Today I want to talk more about Support & Resistance and how understanding some key principles will help you. These are taken from Lesson 2 in our Learn to Trade Program.
Many new traders mistakenly believe that Support and Resistance (S/R) levels are like brick walls, stopping price movement. In reality, they behave more like trampolines. Price often tends to bounce away from S/R instead of stopping as soon as they reach the level.
5 BASIC PRINCIPLES OF SUPPORT AND RESISTANCE
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Finding Support and Resistance Levels. A great tip for trying to identify S/R levels on your charts is to focus on the pivot or turning points in the price. Some traders also call these Swing Highs/Lows. As traders, you want to focus on the obvious areas as these are what other traders are seeing and trading off. If it takes you more than 60 seconds to find them, it's most likely not a key level.
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Always Have Key Support/Resistance Lines Drawn in that are most relevant to current price levels. Draw in at least 2-3 key levels. That way your charts look cleaner and easier to understand. If you draw too many lines drawn on your chart and you’re more likely to become overwhelmed. 🤯
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Focus on levels with round numbers ending in 0 or 5 because more traders are likely to be watching them. We can see this on a chart of AAPL below with $140, $150, and $155 being the key levels nearest to the current price.
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The Role Reversal - What was previously a Support level can later turn into Resistance and vice versa.
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Trade-Off the Bounce of Key Support Resistance levels. Wait until the market is decelerating into the key line before entering By learning to be patient and waiting for the price to bounce off these levels, combined with a reversal candle, you will improve your win rate.
Now that you understand Support & Resistance, I recommend you learn more about another confluence factor, Candle Deceleration, and Acceleration.
By adopting these principles in your trading, you will be able to improve your trade entry and management and improve your results.
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.
This will allow you to learn more about the Stockmarket and our online Learn to Trade Program. It is designed for people who want to take charge of their finances, invest for the long-term, earn more, and become financially secure.
In this training you will learn:
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How to reduce risk and invest in Stocks in a safe and steady way
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Why using options will allow you to create an additional monthly income and boost your returns in only a few hours per month
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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.
If you want different results from the average investor, you have to start investing differently.
So if you’d like to learn how to make more money each month and protect your stocks, you’re going to enjoy this training.
Thanks for taking the time to read this and please share it with anyone who may find it useful.
Best Wishes
Paul Allen
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