How to calculate the support area in trading
The support area is where the price stops falling and buyers start to enter strongly. Understanding it correctly helps you know where the market might rebound and determine a safe entry point.
Firstly: What does support mean?
Support is a price level where strong demand appears, meaning there are people willing to buy when the price reaches this level. When the price drops and reaches this level, it often stops or rebounds.
Secondly: How do you practically determine the support area?
1. Monitor previous lows
Open the chart and observe where the price has stopped falling multiple times. If you see the same level where the rebound occurred, then this area is considered support.
2. Calculate the average of the lows
If there are multiple lows close to each other, take the average prices between them. For example, if the lows were at 105, 107, and 108, then the support would be around 106.5.
3. Monitor trading volume
When the price reaches a certain area and the trading volume increases, this means that buyers have entered strongly. This area is often a real support.
4. Use different time intervals
Look at the same area across multiple time frames, such as hourly, daily, and weekly. If it appears as support across multiple frames, it will be stronger.
Thirdly: How do you ensure that the support is real?
- The price has rebounded from it multiple times
- Clear bullish candles appeared after reaching this level
- The trading volume increased at this level
- It was not easily broken when the price returned to it
Practical example✅
If the price drops and reaches an area it has rebounded from twice before, and a bullish candle appears afterward with clear trading volume, then this area is considered support. Buying from here would be logical, with a stop loss placed just below.
Summary
The support area is not calculated by a single number, but is determined by observing the lows, trading volume, and price behavior at that area. The clearer and more repetitive the area, the stronger it is. A smart trader does not settle
By looking, one calculates and analyzes before entering the trade
