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.

Trading range is a period which prices tend to move tightly, or in consolidation phase. It gives a signal about the pressures of supply and demand sides. In the event of a break-out out of the trading range either above or below, it shows the pressure of which side is stronger. If the break out is up means that the pressure from the demand side is superior and if the break out is down, it mean the pressure from the supply side is superior.

Trading Range Method

Other interesting things about the support and resistance:

• Support and Resistance is not the absolute numbers, but is very useful as rational limitations in your entry.
• When the market has gone through resistance, the resistance becomes support and otherwise when market passing through the support, the support becomes resistance.
• More often the price to test the resistance or support level without through it, this indicate stronger of resistance or support areas.

One thing to remember, support and resistance levels are not Exact number. You'll often see support and resistance levels that successfully penetrated, but actually market only doing a test against support and resistance and tests that conducted on the support and resistance is usually described by candlestick shadow.