AusDoc's Horizontal Line Toolkit: Anticipating & Detecting Support & Resistance

Discussion in 'Indicators and Charting' started by AusDoc, Jun 12, 2014.

  1. AusDoc

    AusDoc Well-Known Member

    Joined:
    Apr 24, 2014
    Messages:
    1,074
    Whether or not you agree that support and resistance (S&R) are key or foundational to trading, you neglect these concepts at your peril. They are very important. Most traders I've met, and all beginning traders, could improve their performance by developing a sound understanding of support and resistance and how to make the most of identified levels.

    I firmly believe that the best tool you can add to your understanding and insight is a simple horizontal line. Learn to see S&R and manually add the lines. Such effort pays handsomely.

    However, some additional tools can prove very useful. They are common enough and can be found almost anywhere. This collection from my toolkit just contains a few little enhancements or ideas about how you might go about adding them to your approach. Some of these tools are best used for locating S&R (sometimes with astonishing precision) while others are so basic and useful as to be regarded as essentials. All can prove useful as aids to study and development, concepts and disciplines that regrettably too many find an instant turnoff.

    The tools here cover the following:
    • Big and mid figures (aka round numbers or psychological levels)
    • Institutional levels (really a nuanced version of the above)
    • Floor trader pivots (with multi S&R levels, daily, weekly & monthly)
    • Previous high & low & close (daily, weekly, monthly) & a weekly open!
    • Previous period Fibonacci levels (daily, weekly, monthly)
    • Gann octaves as Murrey math levels (two versions)
    For a sense of completion I will also include links to my previously released versions of ICT's CDR indicator. The CDR, however "insightful" and mysterious in origin, is just a specialised support and resistance tool.

    Oh, and for those who don't like to read, don't worry, I'll include pictures. :p For everyone, (including those who neither read nor look at the pictures) all the links are at the end of this post. :)

    The famous big and mid figures tool is incredibly useful. It recognises the significance people attribute to so-called round numbers. Price will frequently react at or be attracted to these numbers. Indeed, this happens so frequently there appears to be a distinct behavioural response to them, hence the alternate name, psychological levels or psych numbers.

    This version weights the lines as big figures become rounder and gives control over colour, style and measurement of what you want to consider as mid figures. It also allows you to displace the right hand end, freeing it from the edge of the chart. Sometimes in MT4 the price scale can get a bit cluttered and difficult to read so you can pull these lines away from the edge. You can then optionally add a price tag for clarity, if needed. Some illustrations follow.

    The Basic Tool
    [​IMG]

    Same Tool with Displacement and Price Labels and Different Mid Values
    [​IMG]

    The next tool is a little superfluous in that the above has already illustrated that the so-called institutional levels can be marked with suitable settings in the big and mid figure tool. Nevertheless the next item is the Institutional Price Levels tool. Technically the 20 and 80 levels have come to be known as institutional levels because of the perception that big institutional traders habitually target them.

    This concept of institutional levels is interesting. Oddly enough, if institutional traders did indeed always trade to and from these levels in order to make them work, they wouldn't work! In truth, their name reflects more about myth than reality. Nevertheless, enough big traders focus on these levels enough of the time to keep the myth well and truly alive and it is wise to keep them in mind.

    On this note I have to mention the 40 and 60 levels. These are increasingly being found to be just as significant as the traditional 20 and 80 levels. As Chris Lori points out in his "Trading & Taming the AUD/JPY" course, the Yen pairs love all of these levels. If you trade any JPY crosses the following tool may become your best friend.

    Note that this tool can also be pulled from the side and have price tags attached, just like the tool above. The following illustrates such as configuration.

    The Institutional Levels
    [​IMG]

    So why bother with two tools that do much the same thing? Well, I developed them some months apart using different coding approaches and they gradually tended to converge as features were added. Now I tend to put both on my charts as shown below. At a glance I can quickly see what price levels the market is playing.

    <aside>
    <aside ends>

    Combined Default Big & Mid Figures and Institutional Levels (not sexy, just effective)
    [​IMG]

    Now up above I generously promised:
    • Floor trader pivots (with multi S&R levels, daily, weekly & monthly)
    • Previous high & low & close (daily, weekly, monthly) & a weekly open!
    • Previous period Fibonacci levels (daily, weekly, monthly)
    ...and all of this has been squeezed into a single PivotsPlus indicator, version 2.

    This is a very powerful tool and should come with a "Keep out of reach of children" warning, but I'm happy to let you fly it. Just be aware that it comes with more switches and panel lights than a jet airliner and you will need to invest some time to get your endorsement. Put in enough flight chart time and you'll be an ace in no time.

    Here is one view with lots of things turned off
    [​IMG]

    Here it shows the out-of-the-box Default (which no one should use)
    [​IMG]
    ... for obvious reasons. Labels are so ugly. I suggest you use labels sparingly while you learn and when you're happy with your configuration dispense with them, or at lease seriously restrict them. To me, they are just clutter.

