Beginners Guide- How to spot support and Resistance levels
Hi Fellow Traders,
I wanted to do something different with this post to help those that are new in the world of investing. One of the most fundamental parts of trading is knowing resistance and support levels. Now what do we mean by this? These levels/prices are prices which kind of act as a ceiling (resistance) or a floor (support). Think of it this way, lets say you are in a multi level building and you are on the second floor, for you to move to the next level you have to get through some sort of resistance in the form of a ceiling. If you have the energy and the will you will overcome that resistance and reach a new level which is now the 3rd floor. Now Lets say that you are now on the 3rd floor what price do you think will become the new support price that will keep you at the 3rd level? correct it was the ceiling of 2nd floor which is and always was the floor of the 3rd floor. So remember the key thing here is that resistance always becomes support once broken and vice versa.
If you look at the graph attached to this post you will see some resistance and support levels for bitcoin. if you look at approximately $20,000 we can see that bitcoin failed to break that resistance as it had no more energy to overcome this price level. furthermore this would be a very strong resistance level as we have not tested that value for 10 months so this is a very strong price psychologically for investors, just remember the longer the resistance or support level lasts the stronger it is. So one should suspect that when we reach this price again we might see a retracement of some sort before hopefully eventually breaking it and it becoming a very strong support level.
I will outline some important points below for support and resistance to remember:
1) The longer a support and resistance lasts the more significant it is
2) The more times support/resistance is touched and not broken the more significant it is, an example of this is the $5800 line on the btc chart this price was hit maybe 3-4 times with widely separate times and also this price was not broken with huge down volume on the 5-6th of feb. Some of the publishers on tradingview are saying prices will get lower then $5800 which the probability is quite low as the volume now is much much lower then that of 5th of feb, think of volume as like the energy required to break support or resistance prices, moreover if the prices couldn't be surpassed with much larger volume/energy what makes them think that it will now?
3) Support or resistance levels can act as temporary stops to a trend, an example would be a up trend where the price of a coin would decrease for a short time after hitting the resistance but continuing on with the trend afterwards. This applies to downtrends where the support level would be a temporary stop before the downtrend continues on.
This what i can think of in regards to support/resistance levels, if i remember anything new i will re-post on this page. Please ask any questions if you don't understand anything i have posted here, i will gladly help clarify what I am saying.
Successful Trading
Crypt1c_one
I wanted to do something different with this post to help those that are new in the world of investing. One of the most fundamental parts of trading is knowing resistance and support levels. Now what do we mean by this? These levels/prices are prices which kind of act as a ceiling (resistance) or a floor (support). Think of it this way, lets say you are in a multi level building and you are on the second floor, for you to move to the next level you have to get through some sort of resistance in the form of a ceiling. If you have the energy and the will you will overcome that resistance and reach a new level which is now the 3rd floor. Now Lets say that you are now on the 3rd floor what price do you think will become the new support price that will keep you at the 3rd level? correct it was the ceiling of 2nd floor which is and always was the floor of the 3rd floor. So remember the key thing here is that resistance always becomes support once broken and vice versa.
If you look at the graph attached to this post you will see some resistance and support levels for bitcoin. if you look at approximately $20,000 we can see that bitcoin failed to break that resistance as it had no more energy to overcome this price level. furthermore this would be a very strong resistance level as we have not tested that value for 10 months so this is a very strong price psychologically for investors, just remember the longer the resistance or support level lasts the stronger it is. So one should suspect that when we reach this price again we might see a retracement of some sort before hopefully eventually breaking it and it becoming a very strong support level.
I will outline some important points below for support and resistance to remember:
1) The longer a support and resistance lasts the more significant it is
2) The more times support/resistance is touched and not broken the more significant it is, an example of this is the $5800 line on the btc chart this price was hit maybe 3-4 times with widely separate times and also this price was not broken with huge down volume on the 5-6th of feb. Some of the publishers on tradingview are saying prices will get lower then $5800 which the probability is quite low as the volume now is much much lower then that of 5th of feb, think of volume as like the energy required to break support or resistance prices, moreover if the prices couldn't be surpassed with much larger volume/energy what makes them think that it will now?
3) Support or resistance levels can act as temporary stops to a trend, an example would be a up trend where the price of a coin would decrease for a short time after hitting the resistance but continuing on with the trend afterwards. This applies to downtrends where the support level would be a temporary stop before the downtrend continues on.
This what i can think of in regards to support/resistance levels, if i remember anything new i will re-post on this page. Please ask any questions if you don't understand anything i have posted here, i will gladly help clarify what I am saying.
Successful Trading
Crypt1c_one