How to draw trend lines correctly pdf - Part 2

(6) Sell On-Resistance Area :

           

In the same way, resistance levels can be used to enter new short positions.

The illustration below depicts a resistance level that has been established.

The price may fall when the price comes back up to this price level.

A new short position can be entered at this price.

The stop loss is placed on the other side of the resistance level.

 

Number 1: Resistance level
Number 2: Price finds resistance at this level
Number 3: Short entry after price level successfully holds as resistance
Number 4: Stop loss is placed above the resistance level.

 Nut Shell:

An overview of the lesson discussed so far.
At the support level, there are adequate buyers to stop the price from falling further and reverse the cost to the upside.
At the resistance level, there are adequate sellers to stop the price from rising further and reverse the cost to the downside.
Place horizontal lines on a chart where the price seems to stop repeatedly to find the support and resistance levels.

When our approach is stable, we can use the wicks or the bodies of the candlesticks to draw support and resistance.
Support can become resistance, and resistance can become support.
We need to be careful to avoid false breakouts.
The price may pretend to break through support or resistance but will reverse in the opposite direction.

(7) Support Analysis :

Before discussing this lesson, we need to understand the Japanese candlestick pattern. 

What Is the Support Level?

The significant prices at which sellers have already entered the market in adequate quantity pause to reverse the price movement.
The traders use these price levels to analyze the likely entry of sellers again into the market.

How Can We Analyze?

This can be analyzed on price charts with horizontal lines where there is a pause in price at the same level again and again.

Support

The support finds a price level where buyers enter the market.

The chart below is an illustration of this.

 

When the price keeps moving lower, it will hit a floor. This enables buyers to enter with adequate quantities overpowering the sellers and stopping the price from going further low.

This helps in analyzing a support level.
Support can be used similarly as resistance, either to enter a new long position or close a short position.

How Do We Identify Support Levels?

We need to observe where the price repeatedly pauses in the same place.  The sellers enter the market in this place.
The illustration below depicts a horizontal line placed at this price level to find a support level where buyers are entering the market and overpowering the sellers.

Practice Session:

Exercise: Find the correctly drawn support levels. Show exercise
Support and resistance in a range
The price confronts the same support and resistance levels several times before breaking out of the range in a ranging market. 

Nut Shell

An overview of the lesson discussed so far

At the support level, there are adequate buyers to stop the price from falling further and reverse the price to the upside.
At the resistance level, there are adequate sellers to stop the price from rising further and reverse the price to the downside.
Place horizontal lines on a chart where the price seems to stop repeatedly to find the support and resistance levels.
When our approach is stable, we can use the wicks or the bodies of the candlesticks to draw support and resistance.
Support can become resistance, and resistance can become support.
We need to be careful to avoid false breakouts.
The price may pretend to break through support or resistance but will reverse in the opposite direction

(8) Support Can Become Resistance

Breakout Support Line :

Practice session:

Exercise: Find the correctly drawn support levels. Show exercise

Support and resistance in a range

The price confronts the same support and resistance levels several times before breaking out of the range in a ranging market.

Number 1:  Price finds resistance in a range
Number 2: Price finds support in a range
Number 3: Price finally breaks out of the range through support

The illustration above shows the resistance level provides a clear upper boundary, and the support level offers a clear lower boundary to the range.
A breakout occurs soon after the sellers overpower the buyers and break through the settled support level.

 

 

Placing S&R Levels With Wicks And Bodies:

The two illustration charts depict the placement of support or resistance lines using the wicks and the bodies of the candle.

The chart below illustrates using the wicks of the candles to place a resistance line.

Practice Session:

Exercise 1: Find the resistance level turned into support Show exercise

Exercise 2: Find the resistance level turned into support Show exercise

Exercise 3: Find the resistance level turned into support Show exercise

Support can become resistance.

Sellers will enter the market, and the price will continue down when the price breaks through a support level when the price comes back up to this level.
The illustration below depicts support becoming resistance and resistance becoming support. 