    You may not be familiar with the prior range Fibonacci levels. For each prior range (day, week or month, as the case may be) the levels are calculated as follows.

    Get the range (that is, the distance in pips between the high and the low). Then provide a line at:

    High + range x 0.618
    High + range x 0.382
    High - range x 0.382
    Low + range x 0.382
    Low - range x 0.382
    Low - range x 0.618

    Try them out. They are every bit as good as any other pivot system. Some say even better.

    A special feature you should seriously consider using is the Weekly Open. You can set it independently of all other settings. The default configuration has the prior weekly Closes turned off just so you can't miss the weekly open. If you don't like it this way, no problem, you're the pilot. 8)

    Next up are the esoteric Gann octaves or Murrey math levels. You do not need to be a Gann disciple or a student of Murrey. In fact, you can use these rather clever levels with no prior knowledge of such things at all. They will work just the same. Give them a try. They will probably reveal some S&R levels that you missed seeing.

    Here is one version
    [​IMG]

    You know I don't like to have an indecipherable mess on my price axis so you can treat this tool like the big and mid figure tool, as you can see here.

    Displaced Lines with Optional Price Labels
    [​IMG]

    You can move the text or remove the text, as you prefer. I have also made a version in grey (yes, that's gray for some of you!) because I sometimes set up charts on which I don't want all the "noise" of colour. This way saves having to manually reset every line's colour.

    Here is the grey version without the lines displaced.
    [​IMG]

    Both above versions allow you to change the colours and the line styles but some thought has gone into this so most people will be able to just leave the default settings alone. However, you can set the analysis to any time frame, regardless of the one on the current chart (which is referred to as 0, the default). You can also set the number of periods to use in the calculations (the default is 256).

    One suggestion is to set 256 on time periods at or above H1 and 64 on periods at H1 and below. Yes, H1 is a bit ambiguous, so experiment. You can, of course, choose any number and use it on all time frames. Do some research.

    This is what the settings look like.
    [​IMG]

    The next tool is an all time frame version. Just set how many bars or periods it should analyse (default 256) and it will tell you what the levels mean on multiple time frames. You did know that smaller periods fit within larger ones, right? So within any period the price action can be at different phases of each fractal or time slice. If you can't think in multiple dimensions don't fret, just let the tool do the heavy lifting.

    Here is an example.
    [​IMG]

    Finally we have a couple of versions of the CDR tool. These are not in the league of the above and are not really in my personal toolkit but I developed them to make them easy to study and evaluate. My research found the CDR is no more accurate or reliable than other tools I already use and I don't need it to support my methods but it may prove very useful to those attempting to closely emulate ICT.

    Note that ICT regularly refers to this tool quite incorrectly as showing standard deviation. Anyone who understands mathematics or statistics knows that he must be understood as talking colloquially. ICT has proven himself to be a good enough technician and trader (not to mention all round good bloke) to be forgiven his few peculiarities.

    There is a version that cannot cope with bridging days but is evidently useful on some index charts. A second version handles crossing over zero hour UTC with no problems. No pictures but links below.

    Right then, that's it for now good people of FXGears. Remember to think, your brain improves with regular use.

    Here they all are some! The rest in a following post, the forum software reckons I can't add any more to this post! (I don't think the software can count to 5120KB)
     

    Attached Files:

  2. AusDoc

    AusDoc Well-Known Member

    Joined:
    Apr 24, 2014
    Messages:
    1,074
    The rest...

    Enjoy :)
     

    Attached Files:

  3. sqa

    sqa Village Scribe

    Joined:
    Jan 29, 2014
    Messages:
    2,201
    Thanks AusDoc!
     
  4. AusDoc

    AusDoc Well-Known Member

    Joined:
    Apr 24, 2014
    Messages:
    1,074
    You're very welcome sqa. I hope you find something useful.
     
  5. rod178

    rod178 Well-Known Member

    Joined:
    Jul 16, 2013
    Messages:
    3,117
    Have you found MML at all useful? I've always tended to dismiss it, as I do numerology.

    https://www.bigmiketrading.com/traders-hideout/20540-w-d-gann-murrey-math-white-elefants.html

    PS - serious question
     
  6. AusDoc

    AusDoc Well-Known Member

    Joined:
    Apr 24, 2014
    Messages:
    1,074
    Yes. It is effectively just as useful as floor trader pivots and can be used in exactly the same way.

    The standardised pivots system is based on a purely arbitrary way of dividing up price from a prior period to project anticipated levels into the future. It "works" essentially because a lot of market participants use the system to measure moves. It contains zero additional theoretical foundation but that doesn't stop people using it without question.

    MML is more questioned precisely because it does have a theoretical rationale underpinning it, which offers something to debate. That debate however, IMO, is a complete waste of time. Those who are "into" Gann and more latterly Murrey will always see something in it that those who are not, won't. The two sides of the debate seem to me to attract two different types of people and they will never see eye to eye so I'm happy to leave them to it.

