What Is The Support & Resistance Indicator?
The support & resistance indicator is a technical indicator that helps traders identify areas of support and resistance. This can be used to help predict future price movements, or for traders to manage their stop losses and targets.
Trying to understand support and resistance can be difficult, but most of the time it appears as horizontal lines on charts and can be explained quite simply. Support is an area where the price tends to find buyers (demand), and resistance is the opposite. The idea behind these levels is that when the price approaches a level of support or resistance, the amount of energy in the price meeting that level of supply/demand will determine whether or not it continues on its current path or changes direction.
The support and resistance indicator is a technical analysis tool that helps you understand market dynamics and predict price fluctuations. In this article, we’ll explain to you how support and resistance work. We will also give you some examples of how to use the indicator properly in your own trading.
In general, prices tend to fluctuate within a certain range. When prices break through this range, it’s called a breakout or breakout. This is when the price moves beyond the boundaries of the channel (the upper channel line or lower channel line). When this happens, it’s important for traders to be aware that prices are likely to move in one of two directions:
Resistance levels – A price level where demand from buyers is thought to be high and exceeds supply from sellers. Therefore, the price cannot break through the resistance level. The resistance level is typically encountered multiple times before it is broken through permanently.
Support levels – A price level where demand from sellers is thought to be high and exceeds supply from buyers. Therefore, the price cannot break through the support level. The support level is typically encountered multiple times before it is broken through permanently.
How The Support and Resistance Indicator Works
The support and resistance indicator works identically as the trend indicator to display support and resistance levels for the price action of any market.
The S/R lines are exactly identical to the Trend line and can be used in conjunctions or separately. The Support/Resistance indicator is best used to complement the trend indicator, which displays the dominant trend of the market
The support and resistance indicator can be used in a variety of ways to help determine future price movement. The indicator identifies the current support or resistance levels by connecting the candlesticks that are directly above, below, or at the same level of the indicator.
Exception: If you see a large gap between two candlesticks with no support or resistance in between, it could mean that buyers or sellers are taking profits near this area and it might not be as significant as it appears.
Indicator Placement: The further away from price action the support/resistance indicator is placed; the weaker its influence will be on future price movement. For example, if you place an indicator three candles away from price action, there will be less weight on this particular candlestick than an indicator placed two candles away. Some traders use this information to their advantage by placing them further away from price action to reduce their influence over future price movement.
How Does The Support & Resistance Indicator Help You Pick Stocks?
If you are a newbie to trading and don’t have much experience to work with, then you may find the support and resistance indicator quite useful in your search for great stocks. The indicator helps you make sense of the market data and comes in really handy when you are trying to find out the best time to buy or sell the stock.
The most important thing about support and resistance is that they become stronger barriers if there are multiple touches of these levels. The first touch is weak, but the second touch becomes stronger, followed by a third and fourth touch resulting in yet another strong barrier. If prices break through these strong barriers, it can result in some changes in trends and can be considered as an excellent entry point to trade.
Picking stocks that are poised for a breakout is like picking lottery numbers — it’s a fool’s game. It’s impossible to know which stocks will make big moves. The best you can do is look for stocks that have the potential to move up or down and position yourself accordingly.
The Support and Resistance Indicator is one of the best tools I’ve found for finding trend changes before they happen. This tool gives you the power to see a stock’s price history, along with two key trend lines: support and resistance. Check out roboforex login guide at Traders Union website.
Here’s how it works:
When a stock trades above its resistance level, this is bearish and indicates selling pressure. When it trades below its support level, this shows buying pressure and is bullish. If a stock breaks out of this range, it could indicate an impending trend change.
A stock’s resistance level is located at the highest high on the chart, while its support level is located at the lowest low on the chart. When a stock rises above its resistance level, it creates a higher low that represents higher buying pressure. Likewise, if it falls below its support level, it creates lower highs that are slowly eroding demand from buyers.
Final Words
The support & resistance indicator is a great way to start picking stocks. The simplest way to trade the support and resistance indicator is to use it as a trend-following indicator. If prices are trending up then look for stocks with a resistance level above current prices and a support level below current prices. When prices break out of this range then the stock may have started a new trend resulting in higher profits in your trading account.
