Finding
Support and Resistance
Why
does a market find support
at a specific price. This could be for any
number of reasons which we go into in detail in the various pages in
the rest of our technical
analysis charts
section. It could
even be something as simple as a round number.
- Traders and
investors love round numbers. When most folks decide to take a trade
they usually have a number in mind that they want to trade at. For
example, a
trader
may
decide that they will buy when a stock price drops to $20, so when a
stock drops from, say $23.68 there can be a number of traders with the
same idea and are waiting
to enter the market when prices fall back to $20
- $20 is just an example as the same
scenario would have applied at $23,
$22 and $21 on the way down but just at at a lesser degree as more
buyers will have come in at the bigger round numbers. 10s, 100s, 1,000s
and 10,000s etc...you get the drift, right?
The
point is
that support
is created where buyers have gained control.
The strength of that support depends on how much extra buying there is
at
that level.
The
opposite
is true for resistance.
That is where selling has
overwhelmed the buying.
Trading
with Support and Resistance Indicator Trend Lines
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