The support and resistance (S&R) are specific price points on a chart expected to attract the maximum amount of either buying or selling. The support price is a price at which one can expect more buyers than sellers. Likewise, the resistance price is a price at which one can expect more sellers than buyers.
If someone wants to master the technical analysis in the financial markets, then you have to master the support and resistance.
Shall we get started?
Support
An area or “zone” on the chart with potential buying pressure to push the price higher.
E.g.
Resistance
An area or “zone” on the chart with potential selling pressure to push the price lower.
E.g.
You’re wondering!
How to Draw Support and Resistance Lines on a Candlestick Chart?
Drawing Support and Resistance in technical analysis is very easy if you just follow the basic rules and not be so mentally rigid.
Basic Steps:
- Zoom out the chart (compress the chart), whatever time frame you have.
- Mark the swing highs and swing lows( wicks of candles) starting from today and go leftwards.
- Connect all the points where at least two swing high or swing low connect.
- The more points connect, the stronger that S&R zone is.
Pro Tip: Remember……Support & Resistance is not a single line, but an area or “zone” on the chart. And when price breaks S&R levels, a role reversal occurs in technical analysis of stock trends.
How to trade with support and resistance
Now that you have learned the basics of support and resistance, let us now learn to trade on the basis of support and resistance.
We can trade in two ways-
a). Reversal Trading:
b). Breakout Trading:
Reversal Trading:
Reversal trading means that you are buying on support and selling on resistance. This comes in a form of swing trading, which is commonly known as BUY LOW SELL HIGH.
Breakout Trading:
This is my favorite trading style, because in breakouts big money comes like rain. And add cup pattern breakout to it then that trade can be 10 star.
If you are a beginner in the stock market then only the cup chart pattern should be mastered by you.
I have already written some blog posts, you can learn from these blogs.
And if you want to learn the complete cup pattern setup with rules and live examples, you can take the help of this eBook:
Conclusion
To master technical analysis for beginners, one has to master Support and Resistance. In the above blog we learned about support and resistance and if you want to learn cup pattern breakout setup then you can take help of eBook.
I hope you enjoy this information as much as I enjoy writing it for you. I appreciate each one of you reading this, and if you have a spare second, do share this guide with your friends.
If you have any doubts or queries, ask in the comment section.