|Market Cycle||Steps To Start Trading||Technical Analysis||Stock Analysis|
|Support and Resistance||Futures||Options||Price and Volume|
|Highs and Lows||Trends|
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.
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.
Fibonacci retracement levels of 38.2%, 50 % and 61.8 % acts as a good support/resistance levels
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.