SUPPORT AND RESISTANCE LEVELS
Different points in the market where the price has a high probability of reversing are known as resistance and support levels. Knowing the places where these levels form and why they form is essential. It can help you predict when the price will reverse and move in the opposite direction.
We can always start by drawing our resistance and support levels on a line chart. This gives us a better view of where the levels are located.
On the line chart below, you can see an example of how to determine support and resistance levels.
The support and resistance levels’ names come from what they’re supposed to do to the market when they’re reached. Support levels are supposed to hold the market in place and prevent it from falling further. Resistance levels, on the other hand, are considered to keep the market from moving higher. As a result, it will resist higher prices because the market reacts differently to support and resistance levels. They always form above or below the current market price, in other words.
Take a look at the illustration below. You can see everything a little better now that I’ve changed the Line chart in the candlestick chart.
We can be confident that these levels are, in fact, support and resistance because they all resulted in a series of reversals. And we know they’re resistance levels because they’re all above the current market price.
Levels of Support and Resistance
Understanding what a fake out is and how to recognize it, this is in addition to reading the candlesticks. You can be successful with this strategy if you understand what a retest is and, of course, sound risk management. For your convenience, we have outlined the chart above for you.
Especially in terms of how we view and act on the market. Take good advantage of it and continue to perfect your market reading skills. You’ll do the same with a good book.