Learn Fibonacci

We will often use Fibonacci ratios in our trading, so should you learn Fibonacci and loved it. Fibonacci is a very broad subject and there is so much to be learned from Fibonacci with weird names, but we will only study the two, there are: retracement and extension.

First let us know the Fibonacci maker: Leonard Fibonacci. Leonard Fibonacci was an Italian mathematician. He found a simple series of numbers that make up the ratio describing the natural proportions of a thing in this world.

Determine Take Profit & Stop Loss (Support and Resistance)

There are 3 Main Points to consider

1. Let the chart/graphic that shows us where we should place the stop loss

Optimal Stop loss should be placed under the support (in long position) or above the resistance (in the short position).

The most important thing when we are trading is realized when we should exit from market when our position as opposed to the actual market direction, it mean we have to stay put a stop loss and change it when the market friendly to us. The best place to put the stop loss is above resistance or below support, and change to levels that may form later.

Determination of support or resistance can be performed after measuring the range of price movement and taken an extreme high level (Resistance) or extreme low level (Support) on the chart.

How Do We Know Support or Resistance is truly Break-Out?

There is no absolute answer to that question. There are some arguments that say that the level of support or resistance break-out when the closing price has passed that level. But in reality not always so. Let's look at an example below and see what happens when the price closed through the resistance level 2500. 

In this case, the price had closed twice above resistance level 2500 but they always end with prices that falling back below the resistance level. If you really believe in what you see and say that this is an actual breakout, and then take action to buy, then you will feel very sad. Let's look at the chart now, you can see and make a conclusion that the actual resistance level has not really break-out, and the level is now even stronger than before.

Method to Determine Support and Resistance Point

After explain an understanding of what is supports and resistance in last post before, in this post will explained how the basic method to determine support and resistance.

common methods used in determining the level of support and resistance are Simple Visual Method and Trading Range Method.

Simple visual method in determining support and resistance levels are method that relatively easy to implement. To establish support visually is simply draw a line or area of the previous candlestick. To determine support visually, the support line set at the points where reversal is occur on the candlestick.

Simple visual method

Trading Range Method (making the trading range, or band method) can provide an important role in determining the position of support and resistance. In this method of support or resistance can serve as a critical point which can serve as turning point or continuous pattern.

Support and Resistance Location

Location of Support

Usually the range or line of support established under a running price (the price that happen at this time). Traders generally dont take a position when prices are near the support line or with the support range, because the tendency of price movement has a higher uncertainty.

Location of Resistance

The range of resistance is usually located above the running price (the price that happen at this time). Same with support, generally in this range traders and investors tend to hold themselves to take positions becuase the increase level of uncertainty. And besides that, same, as support, in determining the range of resitance, analysts, traders or investors prefer a resistance zone.

Support and Resistance

Basic Technical Support & Resistance

When we make investments in stocks, indices, forex and commodities, analysts and traders expected the ability to read the direction of price movement. For the purposes of these various analysis techniques have been developed and applied, and one important part in the process of this analysis is technical analysis. One of the most useful tools of technical analysis is support and resistance analysis. This is relatively easy to analysis using support and resistance because can improve the accuracy of the analysis of price movements.

Support & Resistance Basics Definition

Support and resistance describes the estimates where the price movements both from the supply and demand reaches equlibrium point. At that range if supply is more excessive then prices will tend to come down from that range and if demand is excessive then prices will tend to increase from that range, and if the forces of supply and demand are relatively balanced, then the price will tend to survive, consolidation or sideways on that range. On other way, excessive supply cause bearish and excessive demand cause bullish.

Support Definition

Support is the price range where in this level or range is estimated that demand is strong enough to hold the price fall down further. Simple logical is that when prices fall closer to the range of support, causing the increased willingness of investors to buy stock, index or a particular currency, and when prices are touching or near the range then demand is estimated will exceed supply so the markdown is hold .However, keep in mind that the range of support does not mean prices will definitely stuck in range, always open the possibility that the range of support can be penetrated or bypassed, which it indicates the increasing supply greater than demand, in this case support is break, so we need to made other support under the previous support.

Resistance Definition

Resistance is a price level where the trend is expected to sell in that range are strong enough to hold the rate of price mark-up. Basic logical is that if the price mark-up is close to the range of resistance, then the trend of trader or investor to sell is increasing. And on the other hand when the price is perceived too high then the tend to buy will be relatively decreased. So when the price touched resitance range, it is estimated that the supply will exceed demand so that would hold price to increase.