Khamis, 17 Februari 2022

 

Table of Contents

RISK WARNING.................................................................................................................................................. 3

SUPPORT & RESISTANCE EXPLAINED............................................................................................................ 4

MEDTHODS TO IDENTIFY S/R.......................................................................................................................... 6

Horizontal S/R.............................................................................................................................................. 6

Zones........................................................................................................................................................... 7

Long Wicks / Tails........................................................................................................................................ 8

Channels / Trendlines.................................................................................................................................. 9

Pivot Points................................................................................................................................................ 10

Fibonacci.................................................................................................................................................... 11

Moving Averages (MA)............................................................................................................................... 12

Using Confluences of S/R.......................................................................................................................... 13

SUMMARY........................................................................................................................................................ 17

REDUCE YOUR LEARNING CURVE................................................................................................................ 18


Risk Warning

 

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Thank you for downloading this Trading Guide. This is the second of a 4-­‐part series to introduce you to Technical Analysis. Each part has a video and accompanying trading guide which you can view below.

 

Part 1: Trends

Part 2: High Probability Support & Resistance

Part 3: Chart Patterns Trading

Part 4: TA Techniques Combined

 

SUPPORT & RESISTANCE EXPLAINED

At any one time a trader has only 3 options

-­‐    Buy  (buy long)

-­‐    Sell  (sell short)

-­‐    Stand aside

 

Let us take a scenario of the bulls pushing prices upto a level that has previously been a resistance level.

-­‐    Bulls successfully overpower bear to push up prices

-­‐    Price reaches a level that, for whatever reason, saw price previously reverse

-­‐    As we approach this level some bulls decide to cloe thier trades and book a profit

-­‐    At the same time some bears see price approaching the level and it loses momentum, so decide to sell short

-­‐    Price now slows further, and even halts near the resistance level

-­‐    Some other bears come along and decide to join the party, so also sell short

-­‐    Price begins to decline away from the resistance level -­‐ The resistance level has been respected




Further In Time:

-­‐    Price accelerates towards the resistance level

-­‐    Some bears, who previously profited from going short at this level, sell short again

-­‐    However in this instance there are more bulls than bears, so price breaks though the resistance

-­‐    Once past the resistance level price triggers the bears stops, forcig price even higher still

-­‐    Some bulls take profit whilst some bears also decide to go short -­‐ price retraces towards prior resistance

-­‐    Feeling more confident the bulls buy more at the previous resistance level and price slows, then goes up

-­‐    Our previous resistance level has now become a support level

 

Now we understand what causes Support and resistance (S/R) we can now form the following assumptions

-          Support becomes resistance and resistance becomes support

-          The longer an S/R level holds the more significant it becomes

-          The more time an S/R level holds the more reliable it is deemed to be

-          When a significant S/R level breaks the more significant a subsequent move can be expected

Support and Resistance interchange:

Once a level of resistance has been broken to the upside you will often see this same level retested. If this holds the previous resistance is then considered to be a level of support. The reverse is also true – when a level of support breaks it often becomes a level of resistance.

 

The longer an S/R level holds the more significant it becomes

Levels of S/R can last anything between a couple of minutes, to years or decades.

The reason for the break does not usually concern the Technical Analyst because we assume something special has changed within the market conditions for this level to break.





MEDTHODS TO IDENTIFY S/R

Whilst there are many inventive ways of finding S/R levels I am going to cover some of the simplest and most frequently used. These are the methods I use myself and are applicable to every timeframe or market, and accessible to anyone with charting software.

 

The idea is to combine several forms of S/R to gain more confidence in a particular level holding in future. The more of these levels you can identify within a relatively close range to each other, the better.


Price

-          Horizontal S/R

-          Zones

-          Trendlines / Channels


Indicators

-     Pivot Points

-     Fibonacci

-     Moving Averages


This is by far the most simple of methods, and the one I use most often. If you had to learn only one form of analysis then I would recommend Horizontal S/R.


All we are looking for area areas on the chart which have been tested many times (the more times the more reliable) and ideally have been tested as both support and resistance. If they have been tested as both support and resistance, then you will hear me refer to these levels as pivotal S/R levels.





Use the Crosshair to identify horizontal S/R:

Press Control+ D to enable the crosshair on your chart, then move your mouse up and down the chart (without clicking) to find areas that have been tested and respected on the chart. These levels needn’t be perfect (although sometimes they are) so it is OK if the Candle Tails/Wickes test the levels once in a while. Always start on higher timeframes to identify major levels or S/R before moving to lower timeframes to repeat the process.






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