A Guide To The Fundamentals Of Support And Resistance Trading

Here's my definitive guide on how to place your take profit, entry positions and stop loss orders when you are trading using support and resistance patterns. Many people have reached out to me asking to provide more details on where to place the orders exactly. In this guide I will share my experience, and show what I learned during my trading journey to be the most effective.

Again, this is my personal view and the way I personally trade. If you have another view on this, I encourage you to share it in the comments. The reason all of us are on Tradingview is to learn. A trader would be quickly out of the market, if they don't continuously keep learning. Please challenge my explanation, ask questions, and share your own vision. Without further ado, here is the explanation for each of the orders:

Take Profit.
Many people will be looking at the resistance areas. As soon as the price comes close to this area, it will find friction and will struggle to go higher. Make sure you place your take profit limit order directly below the area of resistance, to stay ahead of the curve. This will maximize the chances of your take profit to get hit, even when the price prematurely bounces off the resistance area.

Entry Position.
Similarly to the logic of the take profit, you would want to place the limit buy slightly above the horizontal support. The closer you get to this zone of support, the more bulls will start to fight back and try to push the price back up again.
Keep in mind, if you spot a support and resistance trade set-up, you don't necessarily have to immediately enter the trade. You can place a limit buy on the price where the pattern you spot would be validated.

Stop Loss.
Everything about a trade goes along with the assumption that the pattern you found is true. You should use a stop loss to make sure you exit the trade immediately after your pattern gets invalidated. For a support and resistance set up, this translates to the price breaking through the support.


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Disclaimer!
This post does not provide financial advice. It is for educational purposes only!

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