You may have heard about 3 or 4 types of support and resistance, but today I will share with you 7 types
Of support and resistance. Let's discuss them one by one:
1. Horizontal lines of support and resistance
Support: They are drawn at price levels where the asset stops falling and starts rising.
Resistance: It is drawn at price levels where the asset stops rising and starts falling.
How to draw: Locate price points where the price previously reversed, and connect them with a horizontal line.
2. Trend lines
Uptrend Line: Connects higher lows in an uptrend.
Downtrend Line: Connects lower highs in a downtrend.
How to Draw: Use wicks or candle bodies to draw a line that reflects the price trend and extends into the future.
3. Round numbers
Support and Resistance: Psychological price levels such as $10, $100, $1000, are often strong support or resistance points.
How to draw: Locate the round numbers on the chart and watch the price react around them.
4. Liquidity areas
Support and Resistance: Areas of high trading volume that represent important price levels.
How to Draw: Use tools such as a volume file to define these areas.
5. Moving averages
Support and Resistance: Moving averages such as the 50, 100, and 200 days can be dynamic support or resistance.
How to draw: Draw moving averages on the chart and follow the price reaction to them.
6. Fibonacci retracement levels
Support and Resistance: Fibonacci retracement levels identify potential support and resistance areas.
How to draw: Identify an important high and low, and use the Fibonacci retracement tool to draw levels between them.
7. Pivot points
Support and Resistance: Pivot points and associated support and resistance levels identify potential turning points.
How to plot: Calculate the pivot points using the highest, lowest, and close of the previous period, and plot them on the chart.