resistance/support strategy question.

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Nathan
1438
Nathan  

I have thoughts of developing a strategy using resistance/support. The market seems to be this: Ranges within trends. Trends moving up,down or sideways. THE END. :) Entering the market at tops or bottoms of these ranges seem to be the safest way to enter the market BECAUSE of support & resistance. After entering the range, I can close part 1 of the order when the opposite support or resistance is hit by price. Then allow part 2 of the order to continue up/down with the following trend until price has broken through the trends repeating support or resistance. The size of the range does matter. This is because I wish for the size of the range to cover the spread of the currency pair. Any thoughts for developing this type of strategy would be greatly appreciated. Add comments or private message me your thoughts.

Thank you!


dineshydv
171
dineshydv  

Yeh, good thought. May be fractals() & zigzag() can help you in identifying top/bottom. This type of strategy takes time for a trade to materialize and works better on higher timeframe like H1, H4.

Let me know if you need any help in coding...

Ickyrus
881
Ickyrus  
Check the average true range.
Dadas
260
Dadas  

YES, WhooDoo22, you are RIGHT!!!

However, this is not the problem with strategies and automated trading.

The problem is the extremes, when market turns around in the opposite direction than before.

You can, for example, build a scalpel that will scalp 1 Pip and it will be succesful, even for months, sometimes.

But it will not know when to stop and turn around, because noone knows what the extreme will be.

And then, you get Stopout, or you loose most of the profit.

Take EURUSD, for example. A while ago everyone thought that 1.3000 is extremely low.

Reality showed smthg else.

And, on the other hand - Support and Resistance are not always true as well.

Again EURUSD, just a couple of days ago, crossed all the pivots and resistance lines in a couple of hours!

It is not just as simple as that!

I have a setup with quite a number of lines and other indicators that show me the trends and even

recognise breakthrough points, potential breakthrough, that is.

But, how do you know if it is going to actually breakthrough, or retrace?

When it does take a direction, it is too late to place the Order!

Ickyrus
881
Ickyrus  
Look left for previous structure clues - if none - don't trade
dineshydv
171
dineshydv  
Dadas:

YES, WhooDoo22, you are RIGHT!!!

However, this is not the problem with strategies and automated trading.

The problem is the extremes, when market turns around in the opposite direction than before.

You can, for example, build a scalpel that will scalp 1 Pip and it will be succesful, even for months, sometimes.

But it will not know when to stop and turn around, because noone knows what the extreme will be.

And then, you get Stopout, or you loose most of the profit.

Take EURUSD, for example. A while ago everyone thought that 1.3000 is extremely low.

Reality showed smthg else.

And, on the other hand - Support and Resistance are not always true as well.

Again EURUSD, just a couple of days ago, crossed all the pivots and resistance lines in a couple of hours!

It is not just as simple as that!

I have a setup with quite a number of lines and other indicators that show me the trends and even

recognise breakthrough points, potential breakthrough, that is.

But, how do you know if it is going to actually breakthrough, or retrace?

When it does take a direction, it is too late to place the Order!

Well said about EURUSD, but identifying support/resistance is not that difficult. Its mainly price where you see a bounce. The amount of bounce can be parametrized. Forexample a bounce of 30pips or middle candle out-of 5/7 red(green) is green(red)...

1.3 was more like a psychological support. But if suppose price bounces from there than its happens to be technical support. Thats what this strategy should be around...

Dadas
260
Dadas  

So, how about the latest outcome?

Who would have predicted what has happened Thursday, Friday ...

Which indicator, which strategy?

Nonetheless, what a great opportunity, if someone got in right and did not TP too early.

I TP'd too early!

And look at GOLD - 5000 GOLD points in what? 1 hour, or so!

BTW: Try this indicator, you'll love it once you've learned how to use it!

Files:
Dadas
260
Dadas  
dineshydv:

identifying support/resistance is not that difficult. Its mainly price where you see a bounce. The amount of bounce can be parametrized. Forexample a bounce of 30pips or middle candle out-of 5/7 red(green) is green(red)...

1.3 was more like a psychological support. But if suppose price bounces from there than its happens to be technical support. Thats what this strategy should be around...


Ever tried pivots and midpivots? They do work, most of the time.

Of course, it is not just the indicators.

One must have experience, knowledge, listen to the news, know when the news comes...

Also, there is this 50 points Grid plotter, as psychological levels.

But I don't like it, cause it slows down my OldFaithful computer.

Nathan
1438
Nathan  

@Dadas: I would be interested in what you have to write about pivots and mid pivots because I do not have experience using them.

Also, I have added a screenshot to this post that may be useful to some.

Dadas
260
Dadas  
WhooDoo22:

@Dadas: I would be interested in what you have to write about pivots and mid pivots because I do not have experience using them.

Pivot is a point of reverse, so a pivot line is a price-line, where, theoretically, the trend should reverse.

There are Daily Pivots, Weekly Pivots, Monthly Pivots, etc.

You can calculate pivot lines for any period of time.

There are also several ways these lines are calculated.

Then, each pivot line can have Resistance and Support lines.

There are, usually 3 Resistance lines, above the Pivot line.

There are, usually 3 Support lines below the Pivot line.

And, between each, there are Mid lines.

So, you will have:

R3 line----------------------------------------------------------------------------------------

MR3 line--------------------------------------------------------------------------------------

R2 line----------------------------------------------------------------------------------------

MR2 line--------------------------------------------------------------------------------------

R1 line----------------------------------------------------------------------------------------

MR1 line--------------------------------------------------------------------------------------

Pivot line--------------------------------------------------------------------------------------

MS1 line--------------------------------------------------------------------------------------

S1 line-----------------------------------------------------------------------------------------

MS2 line---------------------------------------------------------------------------------------

S2 line-----------------------------------------------------------------------------------------

MS3 line---------------------------------------------------------------------------------------

S3 line-----------------------------------------------------------------------------------------

Now, the theory says, that these lines are important Support and Resistance levels.

And it is often true. Very often, the price goes toward a certain line, croses it somewhat, or not

and then returns. However, they are just indicators, not definite factors.

There are no definite factors in Forex.

I use these lines in two ways.

1. When I first open my chart, I look at the Daily Open line and the Pivot line.

If I see the price above the pivot line from the begining of the day (00:00 GMT),

this is a strong indicator, the trend will be mostly Bulls (upwards).

Also the position of the Daily Open line is important to me.

The other way I use Pivot, Support and Resistance lines is to predict TP levels.

It is often, if the price is going in one direction, it will cross the line it is heading to.

So, it is a good TP level. Then I wait and look what happens next.

One thing to remember is that every next Support/Resistance is weaker,

so the bigger chance, the price will go further.

Sometimes, the Mid lines proove to be very important SR points.

And one more thing: also the distance between the lines is important.

The smaller the distance, the more likely the next line will be crossed.

I am attaching two files you can download and put on your charts to see how they work.

If you would like some more reading, try this link:

https://www.mql5.com/go?link=http://thetrader.hubpages.com/hub/Pivot_Point

Dadas
260
Dadas  

Look at my setup:

Notice, that the day began above the Pivot line (Magenta dotted).

Notice, That the Daily Open line (White dash) was above the Pivot line and the price went quickly above it.

Then, notice how the price retraced after hitting R1 (Red dotted) then the same at R2, and then MR3 proved to be a stronger resistance.

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