A support level is a level on the way down where it is expected that there will be enough buying to hold the price back from falling further. A resistance level is the opposite, it is a level on the way up where sellers are expected to prevent the price from rising further.
Support levels usually form when:
Over a period of time, the price has fallen to a certain level many times and then rebounded. This level may form a support level. In addition, moving averages can also serve as support levels.
A simple support level calculation formula:
First, find the low point A of a range, and then find the high point B. Next, use the formula:
Support level = (B-A) ÷ 3 + A
Over a period of time, the price has fallen to a certain level many times and then rebounded. This level may form a support level. In addition, moving averages can also serve as support levels.
The support level is roughly calculated to be (73777-53000) ÷ 3 + 525000 = 59925
Resistance levels usually form when:
Historical price highs: If the price has tried to break through a high point many times but failed, this high point may become a strong resistance level.
A support level is a level on the way down where it is expected that there will be enough buying to hold the price back from falling further. A resistance level is the opposite, it is a level on the way up where sellers are expected to prevent the price from rising further.
Here is also a simple formula for calculating resistance level:
Rising resistance level D = high point B × retracement level C ÷ low point A
Taking the same trend of the big cake as an example, the previous low point A is 59678, the high point B is 62083, and the low point C is 60800
Roughly calculated, the rising resistance level is about 62083×60800÷59678=63250
A simple support level calculation formula:
Selling near resistance: When the price rises close to the resistance level and looks like it may fall back, consider selling near the resistance level.
Use Stop Loss:
When trading support and resistance levels, you should set a stop loss. For example, you can set a stop loss slightly below the support level in case the price falls below the support level and continues to fall.
Be patient:
Support or resistance levels may not always be precise, and the price may slightly fall below the support level or break through the resistance level, so as a trader you need to be patient and wait for confirmation.
