Hi, traders:
I have been trading with price action. I have. Here it goes:
'If price is moving into a s/r level, is there some way to predict whether this level will hold or break?'
I feel this question is important in setting profit targets, etc.. And I welcome some comments. THX in advance!
Shuo
When you state price action do you mean pubs or candles? Or with fashion lines, fibs, flat support and resistance?
Hello, Baillie, thx for the answer. By saying that I mean when candle (price) is moving into horizontal support and resistance, is there a way to predict if this degree will hold or not? THX
You will need some kind of confluence that will help you make that decision making. I do not trade using only flat support, I use fashion lines and Volume, fibs to support my decisions, that is my main trading egy or egy. The time frame make your choice easier or you choose can influence your decisions. So that you can see exactly what I mean I will post a pic.
This is a 4 hour chart with a horizontal support (recent) which was preceding resistance, however as you said how do you determine if this amount of support will hold the next time around? It would be purely a guess with out some type of assistance or confluence.
Ok, I have added a fib from the bottom swing low until the horizontal line and stretched it to the maximum swing high following the rest of line. The rectangle box indies the Fib that is 50% -61 %, a likelihood bounce area. Notice the oval where price retraced back to resistance which functioned as service.
On the second picture, notice that there was not a close of price under the low of the down candle, that the low was busted but price failed to close below.
So by just using a line and a fib retracement tool you have a much better picture than you had without. And looking for candles to close over the low coming into that level tells you there's some resistance to some move that is further down.
There are things in my opinion that may help indie a support/resistance degree will hold but ultimately it is unknown until it happens.Originally Posted by ;
Timeframe - S/R on greater timeframes generally holds more weight so when the market comes into these regions it is more likely to hold as opposed to a level on a lower interval
No matter touches - They say the longer prior touches the greater the chance the amount will maintain. From experience you generally get to a max of 4 bits prior to the market breaks through, however after it does this degree often provides a powerful reverse ie support turned resistance and vice versa
Confluence - May make use of things such as Fibs, ATR, convergence/divergence, fashion lines etc to encourage an arguement for a degree however do not get in the practice of manipulating these instruments support exactly what you would like to view ie drawing numerous fibs from multiple swings simply to see whether you can get something to line up.
Price action behaviour to the degree - If you looking for a bounce to go long, has a huge Bearish Engulfing candle or something which indies a strong bearish bias only come into the degree and also possess the probabilities of a fracture increased as a outcome. That is can be especially true if you get a sign on a timeframe that is greater whilst you are taking a look trading levels but yesterday candle is an outside bar - will this 5 minutes degree hold?
Relevancy - What this signifies is how important is the level recently. If there's a solid S/R degree but on the most recent movements the area has no regard (the market has traded up and down without influence) then is it as powerful as perhaps a local level that has.
Stop placements and previous market direction - Having a good step back and looking at the market - what is it currently doing - trending, sideways, forming flags/wedges etc and if you should take a trade where would you place stops and is there a chance that others are going to place stops at precisely the exact same loion. One thing to know about is thinking like a bigger institutional trader and saying where would most amateurs place stops? If you answer is right below a swing then odds are you can get stopped out thus think smarter
Nearby S/R - Be aware that although you might have a solid S/R degree, if there's another degree close by that has a support/resistance argument, you will often find the larger institutions squeeze down to this level in an effort to snare traders who are playing a break of the more powerful level (and who in the process of doing so place their stops immediately above the high/low of the breakout trade), and people who may be playing for a fail. If you've ever seen a solid level get broken, a bounce at a place that appeared to have insignificant support/resistance compared and the immediate run back having a failed fracture then you understand people got played for their liquidity for a bigger institution/s
Hope these help. If I get some time I shall post some charts to explain what I mean by every I shall but just Bear in Mind That S/R like most things trading only demone themselves after the reality so if you are playing entries around them then accumulate as much information to Increase your odds and if you have a trade That's coming to these areas then Take a Look at the trade as a whole and ask the question Can I be better taking profits and re Going into the area if the area does as I expect it, or will I hold and determine what happens
Take care
RT
You need to know the power behind the move as well as the power of this SR..
Simplifying, if a weekly trend is hitting a H4 SR it is less inclined to halt the move.
It as straightforward as OBV
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