​Trading skills sharing | How to use support and resistance efficiently?

Every trader has a unique perspective and method to interpret market support and resistance. Although the methods are different, the importance of support and resistance as key indicators of market behavior is unquestionable. It is precisely because of the precise grasp of these two that countless traders have achieved considerable profits.

First let’s introduce what support and resistance are. Support, in short, is a “floor” encountered by market prices during the decline. When the price touches this area, it often rebounds, indicating that there is strong buyer strength in the area. On the contrary, resistance is a “ceiling” in the process of price increase. The price may encounter selling pressure after it touches this area, causing the price to fall.

So how should we improve the effectiveness of support and resistance in trading?

1. Preferred horizontal support resistance line

Compared with the trend line, the horizontal support resistance line can often more accurately reflect the psychological price of the market due to its intuitiveness and stability. Through review and analysis of historical data, it is not difficult to find that the effectiveness of the horizontal line is generally higher than that of the trend line. Therefore, when building a trading strategy, you should give priority to the use of horizontal lines as the basis for judging support and resistance.

2. Avoid small cycle traps

Although small cycle charts can provide immediate market feedback, they are often accompanied by more noise and false signals. To improve the accuracy of judgmentRate, traders are advised to increase the analysis cycle to at least 1 hour chart, or even the daily level. Within these larger time frames, market trends and support resistance areas tend to be clearer and more stable.

3. Go with the flow

Stock trends are one of the most powerful forces in trading. In an upward trend, you should focus on the support area during the pullback to look for buying opportunities; while in a downward trend, you should focus on the resistance area during the rebound to capture the short selling opportunity. Operations against the trend are not only difficult but also extremely risky, and it is easy to fall into the trap of “buying the bottom and touching the top”.

4. Find resonance signals

The effectiveness of support and resistance does not exist in isolation, they often resonate with other market indicators. For example, combining trading volume analysis can make it easier to understand the power comparison between long and short sides, thereby judging the authenticity and strength of the breakthrough. In addition, changes in position volume can also provide traders with clues about the trends of the market’s main players. When the support or resistance areas resonate with these indicators, the credibility of the trading signal will be greatly improved.

It is worth noting that although the above techniques can improve the effectiveness of support and resistance to a certain extent, the essence of trading is a game of probability and there is no absolute rule of winning. Therefore, traders should always maintain a cautious attitude, comprehensively use a variety of analytical tools and methods, and flexibly respond to market changes. In addition, a strict risk management mechanism is established to ensure timely stop losses in adverse circumstances while making profits and protect the safety of the principal.