The Support and Resistance strategy is a very common strategy used by professional and should be as well adopted by new traders.
What is a Support and Resistance Level?
A resistance level is created when prices have not been able to rise above a certain price level for at least two times and support. As a trader, you have to assume nobody is willing to buy this asset above this price.
Support level works just like resistance level, only the other way around. They keep prices from falling under a certain price level. Once a resistance level is broken, it can, and most likely will turn into a support level.
How to Trade Resistance and Support Levels
The resistance and support level gives you a clue of the market behaviour. As a trader, what you need to so when you discover resistance and support levels is to take advantage of it. The resistance and support level gives you a clue if there would be a reversal in the market; if the market would continue to be bullish or bearish etc.
The image below shows you how to trade resistance and support levels
Tips on Trading Support and Resistance Levels
- Wait for a candlestick confirmation before trading breakouts or reversals
- Always use Indicators while trading, it helps you get a better understanding of the market’s behaviour.
- The trend is your friend. Always follow the trend patterns.