Support and Resistance Level Trading

This is a very short and basic guide of how support and resistance levels can be used to find opportunities of going long or short in a trade.

Support and resistance refer to a price point/level which has a history of being difficult to break through. Whether the trend is going up or down.

You can use these support and resistance levels to determine whether you should enter a long or short position and setting up your exit strategy.

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So starting with the Support Level. The support level represents the lowest price a stock or cryptocurrency tends to trade at. In this example, we have an up trending support level and we can see that the support level has been respected multiple times which gave us opportunities to enter long positions.

NOTE: Stop losses below the support line should be used to protect ourselves from sell downs below the support level

Now the Resistance Level is the opposite of a support level. A resistance level is the highest price a stock or cryptocurrency is trading at and has difficulty breaking through. So looking at the chart we can set a horizontal resistance level at around 2890 and another down trending resistance level since the first wave up didn’t reach our previous resistance level and created a lower high.

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Summary

These support and resistance levels are very useful when looking for long or short positions. Because if a price reaches a support level and bounced then you can predict that it will more than likely try to reach its previous resistance level.

Hopefully this helped you understand support and resistance levels a little bit better and if you have any questions. Feel free to ask me in the comment section below.