EASY Support and Resistance Trading Strategy!!!

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Dear Traders!

Support and resistance levels are horizontal price levels that connect market highs or lows on a price chart. A support or resistance level forms when a market's price action reverses and changes direction, leaving behind a market peak or trough (swing point). Support and resistance levels can define trading ranges, as shown in the chart below, and they can also be seen in trending markets as the market retraces and leaves swing points behind.

Price will frequently respect these support and resistance levels. In other words, they tend to limit price movement until it breaks through them.

How to trade support and resistance

One of the most fundamental trading strategies is the use of support and resistance levels. It can be used to manage risk, set stops, assess market conditions, and determine appropriate entry and exit points. The most common trading strategy based on support and resistance levels is to buy (go long) when the price approaches the support level and sell (go short) when the price approaches the resistance level. However, traders should wait for confirmation that the market is still following the trend.

Placing stops and limits below support and above resistance is also advised. It allows traders to quickly close a position if the price breaks through levels of support and resistance. Before you enter the trade, consider your profit target and an acceptable level of loss, and then set your exit points near the support and resistance levels.

Trading breakouts of support and resistance

Another strategy used in support and resistance trading is the breakout strategy, which involves waiting for the price to move outside of either level. A breakout is more than just a slight movement past the support or resistance levels. It is distinguished by particularly abrupt and rapid movement with increased momentum, which creates opportunities for profit. This way, previous support becomes resistance, or previous resistance becomes new support for future reference.

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