Hello friends,
Thought I'd share a trading principle that I have today. It is that the more times a price level is hit, the more likely it is to break. As you can see above, we hit 6k many times and it eventually broke. Likewise, we hit the 4k region many times and that broke.
Now, I know what you are thinking, isn't this cherry picking? This is hardly sufficient empirical data to suggest this principle is sound. I would have to agree with you. But without going to deep into epistemology, you'll just have to take my word for the empirical side as it's my experience.
Anyways, I have a theory on why this is the case and it's pretty simple. Basically, there are price levels at which people want to buy at (sometimes you can even see these in the form of limit orders). The point is, the demand at these levels is finite, and so each time you hit that price, you are taking away liquidity from that price level. Therefore, that support or resistance is getting weaker and weaker as a result, thus making it more likely that it will break.
This general principle explains why many patterns in trading, like descending/ascending triangles etc. seem to work out so well.
Hope this helps,
Shkreli
Thought I'd share a trading principle that I have today. It is that the more times a price level is hit, the more likely it is to break. As you can see above, we hit 6k many times and it eventually broke. Likewise, we hit the 4k region many times and that broke.
Now, I know what you are thinking, isn't this cherry picking? This is hardly sufficient empirical data to suggest this principle is sound. I would have to agree with you. But without going to deep into epistemology, you'll just have to take my word for the empirical side as it's my experience.
Anyways, I have a theory on why this is the case and it's pretty simple. Basically, there are price levels at which people want to buy at (sometimes you can even see these in the form of limit orders). The point is, the demand at these levels is finite, and so each time you hit that price, you are taking away liquidity from that price level. Therefore, that support or resistance is getting weaker and weaker as a result, thus making it more likely that it will break.
This general principle explains why many patterns in trading, like descending/ascending triangles etc. seem to work out so well.
Hope this helps,
Shkreli