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If you're going to have important S/R on the weekly at 1800, it's going to be there in every other timeframe as well. Other S/R levels will reveal themselves as one travels down through the timeframes, but he isn't required to trade every last one of them. |
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How do I identify important support or resistance levels intraday? I often have no problem identifying support on a higher timeframe, but these "zones" are too wide to trade of really. Like you show on your chart in the PDF files there are macro levels which are relatively easy to identify. But these zones are extremely wide when you plot these lines on an intraday chart.
I don't know about the NQ but on the ES for example I see zones as wide as 7 points that offer support. Often I see price reacting to these levels during the day, but sometimes it's on the upper boundary of the zone, other times it's on the lower boundary. But using stops that are wide enough to compensate (> 7 points, so around 10 points) on the ES isn't very useful when the market on a daily basis moves around 20 points. What happens to me a lot is that I take a long trade from support on decent volume, only to get taken out because price finds support 15 minutes later 3 points lower and then reverses.
Other times it looks as if I got the entry near-perfect on the lower boundary of a support zone, but price breaks support and immediately travels back into the range. A false break in a matter of speaking. When I look on a higher timeframe (30minutes or so) then I see a nice hammer-like formation forming. But on a 3 or 5-minute timeframe (which are the ones I use most of the time) this isn't visible, let alone on a 1-minute timeframe. |
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If the macro S/R forms a range that is consistent enough and wide enough to trade, then you'll have S/R also within that range (see my Blog post on Support & Resistance and Trading Trend). Sometimes price will, for example, drop to a previous support zone and bounce nice and clean, creating those lovely swing points that always wind up in books and articles and video presentations. But it is the nature of support zones that they are created by previous buying. When price returns there, it wants to know if that demand is still there. This usually takes time. And sometimes it means probing around in there to find that demand, like probing the hole in your mouth where your wisdom tooth used to be. This is where the lower the bar interval, the better, so that you can see the push and pull directly and not in summary. But that's not something I can explain to you in a message board post. Perhaps someone more talented and skilled than I can. In the meantime, you just have to put in the screen time.
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I start with the macro, as I show on p 50 and following in the PVSR pdf I posted to my Blog. Then I work my way down to the more minor S&R levels. On my chart, I use lines of three different thicknesses, the thickest being reserved for major S/R that's lasted for weeks or even months, the next for S/R that's not quite so important, then the thinnest for what has been S/R only now and then and hasn't been terribly reliable but has also provided some excellent entry/exit signals (most often I find that what looks like minor S/R is actually something more major that I just overlooked; if I go ahead and plot the line, I'll notice other consistent levels over past days that just never registered with me). I also use three different colors for support, resistance, and the midpoint (what Wyckoff calls the equilibrium level [similar to what MP calls the POC]). This may seem to others like unnecessary busy-ness, but it helps me to see at a glance where I am while also avoiding a double-think at a time when I don't need to be doing that. |
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If you plot these three different kinds of S/R, don't you have lines drawn all over your chart?  In some of your earlier posts on ET you had charts with "important" levels such as the previous day high, low and close... If I understand correctly you've changed your stand on some things you posted in the past. Does this include things like PDH? In my own trading, I used to draw lines around the PDH and PDL ànd use S/R from a higher time frame, say an hourly chart. Sometimes I'd get really nice trades off these levels from the previous day, but my frustration comes from not knowing what or how to do when I have a line drawn on say 1358 from the previous day but also two lines that identify support between 1345 and 1355 where important support is. |
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Back in those days, nearly everyone traded stocks, and the PDH and PDL and PDC can be and often are important. Stocks also often gap between the PDC and the open. But nowadays, a great many people trade things that don't close (unless the market literally shuts down) and often make their highs and lows outside RTH. Therefore, "day" begins to lose its meaning, and one can't rely as much on those swing points as he used to, anymore than he can rely on the "trading clock" or that mid-lunch reversal that was so dependable for so long.
But as for the number of lines, yes, it can get out of hand when we're stuck in a hinge as we have been in all the major averages for the past six weeks. And sometimes price reacts against an S/R level that you didn't anticipate. But that's trading. The only guarantees are those provided in courses and seminars.
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I haven't studied FX so I don't understand it particularly well, nor do I understand the people who trade it. Without any of that, I'm flying blind, and why bother? And not having volume doesn't make things any easier. But if someone else wants to give it a shot, what business is it of mine? |
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I'm not particulary interested in FX, but I do want to know what I can do to understand the people who are trading an instrument. What do you mean by that? Getting to know actual traders? Are people that trade the ES different than those who trade the NQ like yourself? |
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Not actual traders but the thinking behind the trades of those who choose a particular instrument. YM traders, for example, seem to like it because they think it's cheap, and they think they can use tight stops and lose less. Of course, none of this has anything to do with how much money one makes trading the YM, or even whether or not he makes any money at all. But these things crop in posts I read that are written by one trader or another.
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The ES has always reminded me of an old lady. The NQ is something more of a hell-raiser. The YM is something of a new guy who's trying to become one of the cool kids, but they haven't reached the point of letting him sit at their table at lunch. The ER is something of a toddler who can't make it from one end of the room to the other without banging into everything along the way. |
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I don't know if I understand your analogy completely. With an old lady do you mean it moves slowly? Because when I look at charts, there seems to be a striking similarity between the ES and the YM a whole lot of the time. The NQ and Russell seem to follow a path of their own. Anyway, I've focused my efforts on the S&P, but I take it you see the market a trader picks irrelevant as the same principles would be valid amongst all markets, right? |
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The same principles apply to all auction markets, but that doesn't mean that all markets are the same. The same principles apply to all home construction, but not all homes are alike.
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Yes, it would be. I didn't because I was tired. When I get tired, I tend to do stupid things. I don't have to make the maximum number of points every time I trade. The market's there every day. |
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Isn't that an emotional reaction to trading? You say the trade would be valid but you didn't take it because you were tired. I'm convinced you know what you are doing, but how does a trader know when to quit? Should he quit after the first winning trade? The next three days he might have all losing trades. If you can make it a winner the first trade of the day, than that's fine I guess. But most of us probably don't manage to do that. |
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Being tired is no more an emotional response than a headache. And a trader stops trading when he can no longer trade his plan properly.