Fundamentals of Support & Resistance -001
How to identify them??
Support and Resistance are areas where price has reacted to in the past and can potentially react again in the future.
We draw support and Resistance levels because once the price gets back to this levels ,there are possibility of trading opportunities that arise and you have to draw this levels already as a reminder to look.
There are specific criteria we look to identify Support and Resistance levels.
1. We look for the extreme swing high and swing lows ( the highest or lowest points the price has reached in recent time).
Example: picture 01
The red line, it’s extreme swing high(Resistance) thats is where price has reached in recent time and the green line is extreme swing low(Support) where the price has reached in recent time.
Picture 02
You could see, once the price rejected from R1 the price retested S2&S3 , the price then rejected and retraced to R2 and the price got rejected again to S4 and while approaching S4 its rejected again.
So by looking at extreme swing highs and swing lows, we can identify potential Support and Resistance levels and where the market is likely to reverse.
But this is not quite enough to make a trade decision because we always need a confirmation price action pattern.
Will talk about this later and right now i want you to focus only on how to identify Support and Resistance.
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Disclaimer; This content aims to improve readers, you should get more information from multiple sources (DYOR) before setting up your own strategy. All buying, selling and crypto investment activities are responsibility of the reader.