The exact price level in this illustration acts as support and resistance multiple times.

Number 1: Price finds support
Number 2: Price breaks through support
Number 3: Price then returns to the previous support level, which has become resistant.
Number 4: Price breaks through resistance and then finds support once again.

Nut Shell:

An overview of the lesson discussed so far.
At the support level, there are adequate buyers to stop the price from falling further and reverse the cost to the upside.
At the resistance level, there are adequate sellers to stop the price from rising further and reverse the cost to the downside.
Place horizontal lines on a chart where the price seems to stop repeatedly to find the support and resistance levels. 

When our approach is stable, we can use the wicks or the bodies of the candlesticks to draw support and resistance. 
Support can become resistance, and resistance can become support.
We need to be careful to avoid false breakouts. 
The price may pretend to break through support or resistance but will reverse in the opposite direction.

(9) Buy On Support Area :

Practice session:

Exercise 1: Find the support level turned into resistance. Show exercise
Exercise 2: Find the support level turned into resistance. Show exercise
Exercise 3: Find the support level turned into resistance. Show exercise
Trading with support or resistance
Long positions can be entered with the help of support levels. 
The illustration below shows a support level has been established. 
When the price returns to this level, the price may rise again. 
New long positions can be entered with the help of support levels. 
The stop loss is placed below the support level.

 

 

Number 1: Support level
Number 2: Price finds support at this level
Number 3: Long entry after this price level successfully holds as support
Number 4: Stop loss is placed below the support level.

Nut Shell:

An overview of the lesson discussed so far

At the support level, there are adequate buyers to stop the price from falling further and reverse the cost to the upside.
At the resistance level, there are adequate sellers to stop the price from rising further and reverse the cost to the downside.
Place horizontal lines on a chart where the price seems to stop repeatedly to find the support and resistance levels. 
When our approach is stable, we can use the wicks or the bodies of the candlesticks to draw support and resistance. 
Support can become resistance, and resistance can become support.
We need to be careful to avoid false breakouts. 
The price may pretend to break through support or resistance, but will reverse in the opposite direction.

(10) How to Trade Support & Resistance Levels?

What Are The Advantages And Disadvantages Of Taking A Trade When Price Just Enters A Support/Resistance Level?

In the share trading business, the new traders who take steps to stabilize their position must know the two most essential concepts of trading: support and resistance.

Beyond the conception of a share market beginner, these two characteristics come with many complications that allow him to plan his entry/exit when a particular stock enters the support or resistance level.

These concepts of support and resistance levels are recognized as fundamental trading tips to support seasoned investors to decide on their entry/exit moves.

What Is A Support Level?

It is also known as support. The support refers to a price level when investors plan their entry into the stock market.
Found out as a price below which the stock does not intend to drop, this price is based on the past performance of a particular stock in question.
This state of affairs spans and leads to two cases; one is the confirmation and the second is the abolition.
Confirmation is apparent in investors choosing that stock, sourcing it to rise, and abolition occurs when the price exceeds the support level, prompting the market to look for a new level.

What Is A Resistance Level?

It is just the opposite of the support level. A resistance level is mainly linked to auctions.
It is a point of the meeting when the buyers assemble with sellers, with the junction taking place at the ceiling in contrast to the floor.
Two cases are clear to occur. If the volume brings in more sellers, the price is liable to jump off the ceiling, evident in the resistance level.
If the supplementary volumes enthuse more buyers, a noteworthy fall in the resistance level is observed, prompting the share prices to rise over the ceiling.
This is a positive turn of events when the resistance level is invalid to become a new support level for the stock.

How To Read The Support Level On Chart?

Share prices that are subject to recurrent oscillations command the attention of investors at all times.
Aiding investors to make their move, it is significant for them to read the resistance level on the chart, which can bring a chance for them to make a good buy when the prices are balanced to rise higher.

How To Read The Resistance Level On A Chart?

