The Basics Of Support And Resistance In Stock Trading

Have you ever wondered what are support and resistance in stock trading?

There many technical analysis methods traders utilize to help them make the best choices.

Some of them may be very helpful, while others may be somewhat helpful.

Nonetheless, knowing how to use some of the technical analysis methods can help you a great deal in this fiercely market.

For this reason I choose to share some information with you about support and resistance, which are some of the most used methods in trading.

Knowing how to get the best out of them can make you a lot of money, or can help you not too loose too much of your portfolio.

I think all penny stock traders should have a good knowledge about the basics of support and resistance. they should be some signs that are always being looked for. Why don’t we dive into our topic for this post?

What are support and resistance in stock trading?

Stuart Evens from Novice Trader states:

One premise of technical analysis is that stock prices are affected by support and resistance. As those terms imply, support acts to keep a stock’s price above a certain level, while resistance acts to keep a stock’s price below a certain level.

This is a nice and clear definition if you did not know what these two words mean. Now that you have their definitions, we will be moving forward on how they’re used.

If you know how to properly implement them into your daily trades, the result can be very satisfying to you.

When can you use support and resistance?

There’s no specific time or period to get the advantages given by these two. You can utilize support and resistance for any stock.

But they’re supposed to be looked for before you even enter a position on a stock. Very important!

How do you do that?

Spotting the support of any stock could be done by looking for a specific low that has been hit more than once but could never be broken.

On the other hand resistance is the opposite of that.

support and resistance

mysmp.com

If you  look at this stock’s chart which is SIRI, you can see that at “A” there is a spike in the price as well as the volume. Letter “C’ and “E” also show that same spike in the price.

You can conclude that there’s a resistance at those points, although they’ve been hit more than once they did not allow a break through.

support and resistance

http://d.stockcharts.com/

This chart shows a support at $60 for Amazon. The price dropped to $60 three times but it has always reacted by increasing again.

Support and resistance are two nice signals you should look for, not only they would give you confidence in your picks, you may also make money through their correct usage

The more times a stock hits a support or resistance area the weaker it becomes (and the possibility of a breakout increases).

Said Swing Trade Stocks, you have to be a little careful as of how you’re using these signals. Also remember that they may not always work for you.

You may be right with one stock’s pick and be wrong with another one. With that been said, you will need to practice a little before you get used to them.

How can you practice using support and resistance in stock trading?

There are many websites with features for you to practice trading. The good thing about them is that they’re totally free of charge.

I’ve written about a couple of them before, if you want to know some of them you can click here.

If you’re new to trading it could also be a great idea for you to practice with them first. They are like the real market, with the exception of paper or fake money.

It’s a great way to practice because you have nothing to lose. However you would have to act like it’s the real deal in order to learn as you should.

Once you feel confident enough you can move on and start trading with your money.

Conclusion:

There are so many technical analysis methods when it comes to trading. It wouldn’t be an easy task if you want to learn them all.

However, there are some of them that you need to know in order to help you trade successfully.

Support and resistance are two technical analysis methods that are used very widely in trading, not only stock trading but in many other markets.

They are very important to us traders. For this reason you should not underestimate the value of them and you also need to learn how to utilize them which should help you throughout your trades.

As always, do your research and trade smart.

Don’t hesitate to comment on the comment section below to get the communication started.