    I studied Gann's work for some time and found it quite interesting but unnecessarily shrouded in mystery. He was a brilliant analyst and very creative. Some of his ideas were rather off beat but he has been unfairly dismissed in whole because of some anxiety he causes people in part. I eventually dropped all things Gann simply because it is hugely complex, far too tedious and laborious for fast-paced markets in the modern era and ultimately completely unnecessary. If one can achieve the same or better results in a very simple and easy way it is lunacy to go a more complex and difficult route. Of course there is no shortage of "lunatics" :D

    As I said above, the MML tool can be used without any reference to Gann or Murrey. One can approach its use as blindly as one does a pivot tool. In one of my parallel lives I'm a scientist and like you, I dismiss numerology. As a scientist though, I don't join the religion of fear and loathing like some who reject MML and instead am quite happy to suck it and see, to use the tool, make observations regarding its usefulness and generally rely on the empirical method.

    Approaching it with an open mind I have found it to be quite useful. That is probably as much a tribute to Vladilav Goshkov as it is to Gann or Murrey! I use it only sometimes. I find it interesting to use two copies with different settings on the same period chart as a way of measuring moves and I usually discover the bonus of accurate S&R.
     
  7. rod178

    rod178 Well-Known Member

    Joined:
    Jul 16, 2013
    Messages:
    3,117
    Thanks for the detailed response. I had a look at Vladilav Goshkov's indicator(s) some time ago, which is what originally introduced me to MML. I suppose the bottom line is that the basic premise upon which MML is built upon goes against my core beliefs ie there is a lack of convincing evidence. Additionally, the fact that not many seems to use MML makes their effectiveness somewhat suspect. ie a major reason to incorporate Fibs and Pivots is that they are watched by many.

    Like a lot of stuff (including Astro, Numerology etc) it can always be 'found' to work if one 'looks' hard enough. A round peg will also fit into a square hole some of the time, a 'perfect' fit if one squints hard enough.

    As for Gann - 'don't get me started!! I've met several 'successful' Gann 'experts' over the years and was not impressed with what I saw in the carpark.
     
  8. AusDoc

    AusDoc Well-Known Member

    Joined:
    Apr 24, 2014
    Messages:
    1,074
    Hey, no worries, you said it was a "serious question" ;)

    It's interesting to see "beliefs" used in this way, founded on "convincing evidence".

    Ha, yes. So true. A mental hammer can come in handy too.

    Oh yes! I know just what you mean. Not just Gann experts either... ;D
     
  9. rod178

    rod178 Well-Known Member

    Joined:
    Jul 16, 2013
    Messages:
    3,117
    The other option is religion and substitutes
     
  10. AusDoc

    AusDoc Well-Known Member

    Joined:
    Apr 24, 2014
    Messages:
    1,074
    Pivot Tool Update

    This is a minor update to the pivot tool.

    [list type=decimal]
    [*]Changed fibo labels - if you switched them on you know they were too long and ugly
    [*]Added option to set colours for the fibo labels
    [/list]
     

    Attached Files:

  11. AusDoc

    AusDoc Well-Known Member

    Joined:
    Apr 24, 2014
    Messages:
    1,074
    Update to Institutional Levels indicator

    This is an update release to address an issue with display periods. Previously, whatever periods you may have set in your standard settings window the indicator displayed in all periods from D1 down regardless. This was a pain at times as on some pairs it is better not to show these lines above M60 due to excessive clutter.

    A setting has been added for users to control displayed periods.
     

    Attached Files:

  12. AusDoc

    AusDoc Well-Known Member

    Joined:
    Apr 24, 2014
    Messages:
    1,074
    Here's a sample of the MMLs at work. They are clearly marking out real levels.

    I was using 2 versions of MML indicator, each with different settings as explained above.

    I created the first image while they both happened to be identifying different levels, with clear coincidence at regular places. I had just snapped the image as the lower level was being hit.

    As it was a -2 level on one indicator it then recalculated, changing to perfect agreement with its cousin on different settings. This is all normal behaviour. By the time I had placed some arrows to show the short entry positions the change had occurred so you can see this in the second image.
     

    Attached Files:

  13. AusDoc

    AusDoc Well-Known Member

    Joined:
    Apr 24, 2014
    Messages:
    1,074
    Just to extend the above post slightly, here is another capture. Here you can see that the shorter look-back period MML indicator has again reset. This approach keeps a focus on the most recent price action without losing the "bigger picture" view. (Remember though, just an M15 chart here.)

    You can also see areas of confluence revealed using different methods.

    Just always remember that nothing beyond a naked chart is necessary. Everything else is either precise tools developed or chosen by the trader and a few things to flesh out the story the chart is telling. Reading this story is not simply about following, it is an exercise in market intelligence, it allows you to peek into the minds of other traders.
     

    Attached Files:

  14. emailtemporaire000

    emailtemporaire000 New Member

    Joined:
    Sep 3, 2017
    Messages:
    1
    Merci Beaucoup.
     
  15. Sizwe

    Sizwe New Member

    Joined:
    Jan 27, 2018
    Messages:
    1
    Thanks a lot
     

Share This Page