Key insights
- The post discusses how obvious support levels often fail due to concentrated stop-loss orders creating exploitable liquidity. This suggests that market movements are influenced by collective human behavior and the strategic sweeping of liquidity by market participants, rather than solely by fundamental price levels. This can lead to short-term price drops below support before a reversal.
Maybe this is a dumb question but after years looking at charts I swear the cleaner a support level looks, the less I trust it now. Its almost predictable. The levels EVERYONE can see are the ones that get destroyed first. Price dumps just below it, wipes out every stop, people panic sell... then 20 minutes later the market goes exactly where everyone originally thought it would.
I used to think this was just bad luck. Now I think it might actually be the point. Like if millions of people are staring at the same line thinking: .. yeah this is the obvious bounce,... doesnt that concentration alone almost guarantee it gets tested? Not because the level is wrong, but because that many people clustering in the same place creates liquidity, and sweeping that liquidity is profitable for somebody on the other side.
At some point I stopped thinking about support and resistance as price levels and started thinking about them more like maps of human behavior. Where people are hiding. Where their stops are. Where their hope is, Makes me wonder if we're even analyzing the market sometimes, or if we're really just analyzing each other.