What is support at resistance? Well support is just an area where when the price drops to there are most likely a large supply of buy orders, because the stock has become relatively inexpensive and so traders and investors are willing to jump in.
Resistance is a price are where the price runs up and there is likely a large supply of sellers that what to unload there stock, because now the stock has become expensive and it may be about taking profit or there is shift in the trading sentiment, but at that price level the stock pulls back.
So its pretty obvious when the stock is at support you buy at support and when the stock runs up to resistance you sell.
Simple right!
The chart above shows that when it ran into a high in May through June it reversed (resistance) and when it fell to the low of that range it reversed. After the ETF broke resistance in July It eventually fell back and found support at what used to be resistance a few months later.
This chart shows the opposite in that the stock runs up into a high multiple times and falls down to support. When the break in support happens the runs up to support and then turns into resistance.
So as a short term trader we can use these crucial points of support and resistance to short or buy a stock or option.
In the chart above has price begins to move lower each move lower creates a temporary support and when it meets that prior support after breaking below it reverses and this is where a short term trader can take advantage of the swing.
As the price move up after each pullback, this pull back come incontact with prior resistance and then become support and that can be where a short term trader can enter the trade is off the pullback into previous resistance now turned support.
The simple lesson here is buy where you are confident where other traders will be buying and that happens to be at support levels. If you as a trader are selling short you want to be where the majority of traders are going to sell and that is at resistance.
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