As we know, support and resistance levels are commonly used in technical analysis. In this article, we will tell you an advanced concept of support & resistance.
As you know, the market can reverse from any SR level, and sometimes you may get a false breakout of these levels because the market is taking support & and resistance from the particular area, which is known as zones.
What are SR zones?
Support & resistance zone where your price reverses or slows down before continuing the trend, and this behavior repeat in the future.
And one more thing is that the more volatile market, the more SR zones will be created. Most of the traders assume that these levels are specific prices. This leads to wrong trading decisions. Please remember that Support and Resistance are price zones, not only single lines.
Remember that!!
The strong Support zone can't get through to continue to decline after many times of touching. And Strong Resistance zone cannot break through to continue to increase after many times of entering.
Shifting of zone
When price breaks out of resistance to become support, and when price breaks out of support to become a resistance, this process is known as sifting of the zone.
Relation between trends and SR zones
As we have explained above, the sifting of the zone, many times these zones breakout form a trend, see below picture that how the market is breaking its support and retesting them then turns down.
I hope so you got the concept of SR zones.
Kinds of support and resistance
Along with horizontal Support and resistance, there are two more types which SR feature let's discuss -
1. Trend line S&R - Support & resistance can be formed at the trendline also. The following chart below shows the H4 time frame chart with support and resistance marked by the black arrow; you can see that the market test the trendline and get rejected, which means that price is support & resistant from the trendline.
- Fibonacci Support & resistance - The Fibonacci tool is handy to know the price reversal during the correction in the markets. In other words, Fibonacci levels can act as SR levels. According to there are two powerful levels 50% and 61.8 retracement levels, you can see the chart below
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Support & Resistance trading place
Now you know the SR level, SR zone, and types of SR, you can trade these zone in Range, Breakout, or (pullback) and trade with trendline SR.
In ranging, market traders want to buy at support and sell at resistance, you will get the best opportunity to trade this SR zone, you have to draw only SR zone, and when market reach this zone so you can trade it with confirmation to confirm your trade, you can use candlestick pattern like pin bars, engulfing, and inside bar on SR zone.
When the market Breaks out of any support & resistance zone, so you get a trade opportunity, let me explain to you when the market breaks the resistance zone to become support at the support zone, find buy opportunity with confirmation.
next article on price action patterns
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