Support and resistance points are price levels that traders use to determine the likelihood of a price reversal or continuation. These points can be identified in several ways:
1. Using charts (technical analysis):
Support: is a price level at which the price is expected to stop falling and bounce back due to increased demand.
Resistance: is a price level at which the price is expected to stop rising and bounce back due to increased supply.
Steps to identify support and resistance manually:
1. Monitor previous highs and lows:
Identify the points from which the price has bounced more than once.
Previous lows are often support points.
Previous highs are often resistance points.
2. Draw horizontal lines:
Use the drawing tools in the trading platform to draw horizontal lines at these points.
3. Confirm points:
Points that the price has touched multiple times are considered strong.
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2. Using Moving Averages:
Moving averages (such as 50-day or 200-day) act as dynamic support and resistance levels.
When the price is above the moving average, it acts as support.
When the price is below the moving average, it acts as resistance.
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3. Using Fibonacci Levels:
Fibonacci levels are used to determine support and resistance based on certain ratios.
Plot Fibonacci levels between the highest and lowest points on the chart.
