🔍 What are support and resistance levels?
· Support:
✔ A price level where the decline halts due to buying strength
✔ Represents a 'floor' for the price where buyers find the price attractive
✔ Appears on the chart as a horizontal line or price area
· Resistance:
✔ A price level where the rise halts due to selling strength
✔ Represents a 'ceiling' for the price where sellers consider the price high
✔ Appears as a horizontal line above price movement
📈 How do they work on the chart?
1. Reversal Pattern:
· The price bounces up at support (the lower line)
· The price bounces down at resistance (the upper line)
2. Pause Zones:
· In an uptrend: resistance may cause a temporary halt
· In a downtrend: support may cause a temporary halt
🔄 Role Reversal
· Support turns into resistance:
When a support level is broken, it becomes resistance upon retest
· Resistance turns into support:
When a resistance level is broken, it becomes support upon retest
💡 Golden tips for beginners
1. Identifying Levels:
· Use previous highs and lows
· Draw horizontal lines at these points
2. Trading with them:
· Buy at support with confirmation of the bounce
· Sell at resistance with confirmation of the decline
3. Risk Management:
· Place stop-loss below support (for buy trades)
· Place stop-loss above resistance (for sell trades)
4. Tool Integration:
· Use with candlesticks (like the hammer pattern at support)
· Combine with indicators like RSI or moving averages
🎯 Why are these levels important?
· Reflects market psychology (supply and demand)
· Helps identify ideal entry and exit points
· Provides a framework for price movement analysis