What is support and pressure? How to draw support and pressure lines? How to judge and use the breakthrough and conversion of support and pressure?
How to draw support and resistance lines?
Drawing the support and pressure lines is relatively simple, but it is necessary to find the point connection lines formed by two or more small peaks of the highest points or small troughs of the lowest points in order to draw the trend of the lines more accurately.
Basic method of drawing support line: As shown in the figure below, select two or more lowest points and connect them into a straight line, which is the support line.
Basic method of drawing pressure line: select two or more highest points and connect them into a straight line, which is the pressure line.
Detailed explanation of the judgment method of support and pressure breakthrough and mutual conversion
In price movement, support and resistance will actually change with the change of stock price movement trend. Support may be broken and eventually become resistance; conversely, resistance may also be broken and become support.
For example, if the price of a currency suddenly falls and the original support level is broken, the price will continue to fall, and the original support level may become a pressure level in the new movement trend.
Therefore, support and pressure can transform into each other. However, the breakthrough of support and pressure needs to meet certain conditions:
Breakthrough: refers to the current support or resistance price being sufficiently broken or broken upward, so that the support or resistance no longer exists in the future market.
1) Whether it is a breakthrough of support or resistance, a breakthrough of the closing price is considered a true breakthrough, generally based on a breakthrough of more than 3% in the closing price.
2) After the breakthrough, the stock’s trading volume should increase significantly, preferably by more than 30% of the 5-day average trading volume.
After figuring out how to confirm a breakthrough, let's move on to understanding how support and resistance convert into each other.
How to use support and resistance to make trading decisions? A practical guide to trading strategies
Support and resistance are generally the support and resistance formed by the two forces of buyers and sellers when the stock price rises and falls. Therefore, when the price falls to the support line, the price is likely to be supported and continue to rise; on the contrary, when the price rises to the pressure line, the price is likely to be pressured and stop rising and turn to fall. The actual investment operation strategy of support and pressure is summarized as follows:
Of course, if we combine the situation where the support resistance is broken, we can also use a diagram to summarize the entry and stop loss points of buyers (long) and sellers:
Buy side (long): mainly use the support line. Above the support level is the entry point, below the support level is the stop loss point.
Seller (short): Mainly use the pressure line. Below the pressure line is the entry point, and when the price breaks through the pressure line, above the pressure line is the stop loss point.
Based on the above conclusions, let’s take a look at how to judge and use support and resistance lines to find buy and sell signals in the actual K-line chart.