slowly gaining control. Remember... I posted that I didn't get home until 14:00 because I was at school. So, for that, I'm sorry, that arrow is incorrect, I had to erase a few things because I had A LOT more lines drawn then you see up there. I took profit, around 575, and went long at exactly 570. And the long after that, expecting the same thing as the long before hand. And it did repeat. There should be a few more support and resistance lines, that were thin, to point out they were not as critical as the others, but I had a lot of extra crap up there that I had to delete. #2, Again, there should be a thin resistance line there, I guess you could call it a temporary resistance. The first sell was actually a take half, but I decided right afterwards that it would go down, and it did. So you could say there was a bit of hesitation. But I took all profits. And it repeated once again. #3, I seem to have noticed a lot of times fakeouts do occur. I believe my mentor described them as "pullbacks" I notice this a lot on charts as well. I make some very nice gains from those formations. The bar touched the very bottom once. I waited for the next bar and it touched the same place at the bottom, but did not exceed it, and I decided to buy on that, and what do you know, it paid off. #1 again was just an understanding that sellers were stronger than buyers, and that price did not go up as high to touch resistance. But also note that it should be exaclty at 14:00 when I got home and my mentor told me about the trade. #2 again, I erased stuff, all kinds of smaller support and resistance lines. Forgot to add a few of them. I'll be sure to be more careful of this next time I post charts. #3 ... look back in the past for "pullbacks" I guess you could say, it was either going to drop like a rock or shoot up, and it shot up and I was on the right side of that trade. Also, if you look on a daily chart, you can see this was a MAJOR area of support, and I just didn't believe it could be broken, so it was a false breakdown, or pullback, whatever you want to call it. So that is all. I'm sure you might be able to pinpoint a few more missing things that should be highlighted. Next time I post another chart I'll try to make it look better, but in the middle of trading, it is hard to keep track of all this. EDIT: There should also be a resistance line a 610, again, sorry about these errors, when erasing stuff, the eraser tool isn't right on and a lot of stuff that I don't mean to erase does accidently. I'll not make those mistakes again. Thanks for pointing these things out DJ.