How I Started To Learn About Support And Resistance
About The Author
Unlike other market analysts and trading educators who make fleeting appearances and think they’ve hit the jackpot because they’ve appeared on a TV station, James Trescothick is down to earth. Not only does James, our awesome Chief Market Analyst and Trading Educator, have firsthand experience on some of the biggest and most active trading floors in the world, like the Philippines Stock Exchange, he’s also a prominent and star speaker with over 20 years experience in the financial service industry, both online and offline. His works and opinions have been printed in a number of leading industry publications, such as The Financial Times Adviser, Market Watch, The Street and several newspapers, including City A.M. and FX Trader Magazine. You’re in for a productive and fun treat as he’s fun, informative, knows the markets inside out, and most importantly, approachable!
Having said that, fasten your seatbelts ladies and gents as we’re about to jump straight into the subject of Support And Resistance.
For those of you who are somewhat familiar with trading, we have prepared an agenda below, feel free to skip the introductory part and navigate towards the actual examples.
Psst… We’ve also included James’ webinar recording at the end of this article. Go ahead and watch it. We promise, we won’t tell anyone you skipped the whole thing.
AGENDA
- What actually is Support and Resistance?
- Calculating Pivot Points and Support and Resistance
- Using Technical Indicators to find the Support and Resistance
- How some traders trade using Support and Resistance
What actually is Support and Resistance?
Support is a level where an asset could fall to and the market starts to buy in again.
Resistance is a level where an asset could rise to and the market will start to sell from.
Traders study Support and Resistance levels to engage potential entry levels or to use them as a Stop Loss or take profit levels at. At times when either the Support or Resistance is indeed broken they can change roles. The Support becomes the Resistance and the Resistance becomes the Support.
Calculating Pivot Points and Support and Resistance
To calculate Pivot Points and the connected Support and Resistance levels, you simply take the last session’s highest price, the lowest price and the closing price of a selected asset. With a 24 market you can take in the closing price of when New York closed.
The calculation
Pivot Point (PP) = High + Low + Close / 3
Support 1 = PP X 2 — High
Resistance 1 = PP X 2 — Low
Example:
High= 1.1533
Low= 1.1411
Close = 1.1438
1.1533+1.1411+1.1438/ 3 = 1.1460( Pivot)
1.1460 x 2–1.1411 = 1.1509 (Resistance)
1.1460 x 2–1.1533 = 1.1387(Low)
Using Technical Indicators To Find The Support And Resistance
Channel Lines
Channel Lines̬
Exponential Moving Average
Fibonacci Retracement
Bollinger Bands
Methods of trading on support and resistance
The bounce
Methods of trading on the support and resistance
The Break: Aggressive
The Break: Cautious
That’s all for today, Strattoneers! Aggressive or cautious, make sure you stay open-minded and flexible when dealing with volatile markets. If you want to join our live webinars and be able to ask James Trescothick any trading questions in real time, feel free to open an account and subscribe to Stratton newsletter to receive notifications about the coming webinars, market news and all that good stuff.
One last thing…
Do you remember the webinar recording we promised at the beginning of this article? Well, here it is! You’ve deserved it and thank you for making it this far!
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