In disparity, when the price enters the resistance level, the market is aware of traders’ combat with a pressure to sell, when the cost of the stock is balanced to fall further, going by its past performance.
Hence, these two factors are essential for every investor to base his entry and exit moves in the share market when these determinants go a long way in representing the direction of the stock's price, whether it will rise or drop.

(11) Significance of Identifying SR levels ?

What Are The Advantages And Disadvantages Of Taking A Trade When the Price Is In The Support/Resistance Level?

As you have understood the importance of support and resistance levels as two significant determinants in technical analysis, we can look into the situation when the trade price has been at the support or resistance level for quite some time.

What Is The Significance Of Identifying Support And Resistance Levels?

The analysis of support and resistance levels becomes an essential division of spotting price trends of share prices.
It enables investors to make gainful trading decisions; this mechanism also has a role to play to come up with a reversal trend.
When the stock has been in the resistance level for long during many occurrences without being changed, it comes as a sign to an investor to collect in profits when the security moves in the direction of this point without exceeding it.

Trending Styles

Support and resistance levels reveal the tendency of the market to employ in buying the stock (as regards the support level) or to sell volumes of the store (as in the case with a reversal trend).
When these trend lines are intervallic and broken, a transfer in the stock’s movement occurs along with the coming out of new levels of support and resistance.
It comes as a sensible move to read these two levels on the chart as the division of a trading strategy.

Signifying the same trend to continue, it is when the share prices rise and fall between these two high and low levels that are to be implicit.
Another characteristic that is exceptional to these two levels is that even if there is a modification in the share price ahead of the support or resistance level, it does not assure a reversal trend.

Trading Tips

1. Share trading drives a great deal of significance on the two support and resistance points.

2. When the price is stationed between these two points, it is better to avoid making investments at these points.

3. This is a vigilant move in line with the general and established situation that the area around these two points is enormously unpredictable.

4. Another suggestion to bullish investors is to avoid placing stock orders at the support level.

5. In disparity, it is worthwhile to place an order at a price above the support level, on the other hand, close to the support level.

6. On the divergent side, if investors are looking toward placing stops or short selling, it is better to set up a trade price on equivalence or below the support level.

(12) Effects of Trading While Price Leaving Support and Resistance Level ?

What Are The Advantages And Disadvantages Of Taking A Trade When the Price Is Leaving The Support/Resistance Level ?

Support and resistance (SR) levels act as important supply and demand determinants playing in the share trading market.

As a support level is the opposite of resistance, there are several circumstances when the levels are reversed.

Seeing these two levels in concurrence with the economic factors of supply and demand helps investors prepare for their next move when the share prices leave the levels.

The Switching Of SR Levels

With the instability in stock prices, there is a high level of unpredictability established by trading tips like support and resistance between many others.
Predictably, these levels, in effect, display the likelihood of buying and selling opportunities for investors to profit from their respective moves.

The Perception Of Supply And Demand

It is imperative to comprehend the method in which the price arrived at the supply and demand (SD) level, too, in time to decide how they will share costs.

If this circumstance is attached to the economic factors of supply and demand, it will develop a state that stalks from a decline in price from a particular level.
Once the SR bounces back, the price indicates that it is now the time to fall more, exceeding all the barriers that stand between the price and the target.
Since the SR level is all positioned to remove obstacles, one can handle the turnover between support and resistance in the following ways:
A.As a division of a trading strategy, it is worthwhile to take the trade with the expectation that there is no effect on the SR level.
B.Be patient to wait for the SR level to steady and be tested for the information to be supportive in the future.
C.It is most extraordinary to pay no heed to trade such a stock.

On the other hand, with each investor having diverse opinions about the turnover between support and resistance levels, every investor needs to understand the dynamics of the SR level.
At most times, approaching the way of profits in the stock market, these levels permit unaware investors to make an early entry, thus buildup unnecessary losses.
For this motive, a keen analysis of the SR level is significant to avoid the level from standing in the path of collecting profits when driven by the supply and demand levels of stock market transactions.

Thank You...
Dynamic Trader.