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Support & Resistance

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By : JakeAmaral


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Support and Resistance are one of the simplest indicators to determine a great entry when trading, let's talk about them.







What does support and resistance mean?


Support is a level where the price tends to find support as it falls. This means that the price is more likely to "bounce" off this level rather than break through it. However, once the price has breached this level, by an amount exceeding some noise, it is likely to continue falling until meeting another support.


Resistance is the opposite of a support. It is where the price tends to find resistance as it rises. Again, this means that the price is more likely to "bounce" off this level rather than break through it. However, once the price has breached this level, by an amount exceeding some noise, it is likely to continue rising until meeting another resistance level.



You can find support and resistance levels simply by looking at history of a chart. The green line at the bottom represents support and the red line at the top represent resistance.








How can we use support and resistance to profit?



You should be using support and resistance as indicators any time you trade for maximum risk vs reward ratios.



If the current stock price is nearing or at support levels you want to be going long on the first sign of strength (generally the first green candle to make a new high). Setting a stop loss at or just below the support


If the current stock price is nearing or at resistance levels you want to be going short on the first sign of weakness (generally the first red candle to make a new low). Setting a stop loss at or just above the resistance









And lastly always remember if a support breaks it can flip into a resistance and vice versa, if a resistance break it can flip and turn into a support.