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  1. #1
    Rookie Member elite86's Avatar

    For BO Traders Only !!!

    Ok guys, i believe we must have heard or see this before but possibly neglected it cause we hate reading too much to get a piece of information. The concepts of support and resistance are undoubtedly two of the most highly discussed attributes of technical analysis and they are often regarded as a subject that is complex by those who are just learning to trade. This article will attempt to clarify the complexity surrounding these concepts by focusing on the basics of what traders need to know. You'll learn that these terms are used by traders to refer to price levels on charts that tend to act as barriers from preventing the price of an asset from getting pushed in a certain direction.

    At first the explanation and idea behind identifying these levels seems easy, but as you'll find out, support and resistance can come in various forms and it is much more difficult to master than it first appears.

    The Basics:

    Most experienced traders will be able to tell many stories about how certain price levels tend to prevent traders from pushing the price of an underlying asset in a certain direction. For example, assume that I was holding a position in EUR/USD and that i was expecting the value of the pair to increase. Let's imagine that i notice that the price fails to get above my entry price several times over the past several months, even though it has gotten very close to moving above it. In this case, traders would call the price near a level of resistance. As you can see from the chart below, resistance levels are also regarded as a ceiling because these price levels prevent the market from moving prices upward.

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    On the other side of the coin, we have price levels that are known as support. This terminology refers to prices on a chart that tend to act as a floor by preventing the price of an asset from being pushed downward. As you can see from the chart below, the ability to identify a level of support can also coincide with a good buying opportunity because this is generally the area where market participants see good value and start to push prices higher again.

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    In the examples above, you've seen a constant level prevent an asset's price from moving higher or lower. This static barrier is one of the most popular forms of support/resistance, but the price of financial assets generally trends upward or downward so it is not uncommon to see these price barriers change over time. This is why understanding the concepts of trending and trend lines is important when learning about support and resistance. When the market is trending to the upside, resistance levels are formed as the price action slows and starts to pull back toward the trend line. This occurs as a result of profit taking or near-term uncertainty for a particular issue or sector. The resulting price action undergoes a "plateau" effect or slight drop-off in stock price, creating a short-term top

    On the other hand, when the market is trending to the downside, traders will watch for a series of declining peaks and will attempt to connect these peaks together with a trend line. When the price approaches the trend line, most traders will watch for the asset to encounter selling pressure and may consider entering a short position because this is an area that has pushed the price downward in the past.

    The support/resistance of an identified level, whether discovered with a trend line or through any other method, is deemed to be stronger the more times that the price has historically been unable to move beyond it. Many technical traders will use their identified support and resistance levels to choose strategic entry/exit prices because these areas often represent the prices that are the most influential to an asset's direction. Most traders are confident at these levels in the underlying value of the asset so the volume generally increases more than usual, making it much more difficult for traders to continue driving the price higher or lower.

    Moving Averages:

    Most technical traders incorporate the power of various technical indicators, such as moving averages, to aid in predicting future short-term momentum, but these traders never fully realize the ability these tools have for identifying levels of support and resistance. As you can see from the chart below, a moving average is a constantly changing line that smooths out past price data while also allowing the trader to identify support and resistance. Notice how the price of the asset finds support at the moving average when the trend is up, and how it acts as resistance when the trend is down. Most traders will experiment with different time periods in their moving averages so that they can find the one that works best for this specific task.

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    Last edited by elite86; 10-18-2014 at 11:16 AM.

  2. #2
    Legendry Member Okane's Avatar
    Hi, elite86.


    Nice info on S/R lines. This is something that I think every serious trader
    should learn. However, would be nice if this was shared under
    "Binary Options Trading Strategies and Systems", because this is a nice strategy.
    But I'm sure an admin can move it there.
    Please use this thread to instead give some more info about yourself and introduce yourself!
    Thanks.

    Anyway;
    I would also like to add that S/R lines drawn on higher timeframes
    are often more reliable than the ones drawn on lower timeframes.
    All of the info you mentioned are good to know for short-expiry traders.

    Since I changed to using S/R lines together with "Price Action" I've
    had much higher success trading Binary Options and it works well with
    the short expiry times that BO offers.
    Live Webinar: Hidden Content
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  3. #3
    Rookie Member elite86's Avatar
    Quote Originally Posted by Okane View Post
    Hi, elite86.


    Nice info on S/R lines. This is something that I think every serious trader
    should learn. However, would be nice if this was shared under
    "Binary Options Trading Strategies and Systems", because this is a nice strategy.
    But I'm sure an admin can move it there.
    Please use this thread to instead give some more info about yourself and introduce yourself!
    Thanks.

    Anyway;
    I would also like to add that S/R lines drawn on higher timeframes
    are often more reliable than the ones drawn on lower timeframes.
    All of the info you mentioned are good to know for short-expiry traders.

    Since I changed to using S/R lines together with "Price Action" I've
    had much higher success trading Binary Options and it works well with
    the short expiry times that BO offers.
    Thanks bro, for the comment and recommendation. Tried to move the thread to the BO area but couldn't do it. I hope that the admin can help.

  4. #4
    Legendry Member Okane's Avatar
    No problem! Don't worry admin can help with that.
    Live Webinar: Hidden Content
    Join My Skype Group: Hidden Content

  5. #5
    Moderator Kolyo's Avatar
    Welcome here elite86!

    Thread moved to BO strategies. Wish you happy trading and hours spend in our community
    "The goal of a successful trader is to make the best trades. Money is secondary." - Alexander Elder

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