In stock market, support and Resistance symbolizes key junctures
where the forces of supply and demand meet.
Prices are driven by excessive supply (down) and demand (up). Thus technical analysis is very
much important in the wake of knowing buy/sell signal. Supply is synonymous with bearish, bears and
selling. Demand is synonymous with
bullish, bulls and buying. These terms
are used interchangeably throughout this and other articles. As demand increase, prices advance and as
supply increases, prices decline. When
supply and demand are equal, prices move sideways as bulls and bears slug it
out for control.
SUPPORT?
Support is the price level at which demand is thought to be strong
enough to prevent the price from decline further. The logic dictates that as the price declines
towards support and gets cheaper, buyers become more inclined be it intraday
or delivery. The intraday trading
software can make out a picture of it by assimilating the data and putting
out result even about nifty futures. The best trading software must be able
to grasp the support of a falling stock so that it may help investors to know
where to enter, especially reading live buy/sell signal.
RESISTANCE?
Resistance is the price level at which selling is thought to be strong enough
to prevent the price from rising further.
The logic dictates that as the price advances towards resistance,
sellers become more inclined to sell and buyers become less inclined to
buy. By the time the price reaches the resistance
level, it is believed that supply will overcome demand and prevent the price
from rise above resistance. Resistance
does not always hold and a break above resistance signals that the bulls have
won out over the bears. A break above resistance
shows buyers have increased their expectations and are willing to buy at even
higher prices. In addition, sellers
could not be coerced into selling until prices rose above resistance or above
the previous high. Once resistance is
broken, another resistance level will have to be established at a higher level.
The Importance of Support and Resistance
Notwithstanding the fact, support and resistance analysis is an
important part of trends because it can be used to make intraday trading
decisions and identify when a trend is reversing. For example, if a trader
identifies an important level of resistance that has been tested several times
but never broken, he or she may decide to take profits as the security moves
toward this point because it is unlikely that it will move past this
level. The intraday traders in nifty
futures analyses live buy/sell signal after giving enough thought
to his technical analysis.
The Nifty trading system based on online trading software
do care importance of support and resistance in both, intraday trading as well
as reading between live buy/sell signals for delivery trade. Chart analysis also gives a picture of
how to draw proper support and resistance level for option trading.
Support and resistance levels both test and confirm trends and need to
be monitored by anyone who uses technical analysis. As long as the price
of the share remains between these levels of support and resistance, the trend
is likely to continue. It is important to note, however, that a break beyond a
level of support or resistance does not always have to be a reversal. For
example, if prices moved above the resistance levels of an upward trending
channel, the trend has accelerated, not reversed. This means that the price
appreciation is expected to be faster than it was in the channel. The best trading software includes all
such aspects to give an authentic idea about the stock market as well as
commodity market.
Undoubtedly this also helps in analyzing nifty chart while trading in
nifty future with the help of intraday trading software. Even pattern of nifty live can be accrued
well by knowing proper support and resistance in intraday trade. Intraday tips providers too, study it
properly before making confidant decision.
How to draw a valid Support and Resistance?
In
fact, drawing valid support and resistance is the most important concepts when
it comes to forecast any financial market (Forex, stocks, futures, etc). Drawing the key levels of support and
resistance that I feel are the most significant in the current market
environment. It really is a very logical
and but not simple task. I think, support and resistance levels, some traders
might disagree with me, but the information we could get from these levels
could actually help one trade with better results.
There
are three things the market could do after hitting a support or resistance
level:
1. Retrace
2. Change direction
3. Stall
Knowing
what the market is likely to do after reaching one of these levels, we
could adapt our strategy to trade based on that information: on what the market
is likely to do. Therefore, we need to know how to draw support and resistance
levels and be prepared to make the necessary changes to our strategy:
move your stop loss levels, close your trade, add to your trade, etc.
Simple rules to draw perfect support and resistance levels in stock
market.
Rule No. 1: the market needs to get rejected at least twice from the level (not one, twice).
Rule No. 2: the more rejections the level has, the more important it becomes
Rule No. 1: the market needs to get rejected at least twice from the level (not one, twice).
Rule No. 2: the more rejections the level has, the more important it becomes
Rule
No. 3: most recent rejections are more important than less recent rejections
The
resistance level; it’s very important,
the market has been rejected three times from the same level. If there was
another resistance level near this one, with only two rejections, the one would
be more important for chart analysis and knowing stock behaviour.
Now,
about the support levels (both have three rejections), which one is more
important
Conclusion:
There is one rule which one must follow: only take on consideration the
support and resistance levels that the market is actually taking in
consideration. Why one act would base on a level that the market is responding
to? Some intraday software religiously follows
it so that best intraday tips can be provided for intraday
trading.
One important thing to consider:
support and resistance levels are
in intraday trade most important to know.
It is more like zones instead of levels. So don’t break your head trying
to figure out where to draw your level: at close of the candlestick, at the
lowest low, etc. Just draw it where it touches the most rejections be it commodity
trading, intraday stock trading or nifty future.
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