<Last updated 25.04.2020>
Hi! If you are interested in online trading you should read the below that provides explanation about Support, Resistance and Trend formation.
What is support and resistance?
When the market moves up and then pulls back, the highest point reached before it pulled back is now resistance.
As the market continues up again, the lowest point reached before it started back is now support. With candlestick charts, these “tests” of support and resistance are usually represented by the candlestick shadows.
Now, if enough selling and liquidation of losing positions happens at the broken support level, price will reverse and start falling again.
As the name suggests, one method of trading support and resistance levels is right after the bounce.
What are trend lines?
The most common form of technical analysis
In their most basic form, an uptrend line is drawn along the bottom of easily identifiable support areas (valleys).
In a downtrend, the trend line is drawn along the top of easily identifiable resistance areas (peaks).
Draw a parallel line at the same angle of the uptrend or downtrend, we will have created a channel. Channels are just another tool in technical analysis which can be used to determine good places to buy or sell.
There are three types of channels:
- Ascending channel (higher highs and higher lows)
- Descending channel (lower highs and lower lows)
- Horizontal channel (ranging)
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