Today I want to talk about how to trade in the zones. Specifically, support and resistance zones. They add another dimension to horizontal support and resistance lines you may already be familiar with.
Let's take a look at the weekly chart for Tesla. The BLUE RECTANGLE highlighted represents a recent support/resistance zone for this stock. The upper and lower lines of the rectangle are support and resistance lines that have rejected price on multiple occasions and have even reversed roles.
When two support/resistance lines are close together, it is better to treat the entire area as a support zone (or resistance). They are a sign of indecision in the market and are more common in rangebound or sideways markets.
3 Tips for Trading in Zones
Avoid Trading Within Zones. Whenever the market is trading within a zone, price action becomes choppy, indecisive, and unpredictable.
When Price Action Decelerates (ever smaller candle bodies) within the zone after a previous pullback outside the zone, pay attention. This could be a great entry point. Again, the more confluence factors we can add such as Candle formations, the higher our probability of winning.
Place Your Stop Loss Price Targets outside the zone. Give your trades room to breathe.
Read our latest post on how to use the 50 Exponential Moving Average.
If you would like to learn more about investing in the Stockmarket, I want to show you how.
Here's What to Do Next
I’ve created some free stockmarket training for you and I’d like you to have it.
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How to reduce risk and invest in Stocks in a safe and steady way
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A strategy to protect yourself from the Next Stock Market Crash, so you can worry less and focus on the things you enjoy
The training features the safest trading strategies that I recommend for complete beginners. I’ll also show you an actual trade that I placed on Netflix where the stock fell by 19% and yet I still made money.
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Thanks for taking the time to read this and please share it with anyone who may find it useful.
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