Day Trading Support/ Resistance
Day Trading using support / resistance is one of the best ways to consistently beat the market.
Support/Resistance is one of the most used tools in trading and is likely to be around forever. This is because support / resistance is based on human psychology which is never going to change
Support/Resistance is one of the most important fundamentals in trading. We use it for stop loss placement, trailing stop loss, profit target, entries and even trend analysis. We use support/resistance so much in trading that we sometimes do not even realize that we use it.
There are different types of support/resistances. We believe it is important to know the different types so we dont miss those levels when trading. Going short just above support or long just below resistance is not a smart move in trading. But here are the different types of support/resistance:
· Swing High/Low
· What were support becomes resistance and vice versa
· Gap Fill
· Moving Average
· Prior Day High/Low
· Round Numbers
Everyone have to keep in mind that Support and Resistance are regions. That means price can break through it and bounce just below support or above resistance. It is better to keep an eye on price to see what happens at these powerful levels before entering the trade or exiting the trade.
If price breaks support just briefly and then comes back with a retribution it could set up a powerful rally. What this normally signals is that the downtrend is over as there are no sellers left now. The opposite is true if price breaks resistance and comes downs right after. This signals a fake break new to high due to lack of new buyers.