THE SUPPORT AND RESISTANCE

This is the basis strategy using which trade entry points and exit points can be identified and also when used in combination with other strategies and indicators it will result in most profitable scenario. These lines are mostly very effective and hence widely used. These are the lines where maximum buying or selling activity as the case may be, is attracted.


THE RESISTANCE

Resistance always lies above the current market price and this is the point where there are more number of sellers compared to buyers and do not let price go above this point i.e. sellers display strong resistance at this level.


Following observations can be made from the above bank nifty chart:

1. Several weeks apart, but the resistance line still worked, hence it is considered as one of the most crucial technical analysis tool.

2. Resistance line is where there is maximum strength of sellers and they do not let price go higher and this can be considered as signal by the traders and can consider it as entry point, exit point, target or stop loss whatever the case may be.

3. Also, if price breaks this zone towards upside, then trader can take entry for longest upward rally as it broke the strongest zone of bears.


THE SUPPORT


Support lies below the current market price and this is the zone where buyers are stronger than sellers and do not let price go down below this level. This tool provides signals to traders at all levels.


Following observations can be made in the above Bank nifty chart:

1. We can observe in the above chart how support line is respected and hence it is considered as one of the most powerful tool of technical analysis.

2. By identifying correct support line, trader can execute profitable trade as this is the zone which attracts more number of buyers.

3. If price goes below this zone, then trader can expect a potential downward rally. Hence Support line also helps in decision making.



TO SUMMARIZE:

1. Resistance line is a point where there are maximum number of sellers, who do not allow price to go higher beyond this point.

2. Support line is a point where there are maximum number of buyers, who do not allow price to go below than this point.

3. If price breaks resistance/support level then it is an indication that there will good uptrend/downward rally as the case may be.

4. There are various ways of identification of  support/resistance lines and they never stay same. They are dynamic and only on correct identification they prove to be profitable and in detail it is explained in my trade journal posts where I identify these lines in all my trades ( LIVE TRADING POSTS )

5. In my experience, though it is stated by everyone that it can be independently used at all levels i.e. for entry , exit etc. But I advise this to be used in combination with other strategies/indicators for better results.