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What are the support and resistance indicator? And how to apply it in determining stock prices. Support is a level where the price finds it difficult to fall until it finally fails to bounce back. While resistance is a level where the price is difficult to break to rise above it until it fails and is pushed back down.
These two concepts are often used in everyday life, for example, if an item is sold for $7 every day, but one day the price of the item drops by $5. The next day, the price went up to $7 and fell back $5, so that’s when it’s the best price you can get by making that price a support point that keeps the price from falling again.
While Resistance is the price of an item that can rise at a certain price level, the price fails to rise at $5. This is because market power is not sufficient so the price of an item will not increase. And think that the price is the best. Therefore, it is the resistance point that keeps the price going up because many want to sell at that price. Oanda com exists to make the trading experience enjoyable for all users.
How to determine Support and Resistance points
3 possibilities occur where the market will hit the support and resistance levels
- Turn around (reversal).
- Stop moving and stay still until the market decides where to go.
- Breakout of the support/resistance and then continue the direction of the trend, be it the previous one or the new trend.
Up Trend
If we see that the market is moving up (uptrend) it is very strong, what needs to be noticed is that there are at least 2 lows that are the same as the basis for drawing the trendline.
Down Trend
If you see that the market is moving downwards (downtrend) it is very strong, what you need to pay attention to is that there are at least 2 highs that are the same as the basis for pulling the trendline.
The way to create an uptrend is to make it by connecting two support line points (lower limit). As for the downtrend, it is made by connecting two resistance line points (upper limit). If the price breaks the trendline indicates the price will continue. Uptrend and Downtrend are also included in the lead indicators.
Channel Lines
Created by drawing parallel lines at the same angle as the uptrend downtrend. When the price touches the upper line it can be used as an entry signal for short positions and when it touches the lower line it can be used as a signal for long positions.
Pivot Points
This is another way that is often used to determine support & resistance levels in the 1 trading day range. The advantage of this method is that every trader around the world uses the same formula to calculate pivots so that pivots are the level of market psychology most often used by traders to make decisions.
Determine The Right Support And Resistance
Support and resistance are terms that are popular in the world of forex trading. The technique that is often used in technical analysis is indeed crucial for determining profits and losses. Support can be defined as a level that has the potential to withstand a price decline. while resistance is a level that can withstand rising prices. These two levels will be used to determine if the price continues or reverses direction.
In general, support and resistance aim to find the right area to take a buy or sell position and determine the target of price movement. The support area is generally an area that is used as a reference to find buy positions and the resistance area is used as a reference to find short positions.
Trendline
One of the methods used to determine support and resistance is through trendlines, by combining at least two valley points during an uptrend and combining at least two peak points during an uptrend. If the price approaches the trendline, the opportunity area will open into a resistance or support area.
Fibonacci retracement
This forex analysis tool can be used to determine support and resistance. The 0.0%, 23.6%, 38.2%, 50%, 61.8%, 76.4%, and 100% levels are the most used levels in Fibonacci. These Fibonacci levels are often used as a reference to determine areas of support and resistance. In general, to determine support and resistance levels 38.2%, 50.0%, and 61.8% are used.
Round number
The term round number is a level that is a round number and is quite easy to remember. Based on this strategy, the rounder the price figure on the chart, the stronger the price position is and is used as a support or strategy. For example, USD/JPY with the psychological level of 100, AUD/USD with the psychological level of 100000, and so on.
Moving average
Often referred to as dynamic support and resistance, moving averages move according to price movements. Because it follows the trend, when an uptrend the moving average serves as support, while in a downtrend it acts as a resistance.
Many traders use this method as a technical analysis tool because it has the easiest and simplest indicators. Although many methods can be used to determine support and resistance in the market, one of the most important things for forex business people is to do regular exercises to be able to place support and resistance points properly.
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