Hello guys, because it is hard to do any TA at the moment I decided that I will do some posts about how to do Technical Analysis. I would like to begin with Support & Resistance lines. It is very easy to spot them once you have an eye on it.
What is Support & Resistance
Support line is a line indicating where most people will probably buy - meaning that the price should not pass the tested level. Resistance line in the other hand is a line that indicates where most people will probably sell - meaning that the price should not pass the tested level. In other words it means where the price is going to bounce either up or down. When the price has bounced on Support or Resistance line more times it is considered as a Trend line (indicating a trend).
How to spot them
Supports & Resistances are really easy to find. Support line can be found when you connect recent bottoms and Resistance line when you connect recent tops. There is really not much to tell when it comes to finding these lines. The bigger time-frame you use the stronger the support or resistance is.
REMEMBER: Two touches on the line are only speculative. The 3rd touch is most of the times a very strong buy signal because 1) the trend is confirmed and 2) the price often spikes up.
Advanced Supports and Resistances
You have probably seen the picture on the very top. There is advanced Support & Resistance. When the price breaks the resistance line, it will become a support line and when the price breaks the support line it will become a resistance.
TIPS:
- Supports and Resistances are zones not magic lines!
- Always make sure the trend lines are valid!
- Levels are Supports or Resistances in a horizontal line.
As you can see guys it is really easy to use these lines and believe me they are very handy. Without them Technical Analysis would be nothing for me. Thank you guys for reading my article, I hope you liked it. Please upvote, follow and comment for more amazing content. Bye!
- Patrik
