Friday 15 April 2011

Thought for the day:Are all support/resistance trend lines created equal?













It is often said in books that traders believe all S/R lines are created equal from the point of view of their power to halt the path of price. In my experience this is not true and i have consistently put forward my theory that the higher the time frame the greater the strength of the line. So it follows that a ML or RL has a proportionally greater effect the higher its TF origin.
The angle of lines is particularly interesting and i have been looking at this problem for some years and have noticed the effect of a shallow 45 degree RL/ML is greater than a sharper angle -however the angle of any line changes depending on what time frame it is viewed in.
In Dr Dologa's second book he states that the power of a line is strengthened by sharing:
1.Old Highs/lows ( ie major pivots)
2.All time highs/lows
3. fib levels of.38,.5,.618
4. Round number such as 1.4200 or 1.4000 ( say for the EurUsd) and to a lesser extent .50
5. The ML of a high time frame
6.MPL's
7. Chart patterns.

he states that efficiancy of any line (ML/RL/WL) is increased by at least 50% by any of the above.
Multi pivot lines are i believe nothing more than RL, ML's from higher TFs and i have been able to usually find most of them. The horizontal ones usually emanating from a high TF forks that when viewed in say 60 or 240 min appears horizontal- The copper chart (240min) above is an excellent example of this phenomenon as no one would say the angle of the forks in the daily/ weekly chart is horizontal, would they?

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