Support & Resistance — They Should be an area, not just a line.

When To Enter The Market? Refer To The Main Support & Resistance.

Enter the muddled market and lose money for no reason? Stop being the puppet of the market!

Image Credit: Shane Devlin

Instead of operating trades, we are sometimes manipulated by the trade itself…

We will be confused about how should we position ourselves in the market.

There are two things we need to prevent

  • Entering the market without any comprehensive plan
  • Chasing after the market when the price surges up

But of course, sometimes, no position is also a good position.

The misunderstanding of most people have about the support and resistance

“Support and resistance levels are complicated.”“Support and pressure are only used by technical analysis experts.”“Enter the market immediately when the price returns to the support or resistance level?”“The more support and resistance I found, the more trading opportunity”

A “NO!” should be replied to all of the above.

Support?

We can imagine the support as a floor.

Self-shot: tradingview

When the price drops to a certain level, the opposite force struggles in the opposite direction. It decreases the momentum of the price to move downwards and redirect it to move in the opposite direction.

Resistance?

We can imagine the resistance as a ceiling.

Self-shot: tradingview

When the price rises to a certain level, the opposite force struggles in the opposite direction. It decreases the momentum of upward price rush, or even turn around. It serves as a pressure to prevent the market from going up further.

The above is our general understanding of support and resistance.

It’s a rather simple concept, right?

However, if you ever have some trading experience…

You will realize that the two situations that we mentioned are happening repeatedly almost every day. If we simply rely on the situation once or twice (the price’s breakout of certain support or resistance), to decide whether to enter the market, we could have a great chance to receive a painful lesson. We have too many “trade opportunities ” to take care of.

Are they truly meaningful and important positions?
Or they are just some random market noises?

We need the main support and resistance levels

They help us filter out most of the markets randomly generated, meaningless and unreliable support and resistance levels — the noises.

Self-shot: The Noises

Understanding Of The Main Support and Resistance

It is a crucial trading concept where it lets us better position ourselves in the muddled market. Instead of chasing the price like a fool, it helps us develop a better strategy by telling us the correct timing to enter the market. So that we can greatly increase our chances of survival and the winning rate in the market.

The main support pressure level — The Key Level

In layman’s terms, the Key Level is the real pain point in the market, where it is found to be really sensitive and is the most impressive one for the specific market.

How is the so-called “Sensitive” defined?

  • A position where a major response has been triggered previously in the market, or
  • A position where rejections happened a couple of times in the period prior, or
  • A position where it’s turned from yesterday’s time of resistance to today’s time of support.

The key level would be the frequently tested position by the market prices. Once the price is closed to the level, we can expect a certain degree of response to the market price. We can then take them as the real “trade opportunity”.

Next, let’s look into an example:

The strong evidence to prove that a position is meaningful for the market instead of random noise is through “the number of contacts”.

Self-shot: The Key Level

Everything happens for a reason. You may think that it’s just a coincidence when the situation happens once or twice, but when the number of incidents starts to increase, it could be suspicious.

Ask Yourself:

Does it have a special meaning?
Is this position a very critical position?
Is it high and low in a few years?

When you think that it cannot be just a coincidence due to the increasing number of incidents, it can most probably be the key level by then.

What are the benefits of knowing the main Support & Resistance Level?

Image Credit: sippakorn yamkasikorn

People used to make mistakes upon trading.

Forty-five percent of the traders enter the market randomly without having a plan, and another forty-five percent of the traders are chasing the market. While the rest of the top 10% are “Snipers”, who are having a comprehensive plan from the beginning of the task.

The snipers are lurking in the shadow, trying to understand the target person’s habits and behavior, picking the most suitable equipment, planning the entry and escape routes, observing the surrounding environment, and wait patiently for the target to enter your shooting range.

“While trading is similar”

We should have a comprehensive plan before every transaction instead of entering the market randomly.

The main support and resistance level is the excellent deployment area of the sniper as there will normally be a big market response upon the level. It is the place where we can have the greatest opportunity to catch the next big wave in the market. All you have to do is make your trading plan here!

But, how do we plan?

We should always make enough hypotheses on different scenarios.

Key Level Retest

If the price really comes back here again and make another retest … I should… 

“Plan the entry and escape routes once the price breakout the key level”

Game-Changing Candlestick Pattern at Key Level

Self-Shot: Game-Changing Candlestick Pattern At Key Resistance / Support Level
If here presents the game changing candlestick pattern. I should…

“manage my deployment position and the range of shooting ”

A Double-Top

Self-Shot: Double Top
If the chart shows a double top pattern here. I should …

“Observe the surrounding environment and be clear of my escape route”

What if…

  • There is enough profit range away from the next major key level?
  • If the price reaches my target?
  • etc…

“What is your plan? ”

When we make enough plans with hypotheses before every transaction in conjunction with the main support/resistance key level as the strategic deployment position, your chances of success are naturally greater.

The Second Problem — Chasing The Market

Image Credit: Joe Caione

Whenever we see the price surges up and we are so afraid of losing the opportunity to buy in…

We rush in right away. Yet, when we enter the market, the price no longer moves in the expected direction. After hitting our stop loss, we quit.

The price then continues to move in the right direction (upward). You will feel very discouraged as if you can never win this game.

Is this ever happen to you?

To get out of this predicament:

  • We should let go of the emotions and the urge to chase the market.
  • We can however try to develop a trading plan with the sniper example just mentioned.

From chasing the market to waiting for the market to fall into your shooting range. We aim for the opportunity before taking the shot to have a greater chance of success.

The main support/resistance level can help stop us from chasing after the price. Instead, we should develop our strategy by waiting for the price to retest the key level again and look for the entry signal with a higher winning rate.

When we repeat the process and cooperate with proper risk management and correct trading mentality. We shall squeeze in the top 10% of the people in the market.

Conclusion

Disclaimers: Please do not take the above examples as your only benchmark for your trades. Instead, take them as good references and educational information to help you understand better how to look for an effective key level and the things we can do before entering the market.

Develop your plan. Execute your plan.

We plan like a sniper, remember?

We try to trade safely.

It’s the only way for us to win in the long run in the trading world.

Not every day is a trading day.

Sometimes no position is also a good position.

For other trade-relevant articles, you can find them here.

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