----------------------------------Support And Resistance – The House!----------------------------------
Support and Resistance explanation:
Imagine that you are looking at a vertical cross-section of an "Old fashioned dolls house" which is shown in the schematic. Now you can see all the floors and ceilings in the house, and as you can see here we have a ground floor, first floor, second floor, and roof.
The market then moves lower, having reversed, back to the floor, where it consolidates.
The concept of Support and resistance is important for a number of reasons.
--> First, as we have already seen, a breakout from a consolidation phase can be validated with volume, and if confirmed, provides excellent trading opportunities. The so-called breakout trades.
It is a WIN/WIN. You have the comfort of knowing that once the market has broken through a ceiling of price resistance, not only does this become a floor of price support, it has also become a barrier of price protection in the event of any short term re-test of this area. Any stop loss, for example, could then be placed in the lower regions of the price congestion. This is why breakout trading is so popular.
Support and Resistance explanation:
Imagine that you are looking at a vertical cross-section of an "Old fashioned dolls house" which is shown in the schematic. Now you can see all the floors and ceilings in the house, and as you can see here we have a ground floor, first floor, second floor, and roof.
The market then moves lower, having reversed, back to the floor, where it consolidates.
The concept of Support and resistance is important for a number of reasons.
--> First, as we have already seen, a breakout from a consolidation phase can be validated with volume, and if confirmed, provides excellent trading opportunities. The so-called breakout trades.
It is a WIN/WIN. You have the comfort of knowing that once the market has broken through a ceiling of price resistance, not only does this become a floor of price support, it has also become a barrier of price protection in the event of any short term re-test of this area. Any stop loss, for example, could then be placed in the lower regions of the price congestion. This is why breakout trading is so popular.