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Horizontal (Support and Resistance) levels are the most essential part of Technical Analysis, in fact it is the very first thing a trader need to look at, in the chart.
Significant horizontal levels can be found on any time frame but the bigger the time frame will be, the more importance the level will have. There is no standard way of drawing these levels on the chart; finding the appropriate horizontal levels require skills which are developed over time as traders grow his/her knowledge in charting techniques.
Horizontal levels are not hoax & can not be placed randomly on the will of trader, certainly there is a strong logic behind it which determine these areas, understanding this logic clearly gives trader an edge over other market participants.
Horizontal (Support and Resistance) levels are the most essential part of Technical Analysis, in fact it is the very first thing a trader need to look at, in the chart.
Significant horizontal levels can be found on any time frame but the bigger the time frame will be, the more importance the level will have. There is no standard way of drawing these levels on the chart; finding the appropriate horizontal levels require skills which are developed over time as traders grow his/her knowledge in charting techniques.
Horizontal levels are not hoax & can not be placed randomly on the will of trader, certainly there is a strong logic behind it which determine these areas, understanding this logic clearly gives trader an edge over other market participants.
| SELLERS | |||||||||||
| 19 | 25 | 56 | |||||||||
| 39 | 22 | 43 | 55 | ||||||||
| 58 | 46 | 62 | 54 | ||||||||
| 58 | 63 | 77 | 83 | 53 | |||||||
| 76 | 85 | 92 | 110 | 52 | Offer Price | ||||||
| BUYERS | |||||||||||
| 95 | 120 | 80 | 100 | 50 | Bid Price | ||||||
| 64 | 33 | 52 | 76 | 49 | |||||||
| 49 | 38 | 69 | 48 | ||||||||
| 40 | 21 | 37 | 47 | ||||||||
| 18 | 12 | 46 |
| SELLERS | |||||||||||
| 19 | 25 | 56 | |||||||||
| 39 | 22 | 43 | 55 | ||||||||
| 58 | 46 | 62 | 54 | ||||||||
| 58 | 63 | 77 | 83 | 53 | |||||||
| 76 | 85 | 92 | 110 | 52 | Offer Price | ||||||
| BUYERS | |||||||||||
| 95 | 120 | 80 | 100 | 50 | Bid Price | ||||||
| 64 | 33 | 52 | 76 | 49 | |||||||
| 49 | 38 | 69 | 48 | ||||||||
| 40 | 21 | 37 | 47 | ||||||||
| 18 | 12 | 46 |
The LIQUIDITY (Clusters of Pending Orders) on different price levels is the only reason why we have areas of strength/weakness in the chart known as Support & Resistance levels.
Formation of these clusters of pending orders takes place due to many different reasons,
e.g.
The LIQUIDITY (Clusters of Pending Orders) on different price levels is the only reason why we have areas of strength/weakness in the chart known as Support & Resistance levels.
Formation of these clusters of pending orders takes place due to many different reasons,
e.g.
When price approaches to these horizontal levels, it triggers the pending orders. Aggressive orders (market orders) starts eating up the liquidity (passive orders / pending orders) acting as wall, the fight between bulls & bears takes place. If the market orders runs out of their esteem & could not consume all the liquidity, the horizontal level holds & cause reversal. If a great effort reflecting great numbers of market orders out-number the pending orders (eats up all the liquidity), price breaks the horizontal level.
If price doesn’t break the level on first attempt & keeps approaching the same level over & over again, the market orders eats up most of the liquidity (pending orders) which make this wall quite thin & vulnerable. On the next approach the horizontal level gets broken without a great effort. This fact rejects the phenomena that the more touches a level has, the stronger it becomes.
When price approaches to these horizontal levels, it triggers the pending orders. Aggressive orders (market orders) starts eating up the liquidity (passive orders / pending orders) acting as wall, the fight between bulls & bears takes place. If the market orders runs out of their esteem & could not consume all the liquidity, the horizontal level holds & cause reversal. If a great effort reflecting great numbers of market orders out-number the pending orders (eats up all the liquidity), price breaks the horizontal level.
If price doesn’t break the level on first attempt & keeps approaching the same level over & over again, the market orders eats up most of the liquidity (pending orders) which make this wall quite thin & vulnerable. On the next approach the horizontal level gets broken without a great effort. This fact rejects the phenomena that the more touches a level has, the stronger it becomes.
Usually significant highs & lows on larger time frames are taken as support & resistance which is quiet easy to find but there are some hidden support & resistance level in the middle of price action which be find using this unknown technique called “Gap Bar/Candle”.
A Gap bar/candle can be considered the one which will leave the a significant gap between previous & next bar/candle if removed/deleted from the chart. Its usually a wide range candle which body is covering most of the range.
The logic behind is the aggressive market orders which makes a great effort to out-number the pending orders in cluster & become successful in breaking the hidden horizontal level. The formation of the wide body reflects that great effort. So these horizontal levels can be find by detecting these wide body gap candles.
When a support level gets broken, it becomes a resistance level & provide immediate shorting opportunity of first retest and vice versa.
Usually significant highs & lows on larger time frames are taken as support & resistance which is quiet easy to find but there are some hidden support & resistance level in the middle of price action which be find using this unknown technique called “Gap Bar/Candle”.
A Gap bar/candle can be considered the one which will leave the a significant gap between previous & next bar/candle if removed/deleted from the chart. Its usually a wide range candle which body is covering most of the range.
The logic behind is the aggressive market orders which makes a great effort to out-number the pending orders in cluster & become successful in breaking the hidden horizontal level. The formation of the wide body reflects that great effort. So these horizontal levels can be find by detecting these wide body gap candles.
When a support level gets broken, it becomes a resistance level & provide immediate shorting opportunity of first retest and vice versa.
