Support and Resistance Levels

Support and Resistance levels are the basis of the basics of trend trading.

Support and resistance levels are formed when some kind of price barrier becomes psychologically important for traders.

If this is support, then sellers cannot push the price lower due to the high pressure of buyers and the price in most cases rushes up, bouncing off the support level.

The resistance level is formed if the pressure of sellers is higher than that of buyers and the price rolls back down.

Resistance Example

Here is an example of an uptrend resistance line, as we can see, there is a good very good stable trend, all the highs are updated almost exactly bouncing off the drawn line along the bodies of the candles.

Read also - Figure: Pennant and Flag

Support Example

As you can see, the price accurately bounces off the drawn line from below in the direction of the trend and continues to go up.

Strategy for trading along support and resistance lines

Focusing only on these levels, you can use a simple strategy in trend trading:

Buy ↑ — on a rollback in the direction of the trend FROM the support line
Sell ↓ — on a rollback in the direction of the trend FROM the resistance line

This is a good and simple strategy that beginners and inexperienced traders can take as a basis, even with it you can already earn money, not to mention these strategies.

Level formation

If the price breaks through the resistance, then the resistance level becomes the support level:

If the price breaks through the support, then the support level becomes the resistance level: