Support and resistance trading is the absolute foundation of trading. Trading is all about knowing support and resistance. When trading, you typically want to buy low and sell high. Resistance and support are among the most talked about aspects of technical analysis.
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Support and Resistance Trading Introduction
Support and resistance trading is the most important aspect of becoming a successful trader. Look for previous highs and lows on a stock chart, find the current price action, and draw your trendlines. Fundamental analysis is also key; however, knowing the levels of where to buy and sell is the critical component to making money in the stock market.
Resistance and support seem simple, but it can be not easy to get the hang of when you start. Support is the level a stock bounces off of multiple times without breaking. It supports a price without falling below that level.
Resistance is the level a stock hits multiple times without breaking. Knowing how to find resistance and support is one of the most important things you’ll learn when trading. It’s what’s going to keep you from making a bad trade.
Trading Tool
Support and resistance trading is the most important trading tool you can learn. If you’ve ever watched any of our videos, you’ll notice that we always find key areas of support, resistance, and patterns with every stock we look at.
Finding those tells us whether or not the stock would be a good candidate for the watch list. If you’re watching a stock and notice it keeps falling to a certain level, it doesn’t go below that.
Every time it hits that price, it bounces back up. That’s a support level. If it eventually falls below that level, that support level becomes a new resistance level.
Resistance works the same way. If you expect a stock to climb to a certain price but fail to reach it because it falls every time it gets near, that’s a resistance level.
If it breaks that resistance level and holds, the resistance level becomes a new support level. Knowing how to find these levels will be the tool to making the most profit, and there are many ways to find resistance and support. Price action will be your best friend with this trading style.
COURSE |  |  |  |
|---|---|---|---|
| DESCRIPTION | Learn how to read penny stock charts, premarket preparation, target buy and sell zones, scan for stocks to trade, and get ready for live day trading action | Learn how to buy and sell options, assignment options, implement vertical spreads, and the most popular strategies, and prepare for live options trading | How to read futures charts, margin requirements, learn the COT report, indicators, and the most popular trading strategies, and prepare for live futures trading |
| INCLUDED | Daily watch lists • Trade rooms • Trading scanners • Discord • Live streaming Day Trading > | Daily watch lists • Trade rooms • Options scanners • Discord • Live streaming Options > | Futures target levels • Trade rooms • Real time teaching • Discord • Live streaming Futures > |
Trend Lines
Support and resistance trading using trend lines and channels shows you the direction in which a stock is moving. This is especially helpful if you’re going to swing trade. Sometimes a stock will have 1 or 2 good days, and you’re like, man, I need to get in this stock.
While it looks good, it may be in a downtrend or a channel going down. You don’t want to buy when trading at the bottom of the channel because there’s a good chance it falls out of that and goes lower. Use this tool when you swing trade. It’ll keep you from taking a bad position.
Support and Resistance Trading Example
This is an example of trading support and resistance on a chart of $AAPL. Price action was trading in a rising wedge pattern. Several falling wedge and rising wedge patterns made up this chart. Falling wedges are bullish patterns, and rising wedges are bearish patterns. You’ll notice that the price showed bearish weakness at the moving average lines. There is a bearish inverted hammer that’s giving the warning sign.
Candlesticks
Using candlesticks in support and resistance trading gives you many support and resistance levels. You’re looking at the body of the candles and the wicks.
Candlesticks show you if a stock is bullish or bearish at that moment. Candlesticks on the daily chart are a great way to show you how to find resistance and support levels.
Best Trading Tools
Moving Averages
Moving average lines is another great tool for support and resistance trading. Using the 9 and 20 EMAs with VWAP is a great support and resistance system, especially when day trading. Those moving average lines are constantly changing to reflect the price.
As a trader, this lets you identify resistance and support pretty quickly. Stocks use moving averages as support when moving up and resistance when the trend is bearish.
Round numbers are another way to find resistance and support. This is also known as psychological support and resistance levels. Stocks tend to have difficulty moving at whole or half-dollar amounts.
You should never buy at those levels if the stock is already running. Wait until it breaks the 50-cent or dollar mark and hold before buying. Most target prices for a stock are at the whole and half dollar levels, which is why there’s usually strong resistance at those levels.
Final Thoughts: Support and Resistance Trading
Learning support and resistance trading are the greatest tools for making a profit. Using all the different ways to find support and resistance will keep you from buying at a bad level. The mantra is to buy the dip and sell the rip.
Those highs and lows are the resistance and support of the stock. Buying too close to resistance is a recipe for small profits or losses. Learn support and resistance! It’s your greatest tool for trading stocks, futures, or crypto!
Frequently Asked Questions
- Here's how you trade support and resistance levels:
- Bulls, aka long traders, try to push prices up
- Bears, aka shorts try to push prices down
- Long traders buy low at support and sell high near resistance
- Short traders go short near resistance levels and cover at support levels
- Here's how you determine strong support and resistance levels:
- Need to understand candlestick patterns
- Know how to draw trend lines and horizontal support and resistance levels
- Look for as many peaks and valleys on a chart as possible
- Look for reversal patterns and strong volume bars
Support is where traders look to buy since the price is often oversold. Resistance is the area that traders look to sell because the price is often overbought.
