Determining Support And Resistance
Determining Support and Resistance
hello traders here I want to share basic knowledge, and this can be used in the forex market or in the volatility index and other markets, you guys just develop the basic knowledge.
I will discuss determining support and resistance, There are 3 (three) ways to determine Support & Resistance, namely:
1. The highest and lowest points in a period.
Well, this is the simplest way. There are also those who call it the classic method because the way to determine it is simply by manually drawing a horizontal line. But don’t take this classic method for granted because even today this manual line drawing method is still widely used by seasoned technical analysts.
So, how?
The first thing you need to understand by using a classic method like this is that you have to know the history of the highs and lows of the currency pair that you are analyzing at a certain time period. The selected period must not be too long so that the range of support and resistance is not too large but also not too short so that it is difficult for us to determine when to take a position because the distance between Sup-Res is too short.
So here’s an example: for example, GBPUSD on a 1 hour Time Frame has the highest point at 1.9750 and the lowest at 1.9670. Then the GBPUSD Resistance for 1 hour is 1.9750 and Support is at 1.9670. Easy isn’t it?
Now let’s look at the following image:
This is a GBPUSD chart with 4 Hour TF. At the time this picture was taken, GBPUSD was at 1.9699 and as you can see in the picture, we have some historical highs and lows. Thus, it is at these points that we draw lines manually (blue and red lines) as the limits of support and resistance points
2. Simple Moving Average Large Period
Do you know the Moving Average indicator? This indicator is usually used to predict the trend of price movements. However, if you plot it in a larger period then the MA can be useful as price support or resistance line. And the advantage compared to the classic method as in the previous example is that this support or resistance line is dynamic following price movements. Interesting right?
Let’s look at the 100 periods MA. The line shown by the 100 MA is the Resistance for GBPUSD on a Time Frame.
The resistance of GBPUSD on the 1 hour Time Frame is seen at 1.9883 according to the last Moving Average line. But unfortunately, this method cannot determine the line Support and Resistance, you can only get one of them, whether it’s Support or Resistance. In our example this time we can find the resistance point of the price but not the support. You will have to use other methods to find support.
3. Fibonacci Retracement.
Fibonacci Retracement is a branch of technical analysis using the Fibonacci series. Almost all variants of Fibonacci Analysis are aimed at knowing the Support and Resistance points of price movements.
The Fibonacci Retracement used can be in the form of a High Close price or a price at the Close point. Look at the following picture:
The information from Figure 2 is
S1: 1.9650
R1: 1.9935
R2: 2.0023
R3: 2. R4: 2.0397
The point of 1,9650 can also be called the psychological point. Prices experience movement because it is determined by Demand and Supply. Demand-Supply law, namely when there is a lot of supply and constant demand, the currency will weaken due to the large supply circulating in the market.
Under certain conditions, support and resistance points can be penetrated by price movements. It is indeed difficult to penetrate the walls of Support and Resistance that have been formed. When sellers win and buyers are few, of course, the price can continue to fall again even though it has reached the support point. When the price breaks through the support and resistance points, new support and resistance points will be formed. The broken support point will become a resistance point and after that, a new support point will be formed.
Please give it a try to find out which one is more suitable for you. When asked which method is the best, no one is better than the other. Each method has been used and created by traders around the world and has its own advantages and disadvantages. Good luck!