[DbPhoenix]

Originally Posted by forrestang »

The range was previously an area of 00-32 or so. And over the past few days we've had some substantial moves down through the 00 area, into the previous range. This has created what appears to me to be substantial overlap and not as clean a big picture as before.

Now price hasn't retreated to far into the previous range thus far, maybe simply towards the midpoint of the previous range at most. Is this cause for concern, or a prompting to redefine the range? Or am I looking into this too much?

It seems like even if one were to redefine the range as I have on the picture below (70-32), the overall levels will still come out similiar as the old defined range, it just leads to a different outlook as to what price is doing. Regardless, the bulk of the trades are still in the upper portion of the range, whichever way you slice and dice the areas.

Does this question make sense?

When price remains in a range for an extended period of time, weeks in this case, you're going to develop multiple smaller ranges within the larger range, some of them persistent, and consequently multiple S/R levels, some more important than others. At some point, one may begin to trip over his own lines, at which time it helps to look past the lines and even the price swings and focus on the VAP distributions. These are, after all, where the bulk of trades are taking place.

In your chart, you have two, and you may be better off looking to those to provide your range highs and lows and "midpoints". They may also provide an anchor, a focal point for your analyses, a place to begin. In any case, they will at least offer a different perspective.

Since we dropped to the bottom of the mother range this morning, the ranges in your chart would seem to be moot. But they will act as support and resistance again as price moves its way back up.

[gaelgss]

This is a great thread but I have one question about the nature of support/resistance.

Support/R can be found in those points at which price has reversed in the pased such as a swing high/low that has been rejected more than once. In the past traders failed to find a trade above/below this price level, hence these price levels could potentially act as support/resistance in the future.

In this thread, traders consider the midpoint of a trading range as potential support/resistance but I fail to understand this. A trading range is non-directional and represents consensus between buyers and sellers, it represents value during a certain period so here comes my question:

Why do we anticipate the midpoint of a trading range to act as support/resistance?

I hope someone can answer this as it has been bugging me for a few days now.

[DbPhoenix]

Originally Posted by gaelgss »

This is a great thread but I have one question about the nature of support/resistance.

Support/R can be found in those points at which price has reversed in the pased such as a swing high/low that has been rejected more than once. In the past traders failed to find a trade above/below this price level, hence these price levels could potentially act as support/resistance in the future.

In this thread, traders consider the midpoint of a trading range as potential support/resistance but I fail to understand this. A trading range is non-directional and represents consensus between buyers and sellers, it represents value during a certain period so here comes my question:

Why do we anticipate the midpoint of a trading range to act as support/resistance?

I hope someone can answer this as it has been bugging me for a few days now.

Assuming you've read Wyckoff's course, do a search of it using "half" and "halfway".

Db

[gaelgss]

Originally Posted by DbPhoenix »

Assuming you've read Wyckoff's course, do a search of it using "half" and "halfway".

Db

What I've found from seraching "half" and "halfway" is that wyckoff considers a 50% reaction to be normal, if the market trends from support at 10 to 20, a normal correction would be a retracement to 15.

It seems to me that Wyckoff talks about "half way reactions" but not necessarily "reactions down/up to the midpoint of a previous trading range"

If a trading range represents value and a great number of trades, wouldnt it be sensible to assume that once price goes back to the range, it will stay there, rather than bounce?

This is what im talking about in case Im not making myself clear, from a chart you posted some time ago:

http://www.traderslaboratory.com/for...ht-image1a.gif

I am new to wyckoff so maybe I need to re-read the course and the day traders bible...


Thanks for your answer and Im glad to see you're still around

[Gary Fullett]

Originally Posted by gaelgss »

This is a great thread but I have one question about the nature of support/resistance.

Support/R can be found in those points at which price has reversed in the pased such as a swing high/low that has been rejected more than once. In the past traders failed to find a trade above/below this price level, hence these price levels could potentially act as support/resistance in the future.

In this thread, traders consider the midpoint of a trading range as potential support/resistance but I fail to understand this. A trading range is non-directional and represents consensus between buyers and sellers, it represents value during a certain period so here comes my question:

Why do we anticipate the midpoint of a trading range to act as support/resistance?

I hope someone can answer this as it has been bugging me for a few days now.

The midway retracement of a market is something that Wyckoff observed in his work. It is not an edge of a market, that should generally allow for a trade. If a market is trending, there is greater probability that the trading range will make a move in the direction of the trend, unless there is action that negates it. For example, if you have a sequence where you can identify the selling climax, the subsequent trading range is more likely accumulation for higher prices versus distribution for lower prices.

Gary



There is a substantial risk of loss in trading commodity futures, options and off exchange foreign currency products. Past performance is not indicative of future results.

[DbPhoenix]

Originally Posted by gaelgss »

What I've found from seraching "half" and "halfway" is that wyckoff considers a 50% reaction to be normal, if the market trends from support at 10 to 20, a normal correction would be a retracement to 15.

