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Perhaps the key building block of technical analysis -- the most fundamental component -- is support and resistance analysis. Support and resistance can be thought of as key levels that are likely to be where orders are placed; as such, they are, akin to key battle area in the ongoing war between bears and bulls. A deep understanding of support and resistance can help traders learn where to expect reversals, where trends may gather momentum, and where to place orders. Specifically, this guide goes into the following technical analysis concepts:
Defining the terms support and resistance
How to draw horizontal support and resistance lines
Understanding the concept of support and resistance zones
Using candlestick patterns to validate support and resistance areas
Drawing diagonally sloped support and resistance lines (also known as trendlines and price channels)
Using pivot points to mathematically identify where support and resistance levels may emerge
Fibonacci lines and how they can be used to measure how far markets can go before running into support and resistance levels
How the moving average of price is something traders watch, and thus can also be used as a support/resistance indicator
Confluence: Putting it all together to identify high probability setups
Complete the form to view the ThinkMarkets Guide to Support and Resistance and all our other guides as well. Enjoy a free preview of the Table of Contents below.
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