Thursday, September 24, 2009

Identifying and Trading Off of Key Price Levels


When volume builds in a price range, that represents the market's setting of value in that time frame. That estimate of value can be regarded as a kind of magnet, as weak rises and declines above and below the range tend to return to value. We saw that in much of this afternoon's trade, as volume built in the 1045-1048 price level. Strong moves away from that level can be conceptualized as breakout moves; failed breakouts can be traded for reversion trades back to value. An important facet of market preparation is knowing those price levels from the current and recent trading sessions.
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2 comments:

Daniela said...

I consider the markets consensus of value on a day to day time frame the most significant measure to track and understand. Tracking its expansion/contraction, movement from day to day, relative range and relative volume are just some of its uses. The value of value goes far beyond just a support or resistance level. Really grasping and understanding how to take advantage of opportunity when price and value diverge, or when value is tracking slowly behind price is the only strategy. Every strategy at some level, whether you realize it or not, is trying to exploit this.IMO

jgpietsch said...

A follow through post might focus on a priori identification of breakout failure vs. continuation. Regards, J