Introduction to Support and Resistance
Support and resistance are lines that illustrate the divergence between the buyers (bullies) and the sellers (bears).
Support & Admin
Support levels indicate the price where most investors think prices will rise. As the price drops towards support and becomes cheaper, buyers will be more inclined to buy and sellers less inclined to sell.
Resistance levels indicate the price at which most investors believes that prices will go down. As prices move into the resistance zone and the price increases, sellers will be more inclined to buy and buyers less inclined to sell.
How to Draw Lines
To draw a support and resistance line, you need to find out the following: where is the most recent low point? Where is the most recent high point? From there, simply draw a horizontal line below the low point and one above the high point. It is common to have to wait a while to determine if these lines take shape.
You need to check for a support zone, which usually means having to wait to see three failed attempts to break support or resistance.
First Operation Strategy
You are now ready to develop your first trading strategy. If you want to buy and sell on the market, one of the best places to do so is near a support area.
On the contrary, if you want to sell on the market, one of the best places to sell is near a resistance area.
The reason for this fact is very simple. Strong support makes it likely that a low in price has been established, and if strong resistance has been established, it is likely that a high point has been established.
Carrying out buy and sell operations close to support and resistance helps to achieve the objective of buying at a low price and selling at a high price. This is nothing short of a cliché, however it also represents a solid and profitable business plan.
You might be thinking that this seems too simple. Lines break frequently, and you will soon understand this simple fact and be able to incorporate this reality into your operating strategy. When a line breaks, the line changes character.
The support line starts to act as a new resistance line. The resistance line starts to act as a new support line, depending on which line has broken through.
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