Trading with support and resistance levels refer to price level on charts. These levels usually act as barriers and prevent the price of an underlying asset that is traded to be pushed in a certain direction.
You may be able to see them directly on the charts and this can help you place stop loss or book profits or see the movement of the market easily.
After the market hits a support or resistance level, three things are most likely to happen and these include a change in the direction of the market, stall or retrace.
When you know how to draw these levels, you may be able to make changes to your trading strategy easily. You can make use of the information to decide when to trade, when to move a stop loss or close a trade.
Learn support and resistance levels
Although most traders think it is difficult to draw support and resistance levels, you may be surprised to know that it is actually quite easy and you may be able it learn perfectly after a few practice sessions.
One thing that you need to remember is that you should avoid drawing too many levels on the charts. You may make the entire process of reading a chart complicated when you draw too many levels.
When you learn how to draw support and resistance levels in real time charts, you may be able to plan for the day or week easily. This can help you take important investment decisions in such a way that you may be able to maximize your profits and minimize your risks.
Basic concepts of support and resistance levels
- Remember that is not necessary to draw every level that you find on the charts. Most traders tend to draw at every price level and this can take a lot of time and effort. It is advisable to draw only the significant levels on the chart instead of messing up the entire chart.
- The other thing that you need to remember is that you do not have to draw the level exactly at the high or low of the bar.
- It is also not necessary that you really go back in time to draw these levels on the chart. It is best to focus on a three-month period and draw the support and resistance levels instead of trying to go back several months.
- You may be able to determine the best time to enter and exit the market when you make use of technical analysis for trading.
- This can help you minimize the risks of trading and you may be able to make regular returns on your investments.
Trading with support and resistance levels can help identify price reversals in the binary options market before you place a trade