Reactive and Proactive Support and Resistance:
Proactive support and resistance methods are “predictive” stock trade analysis methods in that they often outline areas where the price has not actually been. They are based upon the current price action that through analysis has been shown to be predictive of future price action. Proactive support and resistance methods include measured moves, swing ratio protection/confluence (static), dynamic, calculated pivots, volatility based, trend lines and moving averages.
Reactive support and resistance are the opposite:
They are formed directly as a result of price action or volume behavior. They include volume profile, price swing lows/highs, initial balance, open gaps, certain candle patterns.
Various stock trading analysis methods of determining support and resistance exist. There are many ways to ascertain these levels. Some of the prevalent methods are
- Horizontal Price Levels
- Trend lines
- Moving Averages
- Fibonacci Retracement Levels
A price histogram is useful in showing at what price a market has spent more relative time. More recently, volatility has been used to calculate potential support and resistance. Both proactive and reactive support and resistance methods have merit and form a staple part of any support and resistance based trading strategy.