What is Support & Resistance (S&R)? What Types of S&R?
Support & Resistance (S&R) is one of the basic topics that we need to know in trading, whether trading forex, shares or cryptocurrency.
Support & Resistance can show the upper and lower limits of price movement in a certain time.
*) Resistance is the upper limit to limit prices from rising further.
*) Support is the lower limit to limit prices from falling further.
The market moves because of differences in demand and supply.
When demand is greater the price will rise, if the supply is greater the price will move down.
Types of Support & Resistance:
1. Classic S&R
The way to determine S&R in Classic S&R is using previous swing high and swing low as referece (picture no.1)
The advantage of using this method is we can know previous S&R and we can use that as our reference to determine target profit, or stop loss area.
The weakness of using classic S&R is when the price break S&R we don’t know the next S/R
2. Dynamic S&R
The way to determine Dynamic S&R is using moving average. We determine high point & low point when price touch moving average diagonal line. (picture no.2)
4. Harmonic S&R
Harmonic S&R Is useful to determine S&R when price in all time high.
The weakness of Classic S&R is when the price break S&R we don’t know the next S&R, because of that we use Harmonic S&R to analyze the next target profit or loss area.
We use Fibonacci methode (picture no.3) to determine S&R
How we know this is a strong S/R or not?
That is a strong S/R when the price touch the S/R area and the price have a strong movement.
Function of Support & Resistance
Support & Resistance makes us know if this area can be a price target area, so we understand if the price doesn’t always go up or down, so we must to take profit and we have to put a stop loss.
In stock market activity, support & resistance prices indicate certain psychological levels, like:
*) Support is the level where people buy shares at the lowest price and make a profit when the price rises.
*) Resistance is the level where people have bought shares at the highest price and experienced losses because the price fell.
That activity becomes a repeating pattern.
People tend to buy at the support price because they know the price will rise and when the price is almost or already in the resistance area they will sell.
In the Forex market, we can have 2 positions in the same time,
So when the price is at the support we can make a purchase, and when the price is at resistance we can sell the previous position and in the resistance area we can also look for a selling position with a profit target in the previous support area and a stop loss area above the resistance area, because if price breaks through the resistance, price will continue to rise and create a new resistance.
Notes:
1. The source of this writing comes from several ideas that I have read, heard, or experienced personally. So if those of you reading this post & feel this is your idea, Please allow me to share again, because maybe I also learn from you.
2. The topic of Fibonacci and Moving Average will be discussed at another time
Thank You.
28 Sep 2023
Support & Resistance can show the upper and lower limits of price movement in a certain time.
*) Resistance is the upper limit to limit prices from rising further.
*) Support is the lower limit to limit prices from falling further.
The market moves because of differences in demand and supply.
When demand is greater the price will rise, if the supply is greater the price will move down.
Types of Support & Resistance:
1. Classic S&R
The way to determine S&R in Classic S&R is using previous swing high and swing low as referece (picture no.1)
The advantage of using this method is we can know previous S&R and we can use that as our reference to determine target profit, or stop loss area.
The weakness of using classic S&R is when the price break S&R we don’t know the next S/R
2. Dynamic S&R
The way to determine Dynamic S&R is using moving average. We determine high point & low point when price touch moving average diagonal line. (picture no.2)
4. Harmonic S&R
Harmonic S&R Is useful to determine S&R when price in all time high.
The weakness of Classic S&R is when the price break S&R we don’t know the next S&R, because of that we use Harmonic S&R to analyze the next target profit or loss area.
We use Fibonacci methode (picture no.3) to determine S&R
How we know this is a strong S/R or not?
That is a strong S/R when the price touch the S/R area and the price have a strong movement.
Function of Support & Resistance
Support & Resistance makes us know if this area can be a price target area, so we understand if the price doesn’t always go up or down, so we must to take profit and we have to put a stop loss.
In stock market activity, support & resistance prices indicate certain psychological levels, like:
*) Support is the level where people buy shares at the lowest price and make a profit when the price rises.
*) Resistance is the level where people have bought shares at the highest price and experienced losses because the price fell.
That activity becomes a repeating pattern.
People tend to buy at the support price because they know the price will rise and when the price is almost or already in the resistance area they will sell.
In the Forex market, we can have 2 positions in the same time,
So when the price is at the support we can make a purchase, and when the price is at resistance we can sell the previous position and in the resistance area we can also look for a selling position with a profit target in the previous support area and a stop loss area above the resistance area, because if price breaks through the resistance, price will continue to rise and create a new resistance.
Notes:
1. The source of this writing comes from several ideas that I have read, heard, or experienced personally. So if those of you reading this post & feel this is your idea, Please allow me to share again, because maybe I also learn from you.
2. The topic of Fibonacci and Moving Average will be discussed at another time
Thank You.
28 Sep 2023