Simple Explanation of Support & Resistance

The concept of support and resistance level is undoubtedly the two highest discussed topics of technical analysis, but what do support and resistance level tell us in candlestick charts, and why it is the most discussed topic in technical analysis, In this short blog we’ll try to shed the light on these topics.

So basically support and resistance level are those which prevent stock price or index from moving further. A support level is always below the current market price, and whenever a stock plunge to a support level, it bounces back and hesitates to go below the support level because when it reaches a support level, it gives buying signal or else, with less probability, it will go down further.

Likewise, a resistance level is the opposite; it is above the current market level. When the current market price hit the resistance level, it will hesitate to go further and reverse back, which indicates heavy selling.

Trader always pays close attention to the candlestick chart if prices reach either of the levels. Anyone wants to trade on the basis of support and resistance level, they have to set criteria; if their objective is for intraday or buy today sell tomorrow, then they have to look after a 3-6 month candlestick chart to identify the level and if someone wants to trade for positional or swing trading then almost 12-18 month candlestick chart is helpful to identify support & resistance level. When you see any chart, try to identify 2-3 series of the point where it hesitates to move up or down and has shown sharp reversal and after identifying a series of points connect a horizontal line through the point. One cautious point to highlight, sometimes a candlestick chart can be either in an uptrend or downtrend that time your support and resistance level horizontal line will be in slanting style.

Whenever you identify a share reversal point in the chart and the way the candlestick is created it's totally different, it can either be a single or multiple candlesticks like maruboju, bullish or bearish reversal pattern, shooting star, hammer, etc. These are all types of charts a trader should know because when you know about support and resistance level and type of candlestick chart, then with strong conviction, you can trade and able to identify entry and exit points and you will be spared with heavy losses in trading. If you explore more and diligently practice (identity pattern and create your own trading idea with paper trading) it provides a real possibility of success in finding opportunities.