Support and resistance are the two major foundations of technical analysis and no one can deny this. If they skip learning those things. Their trading journey will be incomplete. Traditional support and resistance are common and everyone uses it. It gives a lot of false signals. But I am going to tell you a new way to use support and resistance that I have learned from an Indonesian millionaire trader. These support and resistance techniques will change the whole perspective of your trading.
You can easily identify the charts and differentiate different kinds of support and resistance that make you a pro trader. The way I tell you to draw the support and resistance will give you a sniper entry point. To start first you have to know what is support and resistance if you are new.
What Is a Support Zone?
To understand support and resistance. You have to know how the support and resistance zones work. What is the logic behind this? The chart price moves because of the supply and demand zone. When the demand is greater than supply the prices rise and the opposite is when supply is greater than demand the prices fall. Sometimes the price moves between the supply and demand zone because they are in equilibriums.
Prices fall during a downtrend because there is an excess of supply over demand. The lower the prices fall, the more appealing the prices become to individuals waiting to buy shares. Demand, which would have been gradually increasing, will eventually catch up with supply. Prices will stop declining at this moment. This is called support.
What Is a Resistance Zone?
Resistance is the polar opposite of support. Prices will rise when there is more demand than supply. As prices rise, the desire to sell will eventually outweigh the impulse to acquire. This can happen because of a number of causes behind this. It is possible that dealers have judged that prices are too high or that they have reached their aim. It could be the purchaser’s unwillingness to enter new holdings at such high valuations. It could be for a lot of reasons. A technical, on the other hand, will plainly notice on a price chart the point at which supply begins to outnumber demand. This is a form of resistance. It is a level or a zone, just like support.
Why Support And Resistance Zone Are So Essential?
Support and resistance zone is the first and foremost thing if you want to study well the charts. Every strategy, indicator, or candlestick pattern will work perfectly if you understand support and resistance and learn its basics to advance. In most cases, strategies won’t be useful because there are support and resistance zones. If you know the support and resistance zone perfectly the market will respect the zones each and every time. Cause support and resistance zones are nothing but trader’s psychology. The psychology when other trades open a long position or open a short position. That’s why you should know support and resistance.
Different Types of Support and Resistance. There are three types of support and resistance.
1. SNR (Support and resistance)
2. SSNR ( Strong Support and Resistance)
3. VSSNR (Very Strong Support and Resistance)
1. SNR (Support And Resistance)
It is a normal support and resistance. It is also known as weak support and resistance. It is called weak support and resistance because if you see the image the support and resistance zone only touches one time the prices. If the price movement touches only one time then it means the support and resistance zone are very weak. It could break out at any time. The supply and demand zone is not so strong though. It’s not a good point of reversal zone. Traders are not able to differentiate between strong SNR and weak SNR. That’s why often they take a trade on weak SNR and lose money. This SNR can break easily. So my advice is to not trade this type of SNR.
2. SSNR (Strong Support And Resistance)
Strong support and resistance zone has a lot of potential and it can be a game changer. Most of the time the price takes reversals from that point. But not always. But if you have good money management and risk management. Then you can be profitable too. Three types of strong support and resistance are found in the Chart.
Bouncing Back Support And Resistance
A bouncing-back support and resistance are easily spotted in the chart. When the price touches the support and resistance level at least two times. That means two times in the support zone and two in the resistance zone. It indicates that the price will also take a reversal a third time. The price movement makes the market sideways.
The logic behind bouncing back SNR is the equilibrium of demands and supplies. Even the same number of buyers and sellers pressure is also the main reason for the formation of this type of support and resistance.
Do not trade a second time on the same SNR if it hits the support and resistance a third time. Remember any SNR could occur break out. Though it is a strong one. But as time goes on and touches more SNR. That means it getting weaker and can break anytime. If the price touches the SNR line a third time and you have already missed the chance. Then try on another chart.
Lonely Candle Support And Resistance
A lonely candle is a strong candle that works as a reversal and strong support and resistance as well. Lonely candle is identified in two ways. As you see in the image. If there is a strong trend of buying or selling. Of this image, there is a strong buy trend. There are so many green candles. after consecutively so many same color candles, if there is an opposite color candle, appears. That’s a lonely candle and when the price back this candle again. It will give respect to this candle and will reversal happen. Even the end of a consecutive same-color candle is also called a lonely candle. You can see in the image. The end of the trend is marked as a strong support and resistance zone. It will take a reversal next time.
The logic behind the lonely candle is the extreme pressure of the opposite party of the trend. If a powerful trend ends up with just one candle. That means there is a high volume of the opposite party who are ready to take over the market. When the market comes to that point. It will make a reversal from that point. Do not trade if there is already a reversal happening at once.
Consolidate Support and Resistance
A consolidated zone is a market structure where the buyer and sellers push each side to control the market. A consolidation zone can sustain for 15 minutes to even 1 day. It depends on different time frames.
The logic behind this zone is equal and extreme pressure on buyers and sellers. When it breaks the consolidate zone. It will move very fast and when it comes to again at that price point. It reverses from there.
3. VSSNR (Very Strong Support And Resistance)
Very strong support and resistance are also known as sniper entry. It is a very important support and resistance zone because it has a very high winning accuracy.
Unusual Hammer Big Wick Tip
We all know what is hammer candle and what it looks like. A hammer candle is a reversal candle that forms at the support or resistance zone. The wick of a hammer candle must be 2.5 or 3 times bigger than the body of the candle.
An unusual hammer has a very big wick. The wick may be 5 to 10 times bigger than the body. Even it can more bigger than that. Generally this type of hammer forms because of news impacts. However, the tip of the wick is very important and it works as a very strong support and resistance zone.
When the price action once broke that tip and came to retrace that area. It works like an iron wall and reverses the market back. It is a very strong support and resistance zone.
This type of candle is hardly seen in the chart. But It has high accuracy. Moreover, the candle could be any color, and the wick could form on any side.
SBR And RBS Zones
SBR (SUPPORT BECOMES RESISTANCE) – FOCUS TO SELL
What is support becomes resistance. Support is a place where we find our chance to buy but breakouts happen and it immediately turns into a sell setup (same as when a buy setup fails and
automatically becomes a sell setup) SUPPORT has been broken out and becomes RESISTANCE.
RBS (RESISTANCE BECOMES SUPPORT) – FOCUS TO BUY
Same as the concept above but this time, the difference is that initially, resistance is a place where we want to find a chance to sell, however, it has been breakout and automatically becomes a buy setup. (Sell setup can turn into a buy setup).
SBR and RBS are some of my personal favorite strategies. First of all, it’s easy to identify. Secondly, you can find it in every currency chart at once in a day. And last it has a very high potential. SBR and RBS is very strong reversal point. It never makes me disappointed.
Final Words
If you learn this support and resistance. It will not only clear your support and resistance but also the overall market structure. And always trade with other confirmations like candlestick patterns and indicators. This strategy is not 100 percent guaranteed to you but if you trade with proper money management and risk management then sure you will be successful. Success in a trading career also depends on brokers. Choose a broker carefully. Don’t trade with a scam broker. They don’t pay you. Always find a broker who is trusted and has given payment regularly to their customer for decades like Exness, FBS, and M4Markets. They offer a very low spread or some of them with no spread and 24/7 customer support on working days. So choose wisely. that’s all for now. Best of luck with your trading journey.