March 2, 2019

Support and resistance explained with 20+ charts Support and resistance explainedSupport is an area with potential buying pressure. Similarly, a  resistance is an area  with potential selling pressure.

Once the price breaks below a support level, the broken support level can turn into resistance. The break of support signals that the forces of supply have overcome the forces of demand. Therefore, if the price returns to this level, there is likely to be an increase in supply, and hence resistance.

The other turn of the coin is resistance turning into support. As the price advances above resistance, it signals changes in supply and demand. The breakout above resistance proves that the forces of demand have overwhelmed the forces of supply. If the price returns to this level, there is likely to be an increase in demand and support will be found.

Support and resistance areas offer "safest" entry opportunities for traders as the stoploss is very close. This means your risk is low and reward can be high (as exit level is defined).

How to draw support and resistance lines:

Look at visually obvious areas where price keeps taking support or resistance. More the number of "touches or contact", the better.

Ignore minor support and resistance lines... these serve no purpose and simply add clutter to the chart.

In case where there is too much clutter, then one should zoom out or shift to a higher degree timeframe (hourly to daily or daily to weekly).

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