How to draw in Support and Resistance - Education
1. What is support and resistance?
Support - Area on your chart with potential buying pressure
Support - Area on your chart with potential buying pressure
Most of the text books says the more times support and resistance is tested, it become stronger.
But the truth is the more time it tested it becomes weaker. ( Refer the Image).
2. Support and Resistance is not Line in Chart:
Most of think support and resistance is line in the chart, where they face 2 problems,
a. Price undershoot and you miss the trade or
b. Price overshoot and assume Resistance is broken
it's become false breakout.
How to address this problem?
Simple, Treat support and resistance as area on your chart not lines.
Why S&R are area on your chart?
Because of 2 groups of traders
i Traders with fears of missing
ii Traders who want to get possible price
I will explain in detail:
traders with fear of missing out would enter their trades the moment price comes close to support and if there's enough buying pressure the market reverse at the location
on other way, there are traders who want to get best possible price so they place orders at the low of support and if enough traders do it the market will reverse near the lows of support.
But one thing for sure:
We have no idea which group of traders will be in control, whether its FOMO or Cheapo traders.
Hence, S&R are areas on our chart not lines.
3. Dynamic Support and Resistance:
What we have seen before are Horizontal S&R ( Where the areas are fixed).
Now we are going to see Dynamic S&R
There are 2 ways to identify Dynamic S&R
A. Moving Average
B. Trendline
How to use Moving Average as Dynamic S&R
I here use EMA50 and EMA79 to identify my dynamic SR.
But any moving average you can use. (Either SMA, WMA, DMA any number too. Do not blindly follow others)
Trendline:
Trendlines are diagonal lines on chart to identify the dynamic S&R
Notes: Treat S&R as areas on your chart not lines.
This is how we can draw a support and resistance . From now we can understand how to draw a support and resistance.
If you like our thought press the thumb button and for more learn how contact us undersigned.
Support - Area on your chart with potential buying pressure
Support - Area on your chart with potential buying pressure
Most of the text books says the more times support and resistance is tested, it become stronger.
But the truth is the more time it tested it becomes weaker. ( Refer the Image).
2. Support and Resistance is not Line in Chart:
Most of think support and resistance is line in the chart, where they face 2 problems,
a. Price undershoot and you miss the trade or
b. Price overshoot and assume Resistance is broken
it's become false breakout.
How to address this problem?
Simple, Treat support and resistance as area on your chart not lines.
Why S&R are area on your chart?
Because of 2 groups of traders
i Traders with fears of missing
ii Traders who want to get possible price
I will explain in detail:
traders with fear of missing out would enter their trades the moment price comes close to support and if there's enough buying pressure the market reverse at the location
on other way, there are traders who want to get best possible price so they place orders at the low of support and if enough traders do it the market will reverse near the lows of support.
But one thing for sure:
We have no idea which group of traders will be in control, whether its FOMO or Cheapo traders.
Hence, S&R are areas on our chart not lines.
3. Dynamic Support and Resistance:
What we have seen before are Horizontal S&R ( Where the areas are fixed).
Now we are going to see Dynamic S&R
There are 2 ways to identify Dynamic S&R
A. Moving Average
B. Trendline
How to use Moving Average as Dynamic S&R
I here use EMA50 and EMA79 to identify my dynamic SR.
But any moving average you can use. (Either SMA, WMA, DMA any number too. Do not blindly follow others)
Trendline:
Trendlines are diagonal lines on chart to identify the dynamic S&R
Notes: Treat S&R as areas on your chart not lines.
This is how we can draw a support and resistance . From now we can understand how to draw a support and resistance.
If you like our thought press the thumb button and for more learn how contact us undersigned.
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