Support and Resistance Trading Strategy
Here you will learn the most powerful and important method of Support and Resistance Trading Strategy. what are support and resistance? How to work on support and resistance? How to find support and resistance? Here you will get all the ideas and answers. Support and resistance are the heart of technical analysis.
we can use support and resistance in intraday trading, positional trading as well as long term investment purpose also.
What are Support and Resistance in technical analysis?
support and resistance are the areas where price has reacted in past and also can react in the future. Most of the trade opportunity comes from S/R. Support is a zone or area from where buyers are aggressive and want to come in power to prevent the price from falling. The logic behind it is the buyer will get the share at a lower price in the support zone.
When the price is on the support zone demand will more than supply because of its price did not fall below the support zone. A pivot point also acts as support and resistance.
The above pic shows nifty support.
Supports do not hold every time, however, if the price breaks the support zone that indicates the bears or sellers are aggressive then buyers and they are ready to sell there share at a lower rate. Once support is broken the particular support zone became to the resistance zone.
Resistances are a zone or area from where sellers are aggressive and want to come in power to prevent the price from rising further. The logic behind it is the sellers want to get sell their share at a high price in the Resistance zone.
The above pic shows nifty resistance.
When the price is on the Resistances zone supply will more than demand because of its price fall from the resistance zone.
Resistances do not hold every time, however, if the price breaks the resistance zone that indicates the bulls or Buyers are aggressive then sellers and they are ready to buy the share at a higher rate. Once Resistance is broke the particular Resistance zone became to the support zone.
How to Draw a Powerful Support And Resistance Zones or Demand and supply?
Open the chart. I use candlesticks chart type. you use whatever chart type you want. There are 3 types of chart type
- Bar chart
- Candlestick chart
- line chart
Do it now! Reading is boring, I want you to apply!
The above image show banknifty support
Identify all the recent swing highs and lows which you can see on the chart. You might zoom out the chart a little bit. Put a horizontal line on all swing high and swing low and other horizontal lines to nearest close to them. As shown in the above picture. While drawing the support and resistance you should be confident about it. There should not be any dought in your mind while drawing it.
Above pic show Baja auto share resistance
How do you determine strong support and resistance?
When a share price takes to support multiple times on a particular level. That is a strong Support zone or Demand zone. Same as resistance If any share price faces resistance on a particular level multiple times that levels are a strong supply zone or strong Resistance zone
How to Trade Support and Resistance levels for Trading Strategy?
Support and Resistance Trading Strategy is the most powerful and most important strategy used by successful traders. Till now we had learned many things about support and resistance. Now the time came to learn how to implement it and earn money from the stock market.
Stock selection For Intraday
- Select the stock from the daily time frame in which Stocks are on Support and resistance before the share market opens. Write down the levels or set the alert of the levels.
- As soon as the Stock market opens if a stock breaks its resistance levels with volume and closes above it in the first 5 min chart time frame. Then Go for buy above first 5min candle high and keep stop loss below the resistance levels or the 50% of the breakout candle body.
If a stock breaks support levels with volume in the first 5 min and close below it then go for short sell below the first 5 min candle low and take a stop loss above the support level or the 50% of the breakout candle body.
This strategy works awesome and shows good results. But the condition is as soon as the market opens within 30 to 60 minutes the support or resistance should break and also with volume. Volume is the main key to this strategy.
How to trade a Breakout on Support and Resistance trading strategy?
What are the intraday breakout
When a price of a particular financial instrument breaks either support or resistance in intraday is called an intraday breakout.
Breakout strategy for intraday
There are mostly 5 type of breakout used by trader by trading in intraday.
- Previous candle high or low Breakout
- yesterday high or yesterday low Breakout
- Recent swing high or swing low Breakout of
- Breakout of major Support or Resistance
- Breakout of Trend line or Moving average
Advantage of Intraday trading through Breakout Strategy
- Trading with breakout gives you trade with momentum
- If you trade with breakout there is much possible to get a big move in intraday with minimum risky.
- In intraday, there is also a chance to get a false breakout