Education

Trading Support & Resistance


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Trading support and resistance is a key to success when trading, without a good grasp of knowledge of the basics traders will have no chance in the financial markets and their capital will be eaten by the sharks that swim around these markets. Support and Resistance is quite basic to understand, but it does take time to master, its one of these things that looks quite easy, but when you start adding other factors with support and resistance it can get confusing for some, luckily we at toptradingreviews.com are here to help you master support and resistance and with the right attitude you will know how to trade support and resistance successfully.

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So, what is support and what is resistance?

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Looking at the picture above, we have took a snapshot of EUR/USD Daily candles 23/07/18 and we have identified support and resistance areas and marked them down with the blue lines. So support is the bottom blue line, and as you can see EUR/USD has respected that support many times, and once the price has reached the support zone the price has pushed back up and continued its way up until the price touched the bottom line again. This example is very basic, but definitely works especially since the EUR/USD financial markets are in a consolidation stage, which means the price is stuck between two zones “the bottom blue line and the top blue line”.

Looking now at the resistance which is the top blue line of the chart, and we can see that the resistance was broken at the start of the chart with a green candle, this means that the resistance becomes support and we can see a great example of that (refer to the picture bellow). After the resistance broke it became support and respected the price for a few days, before breaking back with a massive red candle to the previous consolidation zone, the huge red candlestick break tells us two things, or there was a news event which caused sellers (bears) to kick in and break the new support zone or there where sell orders ready to be activated, which caused the market to go down and enter the previous consolidation stage.

As we can see, a few candles sticks later the resistance was tested again and it was not broken, which means it is a strong zone and you could potentially be looking to short the market (sell) if it meets the conditions you are looking for, also if a resistance became support and then turned back to the previous position it originally was, it is a really good sign of a strong resistance zone, because the one line (top blue line) has been respected as a support and resistance zone all together which is really good for people looking for a strong signal to enter the market whether it would be a sell order or a buy order, depending on what you are looking for and the market conditions at the time, you could potentially make yourself a lot of money.

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How and when do you enter the market?

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To enter the market, you will really need to look at different timeframes such as the 4 hour timeframe the 1 hour timeframe or even lower like the 15minute timeframe, but at the start if you are a beginner I would recommend you sticking with daily and 4 hourly, basically we analyse the markets on the daily and looking for entry on the 4 hourly chart depending on the price action and candlestick formations.  The charts above are of daily candles so if you would for example like to enter EUR/USD and saw something interesting on the daily you would move to the 4 hourly chart and look for entries (refer to chart above for clear understanding). The chart bellow is the same chart of EUR/USD just in the 4 hour timeframe, just for the reference the three red big candles in the 4 hourly chart is the big red candle on the daily chart. On the chart bellow I have just mentioned two profitable entries that we could have taken, but if you look at the chart there are a few more entries that you could potentially have taken and made money.

 

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Conclusion

To wrap things up, support and resistance is a necessarily tool to have as a trader, without it you cannot trade profitably and that is the honest truth. There are all sorts of different ways you can trade support and resistance in this guide we have explained the basic fundamentals that a trader needs to know, before going to the other advanced support and resistance guides that we will have coming out in the near future. This support and resistance guide has explained what S&R is, how to trade it and when to trade it, also this guide only explains the consolidation phase of the market and how to trade support and resistance effectively in this type of market conditions. Consolidation phase is probably the easiest market condition to start learning about support and resistance , but it does not mean that its less useful or a time waster, because it really is useful and in my opinion its the best way to start and get in profitable trading in the near future.  If you are new and do not know anything about trading or you would just like to learn more or just refresh your trading knowledge, you can leave us a comment bellow and we will answer any questions you have or you could suggest on what guides you would like us to add, and we will make sure to make that happen. This was Evaldas at toptradingreviews.com if you are interested in getting in to trading, but do not have time to learn how to trade and you might be considering to buy a profitable trading robot, please check my blog section of my website. We make non-biased reviews, about the newest robots that are for currently for sale on the market, and make sure they are as good as they say they are.

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