Support and resistance

Negated swing trading system or entering the break of a wave after a pivot point.

A highly successful trading pattern is to find situations where price is violating a pivot point convincingly, as there are professional traders and automated trading systems out there watching the markets like hawks to find exactly these hot spots of price action. If the price breaks through the line of a just successfully confirmed support or resistance after having started going the other way, serious traders become active. This is one of the big trading signals for said professionals. All experienced traders, be they trading for themselves or for banks, financial institutions or funds, adhere to the concept of support and resistance. If this concept is violated it signals them strongly to do the opposite.

This price violation can come as a breakout after a false breakout at the other side of a trading range or as a disruption of a turning of the wave. You have to do sort of negative swing trading. The moment ordinary swing traders move in, the wave breaks and the trade begins to look not only bad but catastrophic for them, is the signal for the successful trader to bet on the opposite direction. In such situations even market makers, the ones who normally increase market oscillations by driving prices artificially up and then suddenly turn the tides by selling at top prices and ride the wave down and vice versa - all in all a counter cyclic behavior - jump with market orders into such a wave disruption


One special trick of market makers to get out of a position is to initiate the swing not to ride it up, but to dump a wrongheaded position into its very beginnings. Chances are good that there is some more fundamental reason for them to do so. A disrupted swing can have of course any other cause like e.g. breaking news or a market which has simply more potential for the other direction. The power of this trading pattern lies in the combination of strong thrust and further potential.

There are these scenarios of a safe trade, a trade with a very good win to loss probability ratio. But you need to have discipline in order to enter only the market when price action looks good, when there is a real trading signal, a high probability pattern with an expected gain much bigger than the possible loss and not when you think you need the next trading chance.

Forex   Under the millstones of the banks
Futures  Hoping for the trend and finding chaos
Options   Above average? You will still lose!
Stocks   The negative-sum game for investors