The level of support or resistance evolves over time, the existing points are the result of a confrontation between orders to buy and sell.
As a general rule, the reaching of a support or resistance level for a contract or other product has the impact of increasing the trading volume and temporarily halting or slowing down the speed of price evolution.
All it takes is a lack of counterpart on an order for a "historical" level of support or resistance to be exceeded and move. We can conclude from this that the precise point does not exist, but rather a "zone" of tension.
The strike of derivatives (options) that is fixed, also contributes to the creation of these areas of tension. They give levels that trigger a volume of interest that feeds the price evolution into the mechanism presented above.
About these strike, can an analysis be made of the open positions to determine the strength of the interests? From our point of view, it is a waste of time! Any trader or market maker derivatives will tell you that the majority of the "blocks" traded are O.T.C (thermonuclear bomb of the financial system) and therefore invisible on a organized market.
The supports and resistances presented in the currency and Stock index sections (except EURUSD and SP500) are the result of a mix among various parameters giving fixed zones at a few points ready and resistant to time. Temporary points are not taken into account.
Imagine a fighting video game with two characters each with a power gauge. Our indicator works on the same principle, we follow the confrontation of two characters, a seller and a buyer both having a power gauge.
The green histogram represents the strength of the buyer, the red represents the strength of the seller.
If both progress in the zone above 0, the price will evolve at a moderate speed in the direction of the more powerful one.
At the moment one of the two starts to stall and goes into negative territory, the evolution of the price speed accelerates.
For the one who stalls, 2 landings can stop his fall. Below the 2nd level, we consider that there is a "market anomaly".
This indicator is a synthesis of the first one. Now you are thinking, "Why bother with the first indicator, you might as well look directly at the synthesis." Teu teu mistake ! You won't get the same information out of it.
The synthesis is composed of 3 curves :
One yellow and one green curve giving an indication of the short movement.
A red curve with a level below or above 0 gives an indication of the background movement.
Sales pressure began to pick up again around the first level, confirmed by a discrepancy in its synthesis.
- Deduction : The probability that the price will break the resistance upwards is extremely low.
Buying pressure begins to pick up again on the 2nd stage, confirmed by a stagnation of its synthesis.
- Deduction : Strong probability of the price returning above the resistance.
Buying pressure and synthesis are in the "market anomaly" zone. The entry in this zone is the result of an over-reaction of the analyzed support.
- Deduction : Exit from this zone is generally accompanied by high volatility.
The top indicator (white) is a basic index (oscillator) measuring historical volatility (HV).
Putting complex statistical indicators online requiring more attention and learning, did not seem appropriate to us. Visually an oscillator will allow you to grasp the general level more quickly and easily.
The bottom indicator (yellow) measures the sensitivity of the first indicator.