WHAT IS SUPPORT AND RESISTANCE?
“Support” and “resistance” refer to two key levels on a price chart that can restrict market movement. The support level is where the price often halts its decline and rebounds, whereas the resistance level is where the price typically pauses its ascent and reverses downward.
The market finds support after a bearish move and resistance after a bullish move. Think of resistance as the ceiling and support as the floor.
An example of resistance: 
An example of support:
WHY IS IT SO IMPORTANT?
Traders utilize support and resistance levels to determine when to enter and exit trades. When price action breaks through support levels, it presents an opportunity to either buy or take a short position, depending on the trader’s interpretation of other indicators. And when price action breaks through resistance levels, it presents an opportunity to either buy or take a short position.
HOW TO IDENTIFY SUPPORT & RESISTANCE LEVELS
To identify key support & resistance levels we need to start by looking at higher timeframes. Take a daily chart and start plotting horizontal lines at areas you identify as support and resistance.
Then lower your timeframe down to 4 hours and plot your levels of support and resistance using orange horizontal lines.
After you have done that, let’s go to the hourly timeframe and plot red horizontal lines at our support and resistance levels.
The expectation is that when price breaks above/below the hourly levels (red) we want to chase the next level of support/resistance which will be the 4-hour levels (orange). And once we have broken through the 4-hour support/resistance level we want to chase the next level which will be the end of day (black).
Try this activity to improve your eye for spotting support and resistance levels.
LET’S STOP OUR TRADING FROM GOING “TITS UP”
Greed Definition:
“A selfish and excessive desire for more of something (such as money) than is needed”.
When humans were cavemen they would shoot an animal as they passed by and harvest food to fulfill their daily requirements. As time passed by and there was an increase in the demand they realised that they could run out of food so they started building storage for their grain so that they would have enough for winter and lean times.
Greed has such a negative connotation, is it not rather the fear of not having enough provisions or money for lean times?
In trading, it’s not to say that greed doesn’t exist and so often occurs when a trader has a run of profitable trades and “trading euphoria” occurs where he/she believes they are the “God” of the market and can’t get it wrong. It is at this point that the trader believes they can increase their position size and take an abnormal amount of risk relative to their trading capital. It is the same euphoria which results in the trader ignoring or adjusting stop losses, after all, we believe we won’t get it wrong.
It is usually the next trade where everything goes “tits up”.
Some practical ideas to reduce the fear of not having enough or greed.
- Have a fixed position size based on trading capital which is adjusted periodically according to your risk management plan. Don’t mess with it.
- When tempted to “take a chance” – stop trading, take a break, go for a walk and come back when your mind is clear, and you can trade with a more realistic expectation. 3. Make trading your business. Like any business, plan for consistent profits and efficient cash flow management, lets aim for small consistent profits every session or day and watch how the compounding effect makes profits.
There are only two ways to blow a trading account, trade with a position size that is to big relative to your trading capital or ignore a stop loss.
HOW LONG WILL IT TAKE FOR ME TO BECOME A CONSISTENTLY PROFITABLE TRADER?
Watch this YouTube video and you can see that to become profitable (even if it means learning one strategy) doesn’t require months or years of trading. Just the right support and trading system within a week.
https://youtu.be/FgZRKr4ZgAE?si=Zg15OfNis-yJXl7E
If you want to learn and see how we make money on a consistent basis, then sign up for our FREE Thursday night webinar. We will cover some of our strategy, some psychology and we will showcase what we are all about and how we can help you achieve trading success.
https://www.thesystemstraders.com/free-workshop-thursday-nights/