Trading Basics: Evolution of a Trader

MINOR HIGH RESISTANCE

Minor highs and minor lows are known areas contributing to support and resistance. Let us start with minor highs. Figure 4.2 shows the test configuration. This test answers the question, how often does a minor high (peak) show resistance to future price movement?

Figure 4.2 Test configuration: Overhead resistance at peaks.

For each peak, I counted the number of times that price stopped near the same level, and quit counting when price climbed above the top of the window (the top of the window being 35 cents above the high price in the first peak). Then I moved on to the next peak. The test began with data starting in January 1, 2000, finding 65,535 samples.

I found that 34 percent of the peaks showed overhead resistance at least once before price pushed above the resistance layer. In other words, one of every three peaks will show future resistance before price moves higher.

• Overhead resistance occurs at peaks 34 percent of the time.