Something little understood about support and resistance levels.

2016년 11월 1일

It's not enough to just know where S/R levels are. We need to understand how they work, and when they will no longer hold. I always look at price legs, and then look at where congestion happens within said leg. Congestion is where S/R levels are. Often times, levels are left untested from a previous leg. Usually at one time, I am aware of levels from the leg to the immediate left, and then any levels that may have not been tested from a bigger leg (further left).

When do levels typically break down? On the second test of said level. On the first test of said level, price will almost always be repelled.

The most important concept to understand is how levels are lost and gained. When a level is lost or gained, price will always eventually come back to test it, as long as the level was significant in the past. I have annotated key levels that were gained or lost and then retested to better explain what this looks like. To truly be successful at trading, one must keep track of levels lost/gained within the current price leg.