Limbo

Limbo

01-11-2022

12:11

The Support and Resistance Thread 🧵 We will use the previous thread as the base for this one, so if you haven't read it please do. In that we've discussed trends and ranges. Both of these topics will help us outline the support and resistance. Let's dive straight into it. 1/

When we talk about Support & Resistance, it is an essential part of TA. Every indicator or concept is based on this topic. Support & Resistance is a zone/area, it can be horizontal, diagonal or can be based on any indicator. 2/

•What is support? The price at which there is enough demand to stop a downward trend and possibly reverse is known as support. Ex: Demand between 460 & 470 creates a support area, which indicates that price might bounce when reach there. 3/

•What is resistance? The price at which there is enough supply to stop an upward trend and possibly reverse is known as resistance. Ex: Supply between 860 & 880 creates a resistance area, which indicates that price might drop when reach there. 4/

Psychology of Technical Analysis Market psychology is important because it helps traders and investors predict future market movement by helping them recall the past and respond to shifting circumstances. 5/

For instance: What makes resistance effective? It functions because there are more sellers than buyers in a certain price range. As a result, there is supply in that price range , and vice versa for support. Will dive deep into the Pyschology part in different thread. 6/

Support and Resistance Flip You must have heard this countless times! •Broken resistance becomes support. 7/

•Broken support becomes resistance 8/

Support and Resistance in trending market •Highs acts as a resistance •Lows acts as a support Do read my Market structure Thread to get a better understanding of it. 9/

Now let's see how to trade these Support and Resistance. •When to buy based on risk? •Where to put the stop-loss? •Fakeouts •Breakouts 1) It is always a good idea to buy at support if the reward is significantly more than the risk. 10/

2) Stop-loss goes either below the support levels or below the nearest swing low based on the risk and reward it's providing. Opposite in the case of resistance. Either above the resistance or above nearest swing high. 11/

3) Fakeouts/Deviations create new support and resistance levels. Spot a deviation then wait for the close back inside the support or resistance to take the Trade. 12/

4) Breakouts: If the price stays above a support or below a resistance level for a long time, it weakens it. •Price tends to break the level after some consolidation. Buying on the retest of the Broken S/R is an optimal entry. 13/

In this thread, I have covered what support and resistance are and how they work. I have also explained how you can trade support and resistance. But simply reading this is not enough. You need to open the charts and practice all of the stuff explained in the Thread. 14/



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