It seems to me that Wyckoff talks about "half way reactions" but not necessarily "reactions down/up to the midpoint of a previous trading range"

Depends on what one means by “midpoint” and of what and from where and in what time frame using what time interval and so on. Note here (I've posted the image you linked below) that sellers are unable to find buying interest at the last swing low and the swing low before that and have to go all the way to 1415 (more or less) to find enough buying interest to turn the tide. When buyers step up to the plate in enough force to reverse the movement, they send price back to 1455, a more than 50% retracement, indicating strength. But where does price stop? The midpoint of the trading range. Why?



It's not magic. Most of the trades in that range took place between 1450 and 1460. You don't even need volume to see that. And it's only reasonable to expect a little business to take place if and when price returns there. Understanding this prevents you from sitting there stumped, wondering what traders and doing and why, and not knowing what you should do about it. You can't forecast that swing down to 1415 and you can't predict that it's going to run out of steam at 1455. But you can note that trading range and its midpoint, and when price stalls there on its upward trajectory, you can think Aha! and apply whatever strategy you had planned before the beginning of the trading day, because you know why it's stalled.


Sellers try again to turn price back, but they are only able to accomplish a 50% retracement to 1435, again indicating strength on the part of buyers (an indication bolstered by the fact that price subsequently just hangs there at the top of the range rather than retreat.

Originally Posted by gaelgss »

If a trading range represents value and a great number of trades, wouldnt it be sensible to assume that once price goes back to the range, it will stay there, rather than bounce?

Why? How much money can you make by treading water? Sellers want price to fall. Buyers want price to rise. And each will do whatever he can to achieve that result. Granted you can make something trading the range, but a bigger payoff comes when traders sail off looking for a different value. That is, after all, what trends are all about.

Originally Posted by gaelgss »

This is what im talking about in case Im not making myself clear, from a chart you posted some time ago:

http://www.traderslaboratory.com/for...ht-image1a.gif

I am new to wyckoff so maybe I need to re-read the course and the day traders bible...


Thanks for your answer and Im glad to see you're still around

[gaelgss]

Thanks DB, I think it makes sense to me now but Id like to recapitulate to ensure I have understood this. I am posting this chart as an example of where one should plot S/R (following the method described in the Wyckoff Forum and why we can anticipate price might bounce at these levels)

So, Support and resistance can be found:

1- At a level that has been rejected more than once in the past. In the chart attached, buying pressure exceeded selling presure at aprox. 1.307 and the opposite happened at 1.3220.

2- At the midpoint of a trading range, more accurately, the price level where most trades took place which can be shown using market profile or VAP. When price reaches the midpoint of the trading range, we can expect a reaction from the buyers/sellers that entered a trade at that level, they are traped and will either push prices up or give up/close their possition. These midpoints are represented by a dotted line on the chart, at the present time, we are at a midpoint that may act as support.

When studying Support/TResistance Is this all there is? Swing High/Lows and midpoints (point of highest volume) of a trading range?

I would appreciate some reassurance as I inted to build a trading methodology based on trading of support/resistance.

[DbPhoenix]

Originally Posted by gaelgss »

When studying Support/TResistance Is this all there is? Swing High/Lows and midpoints (point of highest volume) of a trading range?

I would appreciate some reassurance as I inted to build a trading methodology based on trading of support/resistance.

Well, no. Were that it were so simple. Yes, finding the support that is represented by the bottom of the trading range is important, as is finding the resistance that is represented by the top of the trading range. Finding that zone where the bulk of the trades have been/are taking place is also important. In this case, those numbers are 1.3060, 1.3220, and 1.3140 (all +/-). But price also finds support at every swing low and resistance at every swing high within each range. And the number of trades that are occurring during any particular timeframe (month, week, day, hour, etc) will change as you expand or contract that timeframe. The interval you choose (hour, minute, tick) will also influence how those trade numbers are displayed. So, unless you are going to focus on a timeframe of one month with a bar (or whatever) interval of 30m, then no.


But even if you are going to do that, we advance only to maybe. What do you want out of the trade? Points? Ticks? How long do you plan on holding this position? Seconds? Minutes? Overnight? What are you going to do about stops? Are you going to scale in and out or will it be all in and out? And so on.


Yes, it is important to know where S&R are since that is generally where the action is (not only tests and reversals but breakouts and retracements), and midpoints can also be fertile ground for planting trades. But there's a lot more to developing a strategy than this. If you're interested in doing this responsibly, I suggest you click my signature, which should take you to The Trading Journal. You may already be at step three. If all of that is old news, then I suggest you spend some time on the Trading in Foresight thread.


Finding where support, resistance, and midpoints lie only alerts you to where the most profitable opportunities are likely to be. Determining what to do when those opportunities arise is a whole 'nother set of tasks.


Db