If the trend tells us whether to go long or short, support and resistance will help us find important price zones to enter/exit the market. school.

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1. What are support and resistance?

Support: is the price area where the market expects the price to increase when it touches it. At support, buying force tends to be greater than selling force.

Resistance: is the price area where the market expects the price to decrease when it touches it. At resistance, selling force tends to be greater than buying force.

2. Types of support and resistance

In trading, there are 2 types of support/resistance: dynamic support/resistance and hard support/resistance.

2.1 Dynamic support/resistance

These are supports/resistances that do not "stand still" but move continuously. For example: Moving averages, Bollinger Bands…

For example: Moving averages, in addition to showing trends, also act as support/resistance (I will talk more in the article about moving averages). Chart MATIC/USDT 15-minute frame, if we combine it with EMA (20), we will find good support/resistance price areas.

Because the characteristic of indicators like EMA is to fluctuate with price, the support/resistance areas created by indicators like this will not be "fixed" but "mobile". So, when we talk about support/resistance like this, we call it dynamic support/resistance.

2.2. Hard support/resistance

These are support/resistance zones that do not fluctuate but are fixed at price zones.

The most typical examples are horizontal price ranges (like the image at the beginning of the article), trendlines, All-time-high, All-time-Low points...

So, how should we use these 2 types of support/resistance? I will point out some advantages/disadvantages of each type below:

• Dynamic support/resistance: strength and accuracy will be lower, in return, in a large wave (less adjustment) will give more good entries.

• Hard support/resistance: higher strength and accuracy, but requires patience and does not always have a good entry point.

For me, I usually use harder support and resistance. However, the best thing you can do is try a combination: find price zones where the two types of support/resistance converge to create better trade orders and higher winrates.

For example: short order BTC/USDT

Analysis: The main trend (1D, 4H) is all downtrend. In frame 1H, the price sideway then broke through support, and was below EMA 20 (confluence of 02 resistances) => short.

3. Characteristics of support and resistance

To understand the nature and effectively use support and resistance, below we will learn about their characteristics.

Note:  these also work similarly with dynamic support/resistance types.

3.1. Support and resistance can be respected but can also be broken

This is the first characteristic that you must remember. Please note: support/resistance are just important price zones. It's not the case that when the price reaches support we buy up, conversely, if the price hits resistance we just sell down.

We need to observe and see the price reaction there. If the price respects and follows the trend, we will enter an order. Support/resistance can still be broken.

At points 1 and 2, the blue price zone acts as resistance, however if you short when the price touches (zone 3), the short order will have a stop loss because the price breaks the resistance and goes up.

3.2. Broken support becomes resistance and vice versa

In essence, support and resistance are important price zones, so when they are broken, they will "change roles" for each other.

This can be understood as follows: at support, many people wait to buy with the expectation that the price will go up. When the price breaks support, buyers there will "swing to the top". Therefore, when the price returns to this zone, those who "accidentally bought" will have to sell to cut a small loss or break even => selling force => this zone becomes resistance.

On the contrary, at resistance, many people wait to sell with the expectation that the price will go down. When the price breaks the resistance upwards, those who sold in this area will suffer a stop loss or loss => When the price returns, these people tend to cut losses => create buying pressure => support price zone.

3.3. The more times support/resistance reacts, the more valuable it becomes

This is also an important feature that you need to keep in mind. The more times the price reacts to a support/resistance => the more important that price zone is and the easier it is to react well to the market.

With this example, it can be seen that the blue area has reacted many times before, when the price breaks out, this area immediately becomes support and can be long following the trend.

3.4. Large time frame support/resistance will be more valuable

The reason for this feature is very simple: Large time frames are always more valuable, for example, the uptrend in the W frame is the main trend, while the 4H downtrend is just a correction. Likewise, support/resistance on large timeframes is more valuable than small timeframes.

Thus, in this article, we have understood the nature and important characteristics of support and resistance. In part 2, I will guide everyone how to enter orders with support and resistance combined with practice examples.