“Support and Resistance” are the main key point in Technical analysis. Analysis of Support and Resistance can be used in all kinds of markets like the Stock Market, Commodities, Cryptocurrency, and Forex.
All Technical indicators are based on Support and Resistance and every Technical indicator has its own Support and Resistance levels.
Support and Resistance can be used in Intraday, long holding, Options, and Features. So let’s first understand what Support is and what Resistance is.
What Is Support?
Support is the point from where the stock or any kind of assets mentioned above started moving up. That means when a stock is falling, then at some particular level during the fall the buyers get activated due to which the stock price suddenly started moving up, such a point can act as support.
When finding such support points, means there are chances that if somehow the stock fall again then it is possible that it may go up again from the same level from where the stock price started moving up previously because buyers are available at that level which pulling stock price up, so if you are one of who is buying, you should have to take entry at such levels where other buyers also get activated.
How To Find Support?
So, if you are one of who is buyers and want to buy a stock, then while trading/investing you should have to first look at history, does not matter what time frame of the candle you are looking at, it applies to all time frames of the candle1 5 minutes, 10 minutes, 15 minutes,…1 Day, 1 Month.
After checking history, you may find a particular level from where you see that the stock moved up; now let’s suppose at the time when you are looking at the chart, the price of a stock is above that level. in a such condition we should have to wait until the stock price fall and come somewhere around the same previous level from where the stock moved up, we can draw a line at that level to know the accurate price level, like below.
Entry Point
After waiting if we see that the stock price is back to the same level where we marked Support, now is a good time to take a buy entry assuming that the stock went up from this level so possible that the stock may up again from this same level.
Exit Point (Profit Book / StopLoss)
After the Buy trade is executed, you should have to set Exit points to book profit and StopLoss to book affordable loss. Let’s see where you can set the target and the stoploss after the Buy trade is executed.
Target/Profit Book
After the Buy trade is executed, your first target should be the previous level from where the price is down. If you want to hold more and when the price goes up then you can set a second target level from where the price is down, like below.
StopLoss
Stoploss can be set according to how much loss you can afford. After the Buy trade is executed, if somehow the price did not go up and later breaks the Support Level or if you did not book profit at the first target (assuming it may go up more) and later breaks the Support Level, it is good to exit and book affordable loss, because the price may go more down which can give huge unnecessary loss.
You can start your Trading/Investment journey with;
Test Your Knowledge.
Go to Stock Market, you will find a Chart at the Top of the page. You can set any Time Frame, just try to find support and share your knowledge in the comment section of this post.
Conclusion
Trading indicators do not give 100% accuracy but help more to stop unnecessary loss. Support and Resistance are important keys in Technical analysis and help a lot while Trading and Investment.
Buying at the Support level is a good choice because it can be expected that the price may go up from the Support Level. However, while Trading and Investment we should trade/invest with StopLoss to avoid unnecessary losses.