Level quality: counting the touches

[Amanhasnoname]

A level that has been tested many times is considered strong. But more touches may weaken it, as resting orders get consumed with each test. The relationship between the number of touches and the probability of a break is not obvious.

An empirical approach tracks levels and counts the touches, then records outcomes: bounce or break. Group by the number of prior touches. Some markets show higher break probability after many touches, since liquidity has been depleted. Others show stable holding.

The time between touches matters. Recent touches may leave stops and orders fresh in the market, while old ones are forgotten.

Also consider the type of level. Round numbers, prior day extremes, and session highs may behave differently from arbitrary swing points.

With a few months of tick data and clear rules for defining levels and touches, the statistics emerge. The result guides setup selection and expectations for the probability of a bounce.

The numbers replace folklore with evidence.

What does the data say about the success of bounces at the first, second, and third touch?