Resistance Level: Price meets selling pressure during rise, hard to continue up; Support Level: Price meets buying pressure during drop, stabilizing at that price
Four Major Formation Factors
1. Moving Average System
During an Uptrend: All moving averages (MA5, MA10, MA20) act as support
During a Decline: All moving averages act as resistance
Practicality: Price often rebounds or faces pressure when it pulls back to important moving averages
2. Historical Highs and Lows
Previous High Points: Area of dense trading, forming resistance
Previous Low Points: Psychological key level, forming support
Multiple Tests: Points that haven't broken are stronger
3. Gaps
Upward Gap: Today's lowest price is higher than yesterday's highest price
Downward Gap: Today's highest price is lower than yesterday's lowest price
Function: Gap areas create price vacuum zones, providing resistance or support
4. Trend Channel
Upward Channel: Upper boundary as resistance, lower boundary as support
Downward Channel: Upper boundary as resistance, lower boundary as support
Application: Channel boundaries are suitable for high selling and low buying operations
Practical Judgment Skills
Characteristics of Strong Support Levels
Multiple tests without breaking
Accompanied by a large volume of buy orders
Important Moving Averages or Round Numbers
Characteristics of Strong Resistance Levels
Multiple attempts without breakthrough
Accompanied by a large volume of sell orders
Previous Important High Point Position
Conversion Principle
Key Rule: Resistance and support levels can convert into each other
Support Becomes Resistance: After breaking the support level, the original position becomes a resistance level
Resistance Becomes Support: After breaking the resistance level, the original position becomes a support level
Confirmation Standards:
Effective breakout requires volume support
Closing price must stabilize above the breakout level
Pullback test not breaking is a confirmation signal
Practical Strategy
Buying Strategy
Buy at Support Level: Gradually enter when price approaches important support level
Breakout Pullback: Increase position on confirmation after breaking resistance
Moving Average Support: Buy on pullback to the moving average during bullish alignment
Selling Strategy
Reduce Position at Resistance: Gradually exit when approaching important resistance levels
Stop Loss on Breakout: Timely stop loss after breaking the support level
Moving Average Resistance: Sell on rebound to moving average during bearish alignment
Core Points
Judgment Skills
Multiple Confirmations: Use various methods to validate simultaneously
Volume Support: Key positions need volume support
Time Cycle: Longer cycles of resistance and support are more important
Risk Control
Strictly Execute Stop Loss Discipline
Avoid chasing highs at resistance levels
Exit immediately if support level is lost
Reasonable Control of Position Size
Notes
Dynamic Adjustment: Resistance and support levels will change with the market
Relative Concept: Importance varies across different time frames
Psychological Factors: Market sentiment affects the validity of positions
Comprehensive Analysis: Must be used in conjunction with other technical indicators
Practical Insights
Resistance and support levels are basic tools of technical analysis, but not absolutely accurate. The key to success is:
Probability Thinking: Formulating strategies based on high probability events
Capital Management: Strictly control the risk of single trades
Patience to Wait: Wait for the best risk-reward opportunity
Continuous Learning: Continuously improve trading system
Remember: Technical analysis is an auxiliary tool, rational investment and risk control are always the priority. In practice, it's better to miss an opportunity than to take unnecessary risks.
