Chapter 8, Part I. Support and Resistance.

Part I. Support and Resistance

Commander in Pips: As I’ve promised, today we will continue to deal with technical analysis and talk about support and resistance in the market.

In general support and resistance are amongst the major tools that are used in the market by the absolute majority of traders. That’s why it’s very strange, that these tools do not have a definite description – there are almost as many explanations of support and resistance and how to build them as there are traders.

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On a theoretical chart the idea of support and resistance looks very clear – on an upward move as on downward:

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Pipruit: Looks like resistance, despite the direction of the market always stands above it – something that does not allow market to go upward. Support conversely – holds the market from free falling, i.e. stands below the market.​

Commander in Pips: Yes. When the market reaches some level above it, that does not allow it to move higher, and turns it to the downside – this particular level becomes a resistance. After a move lower, the market reaches some level below it that turns it from this level to upside move again. So, this level becomes a support. In fact, the market creates resistance and support levels over time during up and down moves.