Let’s do a quick followup to the recent article on Layered Levels of Support or Resistance.
Because there was an email response that I think is worth sharing.
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Lance, you’re a legend. Your timing is perfect. I’ve been trying to trade off major daily levels (prior days highs and lows, overnight highs and lows, opening balance highs and lows) but have been stuck around breakeven for a little while, due to the exact problem you shared in your first picture. Too much chop around the level before the direction is clear.
I was planning to trial a buffer around the level, like a number of ticks, to make an artificial area rather than fixed price level. But I think your idea is better. Only trade them when there is an actual area formed by multiple levels in close proximity.
I’ve been meaning to get your course. I’m just immersed in testing my own ideas first. I hope you don’t mind me emailing though. I just want to thank you for helping me see a better solution.
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This was the first image from last week’s article, referenced in the email above:
Layered Levels simplified the plan through providing an area to work with – long above, short below, and no trading inbetween:
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Yes, get my course. Ha-ha. It shares not only how I trade S/R, but also how I trade the trend structure in-between levels. So perhaps it will be of use to you.
On the other hand, perhaps you won’t need it. Your current plan and testing may be all you need.
Ultimately your stats will determine whether this adds value or not, so keep good records and assess results over a series of trades. Remember – individual trades are irrelevant.
There is one thing I’d like you to consider though…
You said, “…I think your idea is better”
And “…thank you for helping me see a better solution.”
My idea is not necessarily better. Just different.
There is a risk in only trading key daily levels when they are part of layered levels of S/R – it will limit the number of trades.
I don’t know your trading. If your plan of trading key daily levels is just one part of a larger number of setups, then perhaps this limited opportunity will be no cause for concern. But if this is the full extent of your plan, then you need to consider how will you manage your mindset when for two or three days in a row there are no “layered levels” available. You’ll sit and watch price test the prior day’s high or low, offer what could have been a trade, but you miss it because it’s not “layered”.
If you can handle that, then all is good.
Otherwise, consider the following option. Don’t choose between your idea (a “number of ticks” buffer around the level) and my idea (layered levels). Test and develop both.
Essentially two different contexts:
(1) Non-Layered levels (single touch levels) – applying your idea of trading from an area a number of ticks above and below the level.
(2) Layered levels – trading from the upper and lower levels.
You could even add a third – Layered Plus – being a combination of the two approaches when the layered levels are in very close proximity. That is, trading off the outer layered levels plus and minus a buffer.
It’s not always a ONE or the OTHER choice. Sometimes both can be worth testing.
And your original idea is well worth testing. It’s not how I trade but I believe the idea is sound. And I know of at least one trader who operates in a similar manner from range S/R.
This way, when a prior day’s high was formed by a single touch, you’ve still got trade potential.
Again though, your stats will determine whether this adds value, or whether further thought is required.
Best of luck.
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I thought I had referenced layered levels of S/R quite a bit during past social media posts, but the search functions bring up limited results. I’ll be sure to add more examples in the future.
I did find these though: