Tutorials on support and resistance with examples and Strategies.

Support Basics Resistance Basics

Ways to find support and resistance levels

Trendline: By far most common way to find support and resistance is done by drawing trend line. If the trendline is drawn by joining lower points then its acts as support. If trendline is ascending then the support level keeps on rising with time. This would be a best trade setup as both support level and trend are moving up.

Example of Trendline (support) Formed By Nifty

Moving Average: As we have seen in moving average section that moving average also provides dynamic support and resistance, they can be a good tool for support and resistance. Moving average levels are easy to use as analyst does not require skill to draw trend-lines.

Example of Trend Formed By Moving Average By Infosys Ltd.

Previous Highs or lows: Previous highs and lows are psychological level. Some consider them as extreme trading levels and hence acts as support levels.

Example of Breakout From Previous High Formed By Nifty

Fibonacci Retracement: Fibonacci retracement levels of 38.2%, 50 % and 61.8 % acts as a good support/resistance levels IMAGE

Pivot Point: Similar to Fibonacci levels, Pivot point is also used to calculate multiple support and resistance levels. IMAGE

Overlays: Some of the chart overlays like Bollinger Band provides dynamic support and resistance levels.

Importance of Support and Resistance?
Support and Resistance are important in understanding and interpreting the market.
1. Supports and Resistance helps traders to identify trends (uptrend, downtrend or sideways market).
2. Supports and Resistance are building block of chart patterns like Head And Shoulder, Double Top, Double Bottom
3. It also give signals to traders when to enter or buy a share, and when to exit or sell.
4. They are helps to place stop loss.

Example of Support And Resistance By Bolliger Band Shown in Bank Nifty Chart.

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Support Basics Resistance Basics