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bull market. Since this book is a reflection of how I think, you will need to understand that when I mention "support" it could be in the context of either a bull or bear market. The same is true for "resistance." When I think of a trend, I see it in my mind's eye as consisting of two forcesthe buyers and the sellers, or the bears and the bulls, or the forces of supply and demand, or the white stones and black stones from a GO board. Neither force is morally superior to the other; they just exist. Regardless of how you represent them, there will always be two forces, one that is dominant and one that is submissive yet rebellious. The dominant force will have certain price levels that serve as support to continued advancement, and yet other price levels that act as resistance to advancement. |
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In other words, resistance for the bulls is a price level that the bulls have a difficult time getting above. Resistance for the bears is a price level that the bears have a difficult time getting under. Support is a price level that the bulls retreat back to, and find the support of more bulls willing to buy at the lower price. Support for the bears is a price level that the bears can retreat back to, and find the support of more bears willing to sell at the higher price. A resistance price level for the stronger side is a support area for the weaker side. I fully understand that this view is totally different from the view of most traders. I arrived at my perspective after playing a lot of GO. |
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Occasionally I will say that if a price is violated, then the stronger force just lost. This is best described by an example. Suppose the current price is 100 and the bulls have established 98 as a support level. If the bears close under 98, then I would say that 98 was violated and the bears are in charge. Most of my methodology is based on the close of whatever time frame I am trading in; consequently an intraday price of 97 and a close of 99 would not count as a violation if I am trading off daily charts. While this may seem elementary to some readers, the concept is critical. |
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The truth is that all traders see the same prices; however, their perception of what those prices mean is different. All traders see the price move up and then down, but the meaning they attach to that movement is different. The truth of the matter is that the meaning you attach to the price movement is determined by your perception. Your perception is influenced by your beliefs, values, and physiology. Your beliefs and values are determined by your experiences or references on what this price movement means to you. |
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For example, can you remember the first time you ever saw a price chart? When you saw that first chart, were you aware of what a retracement was or what a double bottom was? Did you know what support or resistance was, and what it signified? In all probability you didn't have a clue. When I first started trading Eastman Kodak, DuPont, and IBM stock back in |
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