Understand Support & Resistance

S+R Lines are points at which price finds a permanent or temporary barrier. So S+R Lines are areas trader expect the price to have trouble getting through. Therefore some trader regarded it as a price reversal opportunity; then they trade accordingly.

"When the price bounced away from this line the last time, it might bounce away from it again, so i should be careful". So the more this happened the stronger the lines became.

How i plot the S+R Line?

Placing a S+R line is an art and you can get the skill after practice and trading actively. The first thing i do when placing S+R Line on chart by Identify The Recent Areas Of Support & Resistance.

There are two type of Price Bounces

1. Wick Bounces
2. Body Bounces.

Typically we want to see at least two or more bounces from the same line either wick or body bounce. We will choose one and decide that as significant line.

The line exists because we think it does. The next time the price approaches that line trader think " last time it was here it reverse exactly that point, so it will probably do that again this time".

When a trader looks at a chart they are always looking for places to enter a trade. They always looking at area which price previously rejected.

S+R line are not exact. There are times when the price will turn away 20 pips before it reaches s+r line. They believe that will be strong barrier. They start to place their trades based on that believe.

Will this S+R Line break or bounce?

We should assess the strength of line. The strength of line can be judge by three factor:-

1. How many bounces it has had without being clearly broken?

2. The power of the moves it rejected?

3. What has happens on past breaks?

What this three questions will impact trader minds?

Strong Line: If the line has had three very strong bounces, without breaking, and the last time it broke it moved lots of pip beyond the line - you can assume most traders think the line very strong.

Weak Line: If the line has only had one minor bounce, and last time it broke it moved a limited pips, you can assume trader will think it's weak line