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Traading Success: How to Spot Support and Resistance Levels

At some point or another, every trader has to find support and resistance levels before being able to trade successfully. But what are support and resistance levels? And how do you spot them before making your trades? Let’s find out in this article!

All About The Big Picture

Trading can be simple if you understand the basics of trading, like support and resistance levels. In this lesson, we'll explore these basic fundamentals, so you can start trading with confidence.

1) Trading sites - Trading platforms have all sorts of bells and whistles when it comes to traiding, but you don't need fancy graphics or charts for a successful trade.

Traading Success How to Spot Support and Resistance Levels

Support vs. Resistance Lines

Support levels are the prices at which a stock is expected to find support, or become more stable. When resistance levels are broken, stocks will go higher. There are many ways for traders to spot these points, including using indicators on trading platforms, an online tool like RSI (Relative Strength Index), or scanning charts using technical analysis.

Trend Lines

There are four basic steps when trading based on support and resistance levels: - Define the level at which the support or resistance is going to happen, - Look for these levels in your chart, - Plot out trend lines with the tools provided by your traiding site, - Buy when the asset crosses over from below or sell when it crosses over from above.

Supporting assets typically generate a bullish signal, while resistant assets typically yield a bearish signal.

Chart Patterns

There are several trading sites that offer the use of a trading platform, traiding account, and traiding platfor for free. The most popular ones include Warrior Trading, TradeStation, and TD Ameritrade. To be successful at trading you need to not only know what you're doing, but also when is the best time to buy or sell.

Chart Patterns

Breakout and Consolidation Patterns

Trading can be successful when you are able to spot the consolidation patterns that show up on many traiding platforms. For example, with a triangle consolidation pattern, traders should identify if the area near the top or bottom of the triangle becomes more volatile. Trading based on support and resistance is risky, but it can also make you successful. There are lots of ways that traders will see these patterns show up in a chart, but one of the most common types is a double-top or double-bottom pattern.

Hedging Your Bets with Bollinger Bands

Online trading sites like Loyal3, E-Trade, Scottrade, and E*Trade offer free or reduced fee trades for different investment types. This includes option traiding, which is when traders buy or sell the right to execute a stock transaction at a specific price within a given time frame. For example, if a trader buys an option traiding contract that gives him the right but not the obligation to purchase stock at $50 in 12 months time, then he pays only $10 now.