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I'm trying to understand a bit better all those lines drawn on your chart, but they are still confusing. I thought I had a reasonable idea to identify support and resistance, but now I'm not so sure anymore. I only trade the ES, but I had a look at the NDX recently because all of your charts are that market and I'd like to understand the concepts better.
So here is my question: if I look at last couple of weeks it seems 1765-1770 is more important. That level was "tested" (hope I'm using the right terms here) twice on the 25th and another time on the 26th where it started to rally big time. Then on the 29th it seemed to find support there, but then fell through.
Then today (just now) we seemed to find resistance around 1765, which coincides with the earlier levels. |
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As I explain in the "Springboard" post to my Blog, the "zone" is found by determining the greatest quantity of trading activity over the period under consideration. It's general, forming what is more or less a bell curve. One can narrow this down to get an equilibrium level, or widen it to find the limits at that time for support and resistance. The entire zone, however, provides its own support or resistance once price leaves it.
Within the outer edges of this zone, there will be "levels" (see above chart) where tests have occurred. These aren't as important as the zone in its entirety because they don't represent much trading activity. The more these levels are tested, of course, the more trading activity. The more trading activity, the more potential S/R. What matters is not that they guarantee turning points but that you're aware of them before trading activity reaches them again.
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That's another question I have. Last couple of days you said something in the line of "today that seems to be...". So this is confusing me, how can you make real time decisions if price is finding support at different levels each time? 1750-1760 is 10 points wide, and although I haven't really a good idea about how wide a stop should be no the NDX, this seems like an awful wide zone to trade from. 5 points on the ES is already wide for my risk threshold  |
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Locate the most likely S/R zones and levels ahead of time, then study what happens to the trading activity if and when the zones or levels are reached. These zones and levels and points are not guaranteed. That's the purpose of trading RT rather than putting in your orders and going to the movies.
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Btw, how do you manage to show those images inline in the post? |
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Use the image icon in your toolbar and supply the url of the image you've uploaded.