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Eiger, thanks so much for posting that info on S/R. I have been working on coming up with a method of just trading VSA/PV when it comes into a "relevant" area of S/R. If you don't mind sharing do you place more weight on high and lows for a given time frame or the number of times an area has hit a certain area. For example, past price action could take out a trading zone by a few ticks and then fall back into the previous zone. Would you place more weight on that new high or the zone with many hits? Hopefully, my question makes sense. I would post a chart, but I am on relative's computer for a few days. |
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Hi Dan,
I place the most emphasis on the daily highs and lows. The market will trade around these areas quite a bit. I don't really think too much about how many times price has hit a specific level in terms of weighting it more or less important (though obvious, major congestion areas are unlikely to be penetrated on the first try). Instead, I focus more on the tape action as price comes into one of these areas. I do not try to get the high or low tick if i am looking to sell resistance or buy support. I am more interested in taking a trade with confirmation than getting the very best price, so I am happy to wait for that confirmation. Usually, if I am focused on getting the very best price, i am ignoring something else that is important, and I always seem to pay a price for that.
What I do think about is when price breaks through a given level. Support and resistance are opposition. When price breaks through the opposition, the odds are very good that it will continue in the direction of the break through. I am then looking for weak rallies or reactions to take a trade in the direction of the break through. Those are high odds trades. And, if the market gods are favoring me that day, price will come back to test the opposition area
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Wyckoff originally talked about this using the analogy of dams. He said that engineers don't build dams right next to one another. So when the dam breaks, there isn't another dam right behind it to hold back the water. Same with price. Once it breaks through the opposition, you can anticipate continuation.
Eiger