Chapter I: Support and Resistance

There are two ways to determine support and resistance level. The first one is by numerical calculation (using yesterday High, Low and Close value), and second one is by marking at the chart directly.In this section, we’re going to discuss about the second one. We’ll have support and resistance levels by marking at the chart directly.Let’s see their definition first:Support:When price finds more and more buyers and they think that it’s oversold so they starting buying it up and that causes price to back up away from support.Resistance:When price finds more and more sellers and they think that it’s overbought/overvalued so they starting selling it up or taking profit and that causes price to back down away from resistance.Now, let’s see the chart below. This is Eur/Usd at 1H of time scale:

Let’s start from May 26. By understanding the definition of support and resistance, then we might draw support level like picture below: (I deleted some part of the picture to help you understand the concept)

Now we have support level at 1.2698 on May 26, where market price didn’t go down further than that level. So we considered 1.2698 to be our support level for the day. And now, take a look at what happened on May 29. See picture below:

On May 29, we have resistance level at 1.2766, where market price didn’t go up further than that level. So we considered 1.2766 to be our resistance level for the day.And 1.2733 can also be considered as our support level. Since market price couldn’t break below that level. See picture below

But then, see what happened on May 30. Market price broke above our resistance level at 1.2766 and technically, our resistance level was no longer considered to be resistance level. It became support level.

Remember this:“When resistance level is broken, then technically it will become support level. And vice versa, when support level is broken, then technically it will become resistance level.” (RULE #1)

And so on, then we’ll have support and resistance levels like picture below:Next->>

How to Determine Buy or Sell Signal Using Support, Resistance, and Trendline

You can create your own buy or sell signals by determining short term trendline, support levels and resistance levels. This article is about short term trading. We enter market using trending method. Support and resistance level will be our guidance to enter and exit from market. I’ve divided this article into 3 chapters to make it easy for you to understand the concept.

CHAPTER I
CHAPTER II
CHAPTER III