As a trader, you must how to identify strong support and resistance, but i see
many traders struggling with it.
In this blog, I'll explain you the two types of support and resistance and how exactly
to find strong support and resistance.
What is support and resistance?
Well, support and resistance is a level that prices have a problem to move
through, a level that they bounce off. And we have support, support is
typically below prices. So consider it like a floor that prices can go through.
And then we have resistance, which is above the current prices, and this acts
like a ceiling.
Support and Resistance Types :
* Static support and
resistance.
* Dynamic support and
resistance.
static
being it's a fixed level it's a fixed price it never moves dynamic meaning
obviously that it moves as time.
Static support and resistance :
Static support or resistance usually can be a straight line or it also can
be at an angle. Support line is also sometimes
called a trend line.
 |
| Static support and resistance |
Dynamic S&R like moving average.
Support and
resistance can also swap their roles.
 |
| Dynamic S&R |
How to find
strong support and resistance ?
ü Zoom out your chart
ü Draw as many obvious levels as you can with more touches
ü Do not draw too many unnecessary line
ü Adjust your levels
Dual action
horizontal support and resistance :
Horizontal
support and resistance is only useful when the market is range or weak trend
and will not work in strong trend. When the price is trending strongly we use
dynamic S&R such as moving average and trend line.
ü Always consider support and resistance as an area not as a line.
ü It is a bad trading strategy to put your stop loss on support and resistance.
ü Trading at support and resistance area will give you a reasonable risk to reward ratio.
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