“You have given very nice idea for differenciating day trading & position trading. But should have given more information about how you decide the KEY resistance & support level.

Your article would have been perfect.I think without your logic of deciding this key S & R levels,the article remains incomplete.”

This is a comment I got for the “High Probability Setup Article“. What follows are some thoughts addressing this comment.

Again if you follow the line of thought through my last 2 articles, and really take a moment to think through the logic behind support and resistance, it becomes fairly obvious what you should consider.

If we really want to break it down to it’s smallest component, every price movement is a battle between the bulls and the bears. The ’stronger’ of the two will win, pushing the price in their respective directions.

We study charts to see how these ‘battles’ went over time.

So everyday, we can look at the price action for the day, and see where the battle started, how far the bears took the market down, how far the bulls pushed it up, and where it ended for the day.

Now looking at each specific day has only a certain degree of value… that’s why we start stringing together days and weeks and months of price action to see where the ‘major battles’ were made.

So if a major bull run was finally stopped at a particular price point, that price point becomes an important area to watch. The more often a market tests and fails to break through that support or resistance level, the more important it is.

For day-trading along side pivot points, I focus on the previous day’s high, low and close. How prices react around these levels helps me to determine how I want to position myself. Again these aren’t to be done in isolation, and the information I shared in the article “High Probability Trade Setups” explains why.

As we move to higher and higher timeframes, we must look to higher timeframes to find our support and resistance levels. I’ll illustrate this in a future article, as I don’t have a chart prepared at the moment to demonstrate this.

Are there hard and fast rules for determining support and resistance levels?

Yes and no.

I’m sure there are proponents on both sides of the fence. While on one hand I look at them as guidelines, on the other I believe they must be objective enough to consistantly apply to the market… a paradox… welcome to the world of trading

Continued Success!

Ray

Categories: Trading

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