Full Guide on Support and Resistance

By Crypto VIP Signal

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This is a complete guide on support and resistance. A trader must know about
the support and resistance of the market to make good trades.

Topics we cover in this guide:

1. What is Support and Resistance
2. How to find Support and Resistance
3. What to do when a support/resistance break?
4. Fake breakout/breakdown
5. Where to put stop loss?

The concepts of trading level support and resistance are undoubtedly two of
the most highly discussed attributes of technical analysis. Part of analysing
chart patterns, these terms are used by traders to refer to price levels on
charts that tend to act as barriers, preventing the price of an asset from getting
pushed in a certain direction.

Support and Resistance is one of the most used techniques in technical analysis
based on a concept that's easy to understand but difficult to master. It
identifies price levels where historically the price reacted either by reversing or
at least by slowing down and prior price behaviour at these levels can leave
clues for future price behaviour.

There are many different ways to identify these levels and to apply them in
trading. Support and Resistance levels can be identifiable turning points, areas
of congestion or psychological levels (round numbers that traders attach
significance to). The higher the timeframe, the more relevant the levels
become.
Support and Resistance
Support is a price level where a downtrend can be expected to pause due to a
concentration of demand or buying interest. As the price of assets or securities
drops, demand for the shares increases, thus forming the support line.
On the other hand, resistance is a price level where an uptrend can be
expected to pause to break selling of the assets. As the price of the asset
increase, more trader starts booking profits and results in a drop in the price.
Horizontal Support Line

Horizontal Resistance Line

How to draw a Support line?

The support points can be easily identified by looking at the chart. A support is
where the price bounce back, look for that points where the price bounced
back many times and draw a line connecting the support points. You will get a
horizontal support line. See the chart example below:

To draw a valid support line, you need at least two points on the chart.
How to draw a Resistance Line?
A resistance is a point where the price of the asset rejected many times. The
market tests the resistance and traders start booking profits that results in a
drop in the price. You need at least two points to draw a valid resistance line.
Breakout
When the price breaks the resistance line and trade above the line is called a
breakout. Market turns bullish after a valid breakout and traders start
buying/opening long position in the asset.

The more times a resistance point gets tested, the weaker it becomes. Majority
of traders are waiting for a breakout of the resistance line to open long
positions. A valid breakout will give good profits in the coming
hour/days/weeks depends on the timeframe you are using to trade.

Always wait for the confirmation of the breakout. Don’t open a trade instantly
because the breakout maybe a fakeout. We will discuss fakeout below in this
post.
Breakdown

When a support line is broken downwards it is called a breakdown. The market

turns bearish after a breakdown. It’s a better idea to close all the long position
when a breakdown confirmed. Many traders open short position after the
breakdown and make good returns on their trades.

This is a very good example of breakdown. Bitcoin is respecting the support of

$6000 in 2018 and the breakdown happens in November 2018. The price of
bitcoin falls to $3000 from $6000. Traders waiting for a breakdown will make a
lot of money in this drop by opening short positions.
Always wait for the confirmation of the breakdown. Don’t open a trade
instantly because the breakdown maybe a fake breakdown. We will discuss
fake breakdown below in this post.
Fake Breakout
Fake breakout or fakeout is a condition when the price breaks the resistance
line and instantly comes below the resistance line in the next candle. No candle
close above the resistance zone to call it a valid breakout. See the below
example and you understand better.

In the above chart BTC price shows 2 fakeout at different levels. The price
breaks the resistance line and comes back under the resistance line with a
huge red candle. Traders those open a long just after the resistance line
fakeout will be in huge loss or rekt. Always wait for the confirmation before
opening any trade.
Fake Breakdown
Fake breakdown is a condition when the price breaks the support line and
instantly comes above the support line. No new candle close below the
support line to call it a valid breakdown. See the chart for better
understanding.

In the above chart the BTC price dumps below the support line and instantly
the next candle with a huge pump get back above the support line. Those
traders opened the short trades instantly after the support is broken are in
huge loss because it is a fake breakdown not a valid breakdown. Always wait
for the next candle for confirmation of the breakout/breakdown and then
open the trades.
Where to Put Stop Loss?

Stop loss is a must thing for every trade. The cryptocurrency market is highly
volatile and sometime the market plays against your analysis or expectations.
Stop loss will help to minimize the loss and open room for better
opportunities.

Always open the trades after trend confirmation. If you are in doubt than leave
it and wait for the next setup. Not every day is a winning day. The stop loss
must be placed below/above 7-9% of the trade. This is for normal trading (spot
trading), adjust your stop loss according to the leverage used (if you are doing
margin/futures trading).

Previous Resistance Become Support

The previous resistance line work as support zone for the market. Below is a
perfect example of this. Bitcoin is respecting the previous resistance line as
support. The same can be true for a support line. The previous support line will
work as resistance when the market start moving upwards.
Thanks for your time. That’s all for today. Hopefully you learn something
today. Always remember trading is not a one-day game, it requires time and
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Crypto VIP Signal

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Contact Admin: https://t.me/jamess141