Support and resistance is one of the most important ideas in technical analysis. They provide a basis for entry, set a stop loss and take profit and implement reasonable trading strategies. But to apply it effectively you must understand the nature of the problem and know it how to draw support and resistance so that right.
You should read: Types of Support and Resistance you need to know.
Concept of support and resistance
Support is the level at which prices tend to bounce when it reaches that level. Resistance is the level at which the price tends to bounce off when it rises there. Support and resistance levels are often not just horizontal lines. In many cases it is a trend-slanting line. Actually they are often one region rather than one Street, Is called "Support zone" good "Resistance zone".
When a support or resistance level is tested multiple times, that is, the price touches it multiple times and then bounces back, it becomes stronger.
When a support level is broken, then it will become a resistance. Conversely, when a resistance level is broken, it will become a support level.
Instructions on how to draw support and resistance standards
In some cases you can connect the highest points of the price to draw a resistance line. Similarly connect the lowest points of the price to draw support lines. The support and resistance levels are then just a straight line. However that is only the ideal case. In fact, it's not like the price just hit that straight line and then turned around. In most cases, the price will go a little higher or lower. More precisely, the price will come a little closer to or beyond that line and then bounce back. Then, we will only be able to draw support and resistance relatively.
Figure below: A straight line cannot exactly connect the highest or lowest points of the price.
Figure below: How to draw support and resistance
Another example of how to draw resistance and support.
Another example of a resistance line is slanting:
To find out more fully about support and resistance, you should read the following article:
Note on support and resistance
The more times the support and resistance areas are tested, the stronger it is. That is, if the price touches it and bounces again and again, the resistance becomes stronger. Of course, no matter how strong, when meeting basic factors strong enough, it will break out of the region. This is called a break out price.
When the price breaks a resistance, it will turn into a new support area. On the contrary, when the price breaks a support level it will become a new resistance.
You have just read the article: "How to draw lines (zones) for support and resistance".
Author: Pham Khuong
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