The Simple Trick Making ME Money and Losing YOU Money
Today's post is going to be a quick one but it is important. I think that understanding support and resistance levels is one of the most important things you can do as an investor. They are key indicators of market movement and they can be used in so many different scenarios. The biggest issue is that people use them incorrectly!
I posted the other day talking about a support level for
BTCUSD
. I said that there was a support at $6000 USDT. Then the craziest thing happened...it dropped below it and actually bounced near 5858. Then I received a comment saying that my support level was wrong.....
Guys! Support and resistance levels are ranges. They ARE NOT singular numbers. There is no magical book that says that the price has to bounce at a specific level! They are buying and selling ranges that form from people trying to break even.
Understand this, there were people that wanted to buy
BTCUSD
when it went down to 6000 the last time but they were not able to. So they did what most people would do. Wait. They left there buy orders there so that they could get in on the action. Then when the price fell all those people that wanted to get in the last time were now able to get in. This is why support levels form over and over again and this is why they eventually break. When there are no longer buyers that want to get in near that level, the price ends up breaking through.
So with that in mind, things are never going to be perfect. I can't really blame you for thinking that it is a specific number because almost every technical analyst uses very thin lines to describe these levels. This is not "wrong" but it also teaches some bad habits.
An easy way to fix this is to start using rectangular ranges instead of thin lines. For example, you can see these ranges for
BTCUSD
that I have drawn above. Anything in the green is a buying range (or a support) and anything in red is a selling range (or a resistance).
I draw these ranges by picking the extreme resistance as the top and then finding the next resistance underneath that for the bottom.
I really hopes this helps you understand where market turns are most likely going to happen. These zone are key and I hate when people don't sell because they are so caught up on a specific number ranther than a range.
Go out there and make some money. I am not going to lie, the market is tough right now. Be smart and always make a plan.
I posted the other day talking about a support level for
BTCUSD
. I said that there was a support at $6000 USDT. Then the craziest thing happened...it dropped below it and actually bounced near 5858. Then I received a comment saying that my support level was wrong..... Guys! Support and resistance levels are ranges. They ARE NOT singular numbers. There is no magical book that says that the price has to bounce at a specific level! They are buying and selling ranges that form from people trying to break even.
Understand this, there were people that wanted to buy
BTCUSD
when it went down to 6000 the last time but they were not able to. So they did what most people would do. Wait. They left there buy orders there so that they could get in on the action. Then when the price fell all those people that wanted to get in the last time were now able to get in. This is why support levels form over and over again and this is why they eventually break. When there are no longer buyers that want to get in near that level, the price ends up breaking through. So with that in mind, things are never going to be perfect. I can't really blame you for thinking that it is a specific number because almost every technical analyst uses very thin lines to describe these levels. This is not "wrong" but it also teaches some bad habits.
An easy way to fix this is to start using rectangular ranges instead of thin lines. For example, you can see these ranges for
BTCUSD
that I have drawn above. Anything in the green is a buying range (or a support) and anything in red is a selling range (or a resistance). I draw these ranges by picking the extreme resistance as the top and then finding the next resistance underneath that for the bottom.
I really hopes this helps you understand where market turns are most likely going to happen. These zone are key and I hate when people don't sell because they are so caught up on a specific number ranther than a range.
Go out there and make some money. I am not going to lie, the market is tough right now. Be smart and always make a plan.
