Support and Resistance

2021年3月24日

There is no magical tactic or indicator to "see" the support levels on a chart, but how do astronomers know a black hole is around without seeing it? They use their brain.

There are several types of support/resistance, the obvious ones, and the less obvious ones, and which ones do you think separate the bottom 95% from the top?:
- Horizontal price level (Bitcoin 9000, 6000, 3000)
- Diagonal price level (trendline)
- Moving averages self fulfilling prophecy
- Constant flow of positive news
- Sovereign fund buying or selling (CCP bags) program
- There is more, up to us to find it, good luck



In my weight gain & weight loss example what supports the increase and decrease?

You cannot predict what exactly that person will eat everyday, if someone will drop them home or not,
how much they will walk, if they hear in the media about a "science" paper claiming chocolate is super healthy.
Those are all random factors (to us puny humans), they are part of the normal day to day fluctuations.
Mere mortals including the best know those fluctuations happen but do not trade them, only daytraders do.

The weight has some support during the visible uptrend. This support is the regularly added calories from the weekly pizza.
Exact same as an institution running an algo to buy shares by increments every week at the same hour (that you could scalp).

On the weight loss period, there is a resistance, which is made up of the every other day walk home and the lack of pizza.
Yes mostly the resistance here is not something but the absence of this something!

So while predicting with precision is not possible we can enter on what we consider 2-sigma oscillations for example.
If we bet on the early "reversal" being just noise with a stop at 3 or 4 sigma we get an asymmetric risk to reward.
The average casual investors (and Bill Ackman) are the ones betting on the 4-sigma "never give up! strong hands! we will win! the power of love!".
4 sigma is human nature (for most people), also not understanding probabilities intuitively is. But I'll make a separate idea about that.
Skilled investors not only exit but even if a trend starts with good support (fundamentals + visible with technicals) they will join the new trend.
But careful not mixing everything. "4 sigma" meaning very low p of being noise in the original trend does not mean high odds of opposite trend.





So this is it, to estimate what supports the price the smart market speculator has to work as a detective, find clues, and as a statistician, put these clues together with p weights,
add potential clues with their own p weights.
How can novices possibly imagine they can use "TA" to magically find these supports, they really expect some big red flashy arrows on the chart that anyone can see?
It's so delusional. As detectives they'd expect the killer to scream "I DID IT! I AM HERE!"?
And of course get a big paycheck for their work as a detective. This is not a video game.