#多军的反击 Support and resistance play a very important role in trading systems, especially in cryptocurrency trading. Here are their importance and applications:
1. Reflection of market psychology
- Support: When the price falls to a certain level, buyers emerge to prevent the price from falling further. This level is called support. It reflects the psychology of buyers in the market that the price is "low enough" and worth buying.
- Resistance: When the price rises to a certain level, sellers increase, preventing the price from rising further. This level is called resistance. Sellers think the price is "too high" and choose to sell.
2. Key trading decision points
- Support and resistance are often used to set entry and exit points. For example, when the price approaches a support level, traders may consider buying in anticipation of a price rebound, while when approaching a resistance level, they may consider selling in anticipation of a price correction.
3. Risk management in trading strategies
- Support and resistance can help traders determine stop loss placement. For example, if buying close to a support level, a stop loss can be placed below the support level to prevent the price from falling below the support and incurring greater losses.
- Similarly, when opening a short position close to a resistance level, the stop loss can be placed above the resistance level to prevent losses if the price breaks through the resistance.
4. Trend confirmation and reversal signals
- If the price tests a support or resistance level multiple times and fails to break through, it may indicate that the market lacks momentum to continue the current trend.
- However, once a support or resistance level is strongly broken, it may indicate a trend reversal. For example, if support is broken, prices may continue to fall, while a resistance breakthrough may bring new upward momentum.
5. Conversion between support and resistance
- Once support is effectively broken, it often turns into future resistance. Likewise, if resistance is broken, it often turns into future support. This transition can help traders confirm a change in market direction.
6. Multiple time frame analysis
- Support and resistance levels may have different meanings on different time frames. For example, support and resistance levels on a daily chart are often stronger than those on an hourly chart. Therefore, combining multiple time frames for analysis can help improve the accuracy of your trading.
7. Assist with other indicators
- Support and resistance can be used in conjunction with other technical indicators (such as Bollinger Bands, Relative Strength Index, etc.) to further confirm buy or sell signals and increase the success rate of transactions.
8. Dynamic Support and Resistance
- In addition to traditional horizontal support and resistance, there are also dynamic support and resistance, such as moving averages. As prices change, dynamic support and resistance are constantly adjusting, helping to capture important points in trending markets.
In general, support and resistance are an integral part of a trading system, providing clear buy and sell signals while also helping to effectively manage risk.
