As we stated in our post Part A – Relative Momentum Indicator, the RMI is our most valuable indicator, if for no other reason than we use it to create our Support and Resistance Values (SRVs) – the horizontal lines on our charts that provide us with definitive trading entry, exit and stop loss points.
There are different ways of deriving support and resistance values that are likely to affect price in the future. Ours is unique because we use a proprietary indicator, our RMI, to determine short term price support and resistance values.
The most common way of determining support and resistance – and traditionally the way most traders do it – is to use historical peaks and valleys in price. While this method works pretty well, ours seems to produce SRVs that are slightly more accurate than those derived the traditional manner. We also seem to get a larger number of SRVs for most of the markets that we trade.
Typically we will place our SRVs on our trading charts on Sunday before the trading week begins – and use them for the following week.
Occasionally we will re-assess the SRVs during the trading week – but only if there is an uncommon amount of volatility. On some markets that we trade infrequently, we will leave the SRVs on the chart for more than a week – sometimes several weeks at a time – and note that they are often spot on as price approaches them.
As price approaches an SRV in can do one of three things:
1. Breech the SRV and keep moving in the same direction.
2. Bounce off the SRV and move in the opposite direction.
3. Get to the SRV and stall – trading sideways around the SRV for a period of time.
Each scenario can present the short term trader with a possible trading opportunity, but the method of executing the trade is very different for each case.
The trading methods we employ are much too lengthy to describe here, but each method has a routine for handling the above scenarios – each is visually applied and can be executed very quickly once learned.
We update our trading charts with the freshly calculated SRVs for the markets that we trade actively once a week. It takes about 12-15 minutes per market. We seldom do more than 3 – 5 markets at any one time, so our time for preparation for the coming trading week is less than an hour. When we trade we seldom are actively trading more than one market at any one time – we like to watch our trades in real time.
Most of the most successful traders we have encountered over our years in the business have concentrated on one or two markets – confirming the adage, “it is better to be a master of one thing – rather than a jack of all trades”.
You can get the complete story of our short term trading method in our new eBook, “See the Music of the Market”.
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Author & Trader
I trade the US Bond Markets exclusively – amazed at the accuracy of the SRV’s !!George SNew York, NY
“The SRV’s are amazingly accurate”.Tony Texas
the SRV’s are spot on !!Tom CUSA
….very impressed with the whole philosophy – both personal and trading, expressed in the book. I will read and revert !!Richard DUSA
Thanks for the method !! Very solid, very logical entry and exit and genius SRV’s !!Denis DRussia
Great system – couldn’t trade without it !!Frank YDavid, Panama
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