Support, S and Resistance, R
1.1. Support is a zone where price moves up.
1.2. Resistance is a zone where price moves down.
- can interchange when that zone is overcome by price
2.1. Horizontal line
2.3. Moving averages
2.4. A Fibonancci level that you often use (Fibo 61.8)
2.5. A ratio of pattern , or a Fibo derived from
level are mostly depending on the trading skills and experiences of individuals
You and me would discuss a way to draw a horizinteal line
- S1: Change the chart to Line chart (because I prefer Closed price)
- S2: Choose zones where price is mostly reacting to that zone, then draw a horizontal line at those zones
- S3: Change back chart to candle chart of bar chart and adjust the horizontal line to make it look approriate
Just only 3 steps for us to draw a line
- I emphasis that is a zone, not a line. We usually based on historical data to plot the horizontal zone. There fore, the close of candle or the shadow of it getting over that zone are quite common
- Because we base on historical data to plot it, so it doesn't have significant value in some specific cases. Not every time that price approaches that zone and bounce back. And not all the bouncing back case meet our expectation.
- All should depend on the surrounding theme of market, we have to look careful on specific cases to consider applying the zone logically.
- All market are freely traded so there is always a chance to form a brand new .
Good luck !
Part 2: Breaking S/R and Confirmation!
You have shown it in your chart, but I don't think you added it to your description, but convention rule is it needs to touch price 3 or more times to be seen as a support or resistance area.
Becomes trickier when you look at support via horizontal lines (I think the best) vs diagonal vs moving averages vs fib levels vs pivot points etc etc :D
Resistance also becomes support once broken through and retested, and vice versa.
I've added this as an editors pick as you have a simple and easy to understand chart supported by great commentary explaining what is happening.
Thank you for contributing your knowledge to the community.