SUPPORT AND RESISTANCE TRADING

Resistance is any part at which the market stopped going up and turned down
Support is any part at which the market stopped going down and turned up
An uptrend is a series of rising peaks and troughs
A downtrend shows a series of descending peaks and troughs.
A sideways trend is a series of horizontal peaks and troughs, with prices moving within a range, failing to make new highs at the top of the price range and failing to make new lows at the bottom of the price range
Role Reversal
One of the most interesting phenomena regarding support and resistance occurs when the price is finally able go above and beyond an identified support or resistance level.
]When this happens and a previous trough is broken it is not uncommon to see this previous level of support change its role and become a new area of short-term resistance.
The opposite of this process occurs when the price breaks above resistance or previous peak.,this area now becomes a new area of short term support.


Lets take a look at a SIDEWAYS TREND (commonly known as ranging)

Look at charts (any) see how the price travels between its high and low and each time fails to make a new high or low, eventually a breakout of the low takes place ,notice the retest of the low after the breakout.

In the next part we will take a look at ROLE REVERSAL and how S/R works with REVERSALS .
In later parts we will look at the relationship between the area on the charts that we have identified as S/R levels and see how they confirm each other on the higher timeframes.
We will look at how far the price can move into its previous range.
Entry techniques for the different types of trend.
Where to place stop loss using our s/r lines and most importantly where to place our profit targets.

REMEMBER

BUYERS ENTER THE MARKET AT SUPPORT AND TAKE CONTROL FROM THE SELLERS
SELLERS ENTER THE MARKET AT RESISTANCE AND TAKE CONTROL FROM THE BUYERS

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A break out is one way to trade s/r , there are other situations that we can use s/r ,what about reversals ,what about trend continuation .

eg. the market pulls back on the 60m chart to form a top but when you check the 4hr chart and that top is a resistance and the daily trend is down then you know the trend is about to continue.

Its a common misconception that unless a s/r level is broken we are in a range.

eg. price on a 60m chart forms a rising double bottom that means a low and then a higher low ,on the 240 chart that bottom is clearly a support a line,
the daily is showing a series of higher highs and higher lows with the area around the current price as clearly being a retest of a previous peak(role reversal).

BUYERS ENTER THE MARKET AT SUPPORT AND TAKE CONTROL FROM THE SELLERS
SELLERS ENTER THE MARKET AT RESISTANCE AND TAKE CONTROL FROM THE BUYERS

Its important to understand the relationship between timeframes to be able to use s/r effectively.