When the market moves up and suddenly pulls back, the highest point reached before the pullback is resistance.
When the market continues to move up again, the lowest point reached before moving up is called support.
It is important to remember that horizontal support and resistance levels are NOT ABSOLUTE VALUE.
To filter out false break-outs, you should think of subsequent support and resistance as “zones” rather than absolute levels.
One way to find these zones is to set support and resistance on a line chart.
The thing to remember is that when the price crosses the resistance point, the resistance has the potential to become support.
The same thing happens with support, if a support point is broken, it can potentially become a resistance point.
trend line
In its simplest form, an uptrend line is drawn along the bottom of the support area (valley).
In a downtrend, the trend line is drawn along the top of the resistance area (top).
3 types of trends:
Uptrend (higher lows)
Downtrend (lower highs)
Flat trend (consolidation)
Channel
To create an ascending/bullish channel, simply draw a parallel line at the same angle as the uptrend line and then move that line to the position where it touched the latest peak. This should be done at the same time as you are making a trend line.
To create a bearish channel, it is enough to draw a parallel line at the same angle as the downtrend line and then move that line to the position where it touches the latest valley. This should be done at the same time as you are making a trend line.
Channel up (higher highs and higher lows)
Channel down (lower highs and lower lows)
Flat channel (consolidation)
Trading with the implementation of support and resistance in two ways: Bounce and Break
When the price bounces, we want the price opportunity to be on our side and confirm that the support or resistance level will hold.
Instead of buying or selling outright, wait for the price to bounce before entering the market.
By doing this, you avoid times where the price moves so fast that it forms the next level of support and resistance.
As for trading when the price breaks, it can be in an aggressive way or in a conservative way.
The aggressive way, you simply buy or sell every time the price crosses a support or resistance zone.
The conservative way, you wait for the price to make a "pullback" to the support or resistance level that has been broken, then enter after the price bounces back.