An Introduction to Support and Resistance in Under 10 Minutes

We have learned how to do intraday trading, the advantages of intraday trading, and the disadvantages of intraday trading. in this article, we are going to learn the support and resistance. And how it will help in intraday trading. support and resistance are very important in intraday.

What are Support and resistance?

 

Support and resistance are those price levels where the stock prices act in a predictable way. If we can identify those price levels we can trade with the market flow. In the stock market, prices are moving in a pattern which means they always make highs and lows. In some areas prices cannot move up there will be huge resistance from particular price levels.

In some times in some price levels, you can see huge support where the price of the stock cannot go down there areas are usually known as Support and resistance. When there is a huge price action there is a chance of breaking the level in the price levels. if the price action breaks the resistance then it acts as a support. if the price action breaks the support it may act as a resistance level.

 

We can see a detailed view of Support and resistance

Resistance

• It is a point where the price of the stock stops going up further
• In the resistance area, you can see a trend reversal or a bearish movement
• The number of sellers is higher than the number of buyers in the resistance area
• Resistance can be broken with a huge price action movement
• Once the resistance level is broken it acts as a support level

Support

• It is a point where the price of the stock stops going down further
• In the support area, you can see a trend reversal or a bullish movement
• the number of buyers is higher than the number of sellers in this support area
• Support can be broken with a huge price action movement
• Once the support level is broken it acts as a resistance level

How to identify the support and resistance

Suppose you want to identify the support and resistance for a long-term invetsment you need to consider 1 to 2 years of data and you can filter by the data using the time frame. if you are looking for long-term investment you can use the monthly time frame and draw a line that connects maximum price action levels.

Suppose you want to identify the support and resistance for the short-term investment or for intraday you need to consider the last 3 to 5 months of data. you can filter the data in a day time frame or 1 hr time frame. from this, you can draw a line that connects the maximum number of rejections that happen.

Identify price action zones

in this, we need to identify the areas where the stock prices are stuck in a place, it’s not moving in an upward or downward direction so we can imagine there is a support or resistance present. once identify the price action zones mark a horizontal line that connects maximum price action points.

Pivot points from indicator

The pivots point is a technical indicator that helps you to identify the trend reversals or bullish or bearish movement. Once you add this indicator to your chart you can see many lines in the chart. The black lines in the center are known as pivot lines. from the pivot line, 3 lines are visible to the top side and 3 lines are visible to the downside. top lines are known as resistance lines and it is denoted by R1, R2, and R3, and bottom lines are known as support lines and are denoted as S1, S2 S3.

This is calculated based on some formulas and it’s not necessary to know the formula behind this. If you add this indicator and check the previous charts you can see many areas the stock prices are rejected when it touches the pivot points. Depending on the movement you can place the order

 

You can see Resistance levels are always above the current market price of the stock or index. Support levels are always below the market price of the stock price or index. When you draw long-term support and resistance it is useful for  Long term investment or swing trade. if you draw short-term support and resistance it is useful for intraday trade or BTST trade. This support and resistance are mainly to define the nearest price action zones. It’s not recommended to trade based on support and resistance. for a successfull trader, you need to get confirmation from a minimum of 2 indicator

 

Conclusion

• Support and resistance are those price levels where the stock prices act in a predictable way.
• Resistance levels are always above the current market price
• Support levels are always below the market price
• Sellers are higher than the number of buyers in the resistance area
• Buyers are higher than the number of sellers in this support area
• Once the resistance level is broken it acts as a support level
• Once the support level is broken it acts as a resistance level
• This is used to identify the target for the trade