Support & Resistance zones are of key importance in trading on any time-frame. What is immediately apparent in relation to the Midas S/R curves are that they provide dynamic support and resistance zones where many other indicators fall short.
Market Interpretation/Data Analysis System, or the Midas System, was created with the belief that the dynamic interplay of support and resistance with accumulation and distribution are the ingredients that ultimately dictate price behavior. Dr. Paul Levine examined most, if not all, of the commonly available techniques and indicators. He felt that they all could be improved upon and this led to his discovery of the midas indicator.
You can read Dr. Paul Levine’s writing on the topic, which goes into great detail about the philosophy and minute logic powering the indicators formation, but the bottom-line here is that the midas curve is exceptional at identifying robust S/R that is not easily identified by other indicators.
The ability to know where to expect these support and resistance zones are likely to appear, prior to price actually getting there, would something akin to the holy grail in trading. A trader could then just place buy and sell orders at those prices and just relax. If only it were that easy…
The issue is when we look at a price chart, it looks so random and seemingly has no obvious price levels where you should expect to find support and resistance. The trader needs a reliable method objectively determine support and resistance levels.
Trader’s know that there are always counter-trend moves throughout the primary trend. If the trader attempts to capture every minor change in trend, what ends up happening is he or she gets whipsawed in a discouraging series of losing trades. He loses touch with the market and ends up getting in when he should be getting out etc.. “Whipsaw” action eats away at the trader’s account by a string annoying losers along with transaction fees which can devastate the trader’s psychology. Reliably avoiding situations like this are imperative to any professional trader.
If there is more buying than selling pressure (more shares being bought than sold), we refer to the stock as being accumulated. This may not immediately cause the stock to rise, but it will. Accumulation leads to uptrending markets. Similarly when there are more shares being sold that bought, we refer to it as distribution. Prices may not yet be.falling when a stock is being distributed but it will in due course. This changing balance can be tracked using Joe Granvilles (accumulation/distribution) indicator.
Price Spectroscopy & Fractal logic
Paul Levine discovered a way to find order in the chaos of the average price chart. Midas makes sense of the chart via empirical underlying realities rather than subjective analysis. By processing price and volume through a simple algorithm ( something of a price spectroscope) and by anchoring the support and resistance calculations to the actual pivot location, theoretical support and resistance curves come into focus.
This makes the rules being consciously, or unconsciously, followed by the majority of traders transparent which in turn allows us to start making some sense of an otherwise chaotic scenario. MIDAS S/R curves are a powerful tool for identifying emergin patterns for tradeable patterns that could likely no be discerned by looking a prices alone.
Details of Midas Method
Instead of plotting Price and Time, MIDAS unconventionally plots the daily average price, potential support/resistance levels and OB V versus cumulative volume rather than time. By plotting cumulative volume instead of time, there is less visual importance is given slow periods where less shares are traded. This leads to a much smoother display of the curve.
A hierarchy of support curves will emerge in an accumulation phase. Each curve develops more importance as price bounces off of it. A validated S/R curve will be one that has successfully provided support or resistance for several trend reversals. Each of these tests represent an opportunity to the trader which is potentially the lowest risk reward setup available in a given time-frame.
Looking at multiple time-analysis in combination with the on balance volume indicator can help increase the odds of a successful trade. As we approach support levels, and OBV is making higher lows we can use that as confirmation that the likelihood of support holding is higher.