Support and resistance are two basic elements that you need to master, if you want to success in trading . Learn how to identify key support and resistance levels, and you will know enough to create a great profitable trading system.
Support is the important price level where demand starts to rise so much that it prevents the price from further decline. It’s the level where buyers go into action and start buying.
Resistance is the price level where supply begins to be so high that it stops the price from further growth. It’s the level where sellers find the price so attractive that they sell heavily.
How do you find these levels?
There’s no special stock chart custom indicator. There are many ways and you use one of these simple techniques to identify these important levels.
- Horizontal Price Level
- Trendline
- Moving average
- Fibonacci Retracement Level
- Round Numbers
Strength Of These Levels
The strength of the level is depend on 'time frames' you see the level. The strength of the level is depend the number of bounces. Level from a daily chart are more important than levels from H4 chart, and these are more important than levels from a 15 minute chart.Always remember that the 'higher time frames' is YOUR BOSS. So, you have to recognize levels that are more important than others, but again it’s very simple.
Every one of these levels can be broken
Nothing is forever. The same is with support and resistance. So, every one of these levels can be broken.
Remember, these simple but very important rules:
- Broken resistance is now the new support level
- Broken support is the new resistance level
Identify Trade Setup:
- Identify significant support and significant resistance.
- In DownTrend ( Refer Chart) - Identify recent peaks, troughs, falling peaks & falling troughs
- After falling troughs is made, price in Retracement or Pull-up.
- Plot Horizontal Line at 'Troughs'
- A horizontal level is much more a price zone than simply one price.
- Risk Taker Strategy - During retracement, we enter during the 1st Bounce at Horizontal Zone. We look for NickB Candle & James16 Price Actions. Never trade using 'market orders'. Risk is calculated using 'Price Actions'.
- Safe Strategy - During retracement, wait for 1st Bounce at 'Horizontal Zone' & Enter Trade on 2nd Bounces or 3rd Bounces .
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