Learn to Trade Series
Part 1 - Support and Resistance (Horizontal).
I decided to start this short series because I see too many people rely heavily on "signals" without being able to verify the signal themselves.
Don't get me wrong, signals are not bad, they make it easier for me to choose a coin to analyze (p.s. it's good to have a list of coins that you prefer to trade or not trade).
Note: This series assumes that you already have a layman's understanding of trading, I am just going to point out easy trading tools/skills that you can use to verify a setup or to create your trading strategy.
Now to Support and Resistance, what are they?
Support: Imagine the price of a coin (e.g #BTC ) as if it's bouncing on a trampoline. When the price falls to a certain level and bounces back up, that level is considered a "support" level. It's like there's a floor preventing the price from going lower.
Resistance: On the flip side, resistance is like a ceiling. When the price rises to a certain level and struggles to go higher, that level is considered a "resistance" level. It's a point where the price finds it hard to break through and move higher.
now, how do you draw/set them up? its as simple as 1, 2, 3.
1. Identify Peaks and Valleys: Look at a price chart for peaks and valleys. Peaks indicate potential resistance levels, and valleys indicate potential support levels.
2. Draw Lines: Once you identify these levels, draw lines across them. This helps visualize where the price has historically struggled to go beyond (resistance) or fallen below (support).
3. Multiple Touchpoints: The more times the price bounces off a level, the more significant that level becomes. Multiple touchpoints validate the strength of support or resistance.
With this simple skill in hand, it will help you validate entry points, manage risk and have a view of market psychology.
You can draw these lines starting from a higher tf and work your way down to lower tf to get a full view.
I hope this helps someone.
Happy trading and investing.
