Support and Resistance and how to use it to your advantage
Everything You Need To Know About Support And Resistance Lines In Trading
Support and resistance lines are used in trading by in large today. The simplest methods for using support and resistance is to get near support in uptrends, chart patterns, and ranges.
Additionally, it is also used to sell or short sell near resistance in chart patterns, ranges, and downtrends.
Support and resistance lines in trading are used to isolate a longer-term trend. This provides guidance regarding which direction to take or what to trade in.
Upward And Downward Trend In Support And Resistance Lines In Trading
When there is a downward trend, the range will develop and preference should be for short selling at range resistance than buying at range support. When there is a downward trend, it shows us that going short has a better chance of producing a profit than actually buying it.
On the other hand, if the trend is going up, then a triangle pattern will form and it will benefit buying at the near support of the triangle pattern.
There are benefits of buying or selling near resistance but there is no guarantee that the resistance or support will hold. Therefore, before trading in support and resistance, it is better to get some kind of assurance that the market is favoring that area.
Truths About Trading In Support And Resistance Lines
There are 5 main truths to know about support and resistance lines. These are:
• The more times the support or resistance is tested, the weaker it will become
• Trading at both support and resistance can give you favorable and significant risk to reward
• Support and resistance be versatile and dynamic
• The support and resistance are particular areas on your chart. They are not lines
Crux Of Using Support And Resistance For Trading
There are certain methods of drawing support and resistance zones and you might be able to question each and every single one of them. To ensure your lines are right and better than usual, take the three following steps:
• Turn the candlesticks /bars on your chart
• Begin by finding areas of major bounces on the daily, 5min, 15min and 30min charts
• Draw the horizontal lines. The more bounces off of those areas the stronger that resistance or support is, the more times you see it breaking through the weaker that support or resistance is
Understanding Your Chart Results
When you are looking at the chart, after it has been formed, there are three things have to be noticed:
A) Are you seeing where the price has bounced from essentially from your support/resistance lines?
B) Can you see where the price bounced certain times?
C) Can you see and observe where the support and resistance levels changed roles?
Tips For Buying Near Support
If you are looking to buy near support, wait for consolidation in the support area and then try to buy when there is a breakthrough in price that is above the high of that small consolidation area.
When there is such a move in the price, it gives a guarantee that the price is still respecting that particular support area and that the price has started to move to a higher off of support.
This is true for resistance too.
Tips For Selling Near Resistance
When you are buying, wait for a consolidation close to the resistance area. Then make a move to enter a small/short trade when the price falls below the low of a small consolidation.
When you are buying, place a stop loss that is certain cents below the support. Where there is short, put a stop loss that is several cents over the resistance levels.
Support and resistance lines are used for and in trading worldwide today. There are benefits to doing so. However, it is always important to see and assess certain things before you make your trades. Some of these have been listed above.