Support and resistance lines represent a concentration of demand and supply sufficient to halt a price move, at least temporarily.
They are risky areas to buy or sell for beginners, but give clues about reversal in conjunction with other indicators.
Steps to draw support or resistance line:
They are risky areas to buy or sell for beginners, but give clues about reversal in conjunction with other indicators.
Steps to draw support or resistance line:
- Find the correct time frame
- Include 300 - 600 bars
- Find major and minor support lines:
How to identify major support or resistance lines:
- They connect more than 3 high or lows.
- Increase with number of times they are tested
- How far back in time they act as a major support or resistance line
- The volume of exchange in those levels.
How to identify minor support or resistance lines:
- Minor support/resistance lines include the previous lows and highs.
Other factors that are considered as support or resistance levels include:
- Remember the rule of Round Numbers.
- Remember the importance of moving averages.
- Gaps are not always filled, sometimes they work as a support or resistance.
- Fibonacci levels are also important areas for forming support or resistance lines.
General rules:
- Lines with higher significance break only under higher volumes.
- Once a line is broken it reverse its role. Support turns into a resistance and vice versa.
評論:
Next lesson is up: Volume.
