Resistance-Support

#1
Hellow,

I am a beginner and am just beginning to understand Amibroker. Please could someone help me in understanding the following?

1. when a stock is near its support level, do we generally buy, sell or hold (when the NSE/Nifty levels are declining or rising)?

2. I am currently using the volume-at-price indicator to locate support and resistance. I am told that this indicator is rather crude. Are there other methods in Amibroker?

Please let me know. If there are threads on these please refer me to them.

Thanks
 

AW10

Well-Known Member
#2
1) Professional traders buy at/near the support and sell at/near the resistence.
Novice traders do the opposit. They sell after price has already fallen and they buy when price has already gone up.

2) There are many methods one can use to find support /resistence (like price action, Moving averages, trendline, fib levels, pivot levels, value area based etc) .People also get support/resistence from CNBC. More methods you know, more support and resistence levels will u see on the chart (and get confused). Solution is to find the method that u believe in and make your strategy around that.

I am sure Amibroker will be able to provide whatever you are looking for. But first, You need to know what you want to find in Amibroker.

Happy Trading
 
#3
AW10,

Thanks for that quick reply. May I ask you another question (answer one question for the beginner and he will shoot back a thousand!)?

What if the sensex is in a downtrend and stock XYZ is resting on its medium/long term support? Should we expect this stock to break its support and go down, and therefore sell off or postpone fresh buying?

What do experienced traders do in such situations?

Thanks again.
 

AW10

Well-Known Member
#4
May I ask you another question (answer one question for the beginner and he will shoot back a thousand!)?
No problem with that. If you don't ask the questions then you will not learn.
They are first sign that you are willing to learn and move beyond beginner level. I appreciate that enthu to learn so I will wait for your 998 questions from you.

To answer your second question, this is very specific situation and professionals will be having their well tested rules to act on such circumstances. There are atleast 3 ways I can think of that people will play it.

1) Aggressive player, might like to put countrarian buy and place close stoploss few points below support level to cut their loss just in case this stock falls. But if Sensex takes a turn then this stock will have strong reasons to move up as it is showing strength when Sensex is falling and not breaking its support.

2) Another set of aggressive player will short it in anticipation with stoploss.
Their reading is, if overall market is falling, then this stock will also fall and break this support. Once support is broken then the buyers who are holding this stock at current support level, will run to cut their loss and hence will sell their position. That will increase seliing in the stock and it will fall .

3) Third set of player will just stand on the side. They know it well that market is always there and there is no hurry to take a trade, as it this is the last opportunity. They will listen to the market and when they see any clear break either bullish or bearish, they will enter in the trade. They might miss few points, but it reduces the risk and gives them higher probabilty of succcess.

So, in short it depends, what suits their personality and what is their Trading Plan.

Novice will have no game plan, no strategy to play such situation and will take position based on their feeling. they will not listen to the market. And if proven wrong, they will find some or reason to convince themselve that they are right and there trade is always RIGHT.

Hope this helps. Happy trading.
 
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#5
AW10,

Thanks for being nice and kind. You know, when you are just beginning it is very difficult to know how much/many of your questions are silly and, therefore, tiresome and how much/many are really genuine. And then, there are some questions one should not have asked because one is expected to get the answers to those by hard homeworking. Your reply put many things in perspective and certain things I have read about begin to make sense now. I begin to understand what "strategy" means.Thanks, again.

To come back to support-resistance: textbooks provide self-evident and easy illustrations. Whereas my own volume-by-price Ami charts show approximate "areas" of resistance and support. Is there a method whereby one can make these areas or zones of resistance/support reveal much more precise levels? TV analysts speak of very precise price levels. One of them even said that the current support level for XYZ is Rs.45 and if that breaks the next support would come at 37 and that if 45 is broken upwards, than the stock would move upto 65 at which fresh review could be made and part of the holding could be sold. On my own Ami charts I could not see these levels, although they fell within the volume-by-price zones. I am very intrigued indeed.

I know that these questions cannot be answered in spurts of mails. But if you or any experienced member could at least give us short tips or lead us to reading materials/sites, I would be grateful indeed.

Thanks again.
 
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AW10

Well-Known Member
#6
begarkitta, Once upon a time, I was also beginner like you. So I know well the kind of questions / doubts come to our budding trader mind at that time.

You will realise later, that there is lot of difference in text book stuff and reality. But Text book knowledge is must to get the foundation right. But before putting that in
Real life practice, be prepared to accept that you will come across certain bottleneck and got to adjust your bookish knowledge.

Please refer to "Teach a man to fish...", "60 minute flow.. " threads started by Saint on this forum (you can also find many other useful threads in Beginner's section of forum). You will find simple strategy (market structure or price action based) to read chart and find support and resistence levels. In my view, do not get stuck with indicators first (I never use the vol-price indicator to find S&R levels..). Start wth price action (i.e. pivot high/low, trend definition use PvtHigh/low etc), chart patterns and candlestick patterns to understand the charts first. Then you can move on to indicators.
Beofre using indicator we need to understand what the indicator reflects, how it is calculated . In next step, you need to decide, how are u going to use that indicator in your trading.

Happy Trading
 
#7
R
No problem with that. If you don't ask the questions then you will not learn.
They are first sign that you are willing to learn and move beyond beginner level. I appreciate that enthu to learn so I will wait for your 998 questions from you.

To answer your second question, this is very specific situation and professionals will be having their well tested rules to act on such circumstances. There are atleast 3 ways I can think of that people will play it.

1) Aggressive player, might like to put countrarian buy and place close stoploss few points below support level to cut their loss just in case this stock falls. But if Sensex takes a turn then this stock will have strong reasons to move up as it is showing strength when Sensex is falling and not breaking its resistence.

2) Another set of aggressive player will short it in anticipation with stoploss.
Their reading is, if overall market is falling, then this stock will also fall and break this resistence. Once resistence is broken then the buyers who are holding this stock at current resistence level, will run to cut their loss and hence will sell their position. That will increase seliing in the stock and it will fall .

3) Third set of player will just stand on the side. They know it well that market is always there and there is no hurry to take a trade, as it this is the last opportunity. They will listen to the market and when they see any clear break either bullish or bearish, they will enter in the trade. They might miss few points, but it reduces the risk and gives them higher probabilty of succcess.

So, in short it depends, what suits their personality and what is their Trading Plan.

Novice will have no game plan, no strategy to play such situation and will take position based on their feeling. they will not listen to the market. And if proven wrong, they will find some or reason to convince themselve that they are right and there trade is always RIGHT.

Hope this helps. Happy trading.
resistance?

I think you mean to say support.:)
 
#9
AW10,

I will go through the material you have indicated and come back. Thanks for taking time to talk to a lonely beginner ("Every quest is lonely, the path lonely too even when it passes through busy streets." -- Budhist philosophy)
 

AW10

Well-Known Member
#10
R

resistance?

I think you mean to say support.:)
Thanks Vanram for highlighting the places where I shd have put Support not resistance.. I should improve my coordination of thought process and fingers/typing to type right word.

I have modified the original post.

Happy Trading
 

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