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This video introduces you to basic support and resistance in price charts.
This is the second video to start learning basic technical analysis techniques.
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This is the text:
Hi there sylvain vervoort here with another learning video about technical analysis. If you like this video series, pay a visit to my website at stocata dot org. In this part I will look at basic support and resistance lines. The final purpose of this series is to teach you how to trade successfully applying technical analysis.
Prices move in waves. This undulating price picture with tops and bottoms occurs because, at a certain level, the price experiences support or resistance. At a bottom, the price is supported by sufficient buyers, and it bounces up again. At a top, the price is pushed down by selling pressure. The price level of a share has everything to do with supply and demand forming the resistance and support lines. For a given increase in price, there are a number of buyers and sellers. A price increase will attract more sellers, but the number of buyers will decrease. A resistance line forms at a balance in sellers and buyers.
A broken resistance line automatically becomes a support line for future price levels. Horizontal support lines and resistance lines are drawn through turning points in price. A confirmation is given if the price turns against this line. You can consider a resistance line broken if crossed with the closing price.
The same way, a broken support line automatically becomes a resistance line for future price levels. You can consider a support line broken if crossed with the closing price.
Another type of support and resistance is based on price windows. We talk about a rising window if the lowest price today is higher than the highest price of yesterday,
While we have a falling window if the highest price today is lower than the lowest price of yesterday.
Look at how windows constitute important support and resistance levels. The entire area of a window represents support or resistance. The support or resistance of a window is broken; only if crossed with the closing price. The height of the window has no importance.
Turning points at support or resistance levels are often confirmed by candlestick reversal patterns. Here support is confirmed with 2 consecutive piercing line patterns and resistance is confirmed with a bearish engulfing pattern.
A confirmed support by a candlestick reversal pattern is a very reliable buying signal. Note that we will talk a lot about candlesticks later on in this course. Here we see the support of a previous window now confirmed with a bullish engulfing candlestick reversal pattern.
Looking at the price evolution after the buying signal, it was indeed a very profitable trade. Confirmed support or resistance has great influence on the buying decision, while breaking support or resistance will trigger selling signals. Support and resistance levels should be a very important part of your decision making process to buy or sell.
However, never forget that there is always the possibility that the price will move the other way. Then you will have to sell at least when the closing price falls below the previous support level.
That’s it concerning basic support and resistance, based on price turning points and price windows. Later on we will talk much more about many other support and resistance methods. I hope you enjoyed this video. Watch out for the next one. Stay in touch, subscribe to my channel, give me your comments, rate this video and pay a visit to my website: stocata dot org.
Have a nice day and I hope I see you in my next training video.
Risk Disclosure: Futures and forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones’ financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.
Hypothetical Performance Disclosure: Hypothetical performance results have many inherent limitations, some of which are described below. no representation is being made that any account will or is likely to achieve profits or losses similar to those shown; in fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. for example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all which can adversely affect trading results.
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