Support Levels - Universal or Personal?

For sometime now, I have believed 4200 Nifty was an important support level and its breakdown will take the Nifty down much further.

There were others who believed that 4160, 4140, 4100 were the levels to watch for support.

In yesterday's trading, the market frowned on me and smiled on the second group - meaning 4200 broke but the market reversed from around 4140.

This brings us to the important question: which support level should one believe in?

Here is the answer that surprises a lot of new traders. There is no single unique mathematical number that can be calculated by everyone and described as support.

One of my revered mentors, Sudarshan Sukhani, - from whose writings I have learned a lot - has put it beautifully in his blog posting when he says "all said and done, support and resistance levels are personal numbers, used to determine risk. We can have different levels and trade successfully". You can read his posting here.

I would like to add that any support level breakdown is again a probabilistic event - the very fact that it is being called a breakdown means that it is a high probability event , BUT of course once in a while it will be a false breakdown or a breakdown that will see a whipsaw before going down again.

What is therefore important is to develop your own approach to determine support levels and do that consistently - without regard to others levels - this consistency is single most important thing in ensuring that over many trades you will come out with more money ( not necessarily with more number of winning trades) from your winners over your losers.

For myself, I had a bad bad day on Tuesday. On Monday I ended holding a long thinking that 4200 will hold. Of course it did not hold and Tuesday morning first thing I did was to exit that trade and went short at 4180 with SL at 4215. Of course I suffered a loss AGAIN, but then it finally dawned on me that 4160 AND 421O were acting as support and resistance for that part of the day. I successfully used these facts to finally end the day with negative -37 as opposed to -79 the situation I was in after the second trade.

Again for myself, I accept that Nifty has found support at 4140 - accepting that means I will not go short around 4200 any more until that4140 level or even 4100 level is broken. I may choose to go long now or not depending on my reading of the market - remember that for day trading, you have to read the market during the day!!

If you have any comments please write to me at stockmarket.methods.in.madness@gmail.com

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Disclaimer: The above analysis is just that - my analysis. If you choose to trade on the basis of this analysis, you will be solely responsible for the outcome of the trade - profit or loss. Please keep in mind that trading and in particular day trading is not for the novice and there is significant risk of loss of capital in trading.