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Two Tactics For Trading “Off the Chart”

Rig

Oil’s sustained rise over the last six months has created an interesting dilemma for many traders. It has taken WTI, for example, to levels not seen since April of 2015, so for those looking at a 1-year chart prices are quite literally “off the charts”. Most traders, myself included, use recent levels of support and resistance to plot both entry and exit points for trades, at least to some extent, so off the chart pricing is problematic. You could go back to that 2015 action, but time decreases the relevance of chart levels, so for short-term trades that is not helpful. What, then, is a poor trader to do?

First, you need to understand the nature of chart levels and what makes them significant. When you detach yourself from a trading mentality and think about it, there should be no reason why what happened around a particular price point in the past will influence what happens in the present…except for one thing. Support and resistance levels are self-fulfilling prophecies. The significance of those levels rests in the fact that enough people believe they have significance. What stops a move down is the appearance of buyers, or sellers in the case of a move up, and past action at a certain level attracts new entrants into the market. So, in effect, support, resistance and pivot levels matter because they matter.

The trick to off the chart trading, therefore is to identify other things that potential buyers and sellers may regard as significant,…

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