[weiwei]

Now this logic would not be completed without knowing how pro traders dose things.

I personally met a few traders working for big companies. they all made very good living earning their pay check and commissions from those companies.

Once they made that big $$$$, they live very comfortable life, which takes a lot $$$$ to maintain it.

what dose all these mean? that means they must perform, so at end of each month, they can collect that bonus to support their life style.

To perform simply means to make money for companies they work for, and they can do what they can to a limit, usually the risk control department come to tell them to stop.

And btw, they are not smarter or more displine then individual traders, one of edge they have is that some one else is force the displine for them.(risk control department). and the other is the amount of contract they can trade.

After I put all these together, then what I posted was my observation.

weiwei

[weiwei]

Now my conclusion on why support become Resistance and vise versa.

Using my pic as an example, to break that R level, it takes a lot of $$$$, commitment , and your job on the line. Once those pro traders able to push higher, they sure will defend their profit when it is challenged again, because they would want to get that bonus at end of each month.

weiwei

[walterw]

Bright Bright Minds ¡¡¡ thanks for the explanations, they all make sense..
cheers Walter.

[ItalianSharp]

When a breakout takes place, you got different types of traders participating in it:

1) Those who are stopped out

2) Those who enter at BO

3) Those who fade the BO

4) Those who wait for confirmation and/or retracement before getting in

Breakouts often generate spikes because of the many orders placed around those areas.

Soon after a BO markets usually lose momentum or volatility...this is due to profit taking and prices becoming less attractive because of overbought/sold conditions.

This is why markets often retrace to the BO level...that was the level where most of liquidity was, and the big players must place their bets in highly liquid areas to keep slippage to a minimum.

I also believe that since markets move within blocks or key areas, they re-test a prior area before moving to the next one...just to make sure that the BO was for real and not a fakeout.

[jperl]

The idea that support becomes resistance and vice versa is in my opinion not a good description to use. It gives the impression (often false) that when price moves down (up) to one of these points, it will bounce back up (down). So what are support/resistance points? They are points where the price action PAUSES, before either moving on in the same direction, or reversing. There is usually low volatility at these points and so they represent a good place to either exit a trade if you are in one, or initiate a new trade. The direction the market will go in from these pause points will of course depend on other factors.

Looked at in this way, s/r points then become decision points for you the trader.