BEST Algorithmic Supports and Resistances
What are the included Supports/Resistances
Simple Moving Averages MTF
Q: Are they all useful and be all considered before a trade entry/exit?
A: Absolutely YES!
Q: Are they all equally strong (in term of probability of reversal)?
A: NO. Each simple moving average (or SMA) has an attributed value and timeframe (example: SMA 100 W). Here 100 is the period length and W (weekly) the timeframe.
Those 2 levels (period length and timeframe) provide all we need to know regarding how cautious we should be when entering/exiting.
Q: What are the strongest SMA(s)?
Strong meaning here that the reversal probability after the first hit(s) is likely.
A: Glad you're asking this awesome question.
As said before, they're all important. But, the big timeframes (>= H4) are usually stronger.
The timeframe combined with the period length help us figuring out if:
- we should reduce our position sizing?
- we should decrease (or totally cancel) our leverage?
- we should take the trade or not.
Imagine buying a big timeframe resistance at the first touch on a Friday night 😃
Q: How do we take profits on them?
A: That's the tricky part. Sometimes they'll hit those SMAs, sometimes will come close to them (without a physical touch), but will reverse anyway.
There is no way to predict what's going to happen, and we don't have a crystal ball.
✋ That's why we give ourselves a bit of
error margin and setting our TPs a bit before the SMAs.
Q: Can we know where it will reverse when there is a cluster of multiple SMA(s)?
Short answer: no
Better answer: Otherwise trading would be too easy for us mortals.
Our method provides some capital and life saving guidelines though:
1. ✋ For an entry signal given right near a SMA MTF, wait for a pullback
2. ✋ If we touch it for the first or second time, wait for a bigger pullback
3. ✋ If the SMA timeframe is important, really wait for a bigger pullback if possible.
Q: Do we need to apply lower S/R timeframes on a bigger chart timeframe?
A: Not needed at all indeed. If you're charting with 5-minutes periods/candlesticks/bars, then only the SMA(s) with a timeframe >= 5m should be used.
Q: Do I only take profits on those S/R?
A: This is not our role to answer this question as it depends on:
- your performance goals for the day/week/month/year.
- if you'll be able to monitor (even if using some automation and trading bots).
Our BEST practice is to set a trailing stop once a price movement is going in the expected direction.. The art is... not activating it too soon nor too late.
We provide more guidance for our subscribers to master this subtle "art".
Pivots Standard MTF
Q: Should they be used on top of the SMAs MTF for the Algorithm Builders frameworks?
For intraday trading (TF < H4), we use the Pivots Standard Daily.
They're very pertinent TPs levels and safeguards also.
✋ There isn't a concept of strengh/period length here (unlike the SMA(s)).
Though, the candles very often hit and reverse in the short-term on them.