Support and Resistance

[Husires]

Disclaimer: The information's contained in this explanation is the result of my understanding of Bitcoin Support and Resistance and may contain some errors. Search and confirm about it.

Table of contents

      1. Introduction
      2. What are Bitcoin support and resistance levels?
      3. How to use them to predict the price?
      4. OCO order with support and resistance levels
      5. What is support-resistance flip?
      6. Strength of a support or resistance area
      7. Psychological support and resistance

Source: https://www.dailyfx.com/education/learn-technical-analysis/support-and-resistance-trading.html

Introduction

Support and resistance are fundamental concepts related to technical analysis, whether gold, silver, or even cryptocurrencies.

Being well aware of these concepts will bring you wealth, especially in a highly volatile market such as cryptocurrency markets, as it is one of the basic principles for everyone who wants to learn to trade.

Above all, applying one of these concepts will not only make you accurate in predicting, but rather you will need to study a lot of charts. Understanding support and resistance will help you to understand more.


What are Bitcoin support and resistance levels?

Think about it, as if there are limits or areas that the price cannot exceed in the normal situation, and if it exceeds, it means that a big change will happen to the price. It is almost as close to a level as you can’t afford in the normal situation.
In the case of support, the price finds "floor", while in the case of resistance it finds "ceiling."


So, in a simple concept, look for support and resistance points, and when the price exceeds it, this means that a big change will take place, but real cases are usually inaccurate or simple by this principle, because the markets are not governed by strict mathematical rules of 1 + 1 = 2.

Therefore, the most accurate concept is to think of it as a price range (zone) and not as fixed prices.

Talking is easy. Why not move on to some practical charts?

Notice that the price has continuously entered that area, but the price has not been able to descend below it and thus the price has bounced in the other direction.
The same can be repeated for resistance levels.

Source: https://medium.com/@cryptocurrencyexplained/a-guide-to-horizontal-support-and-resistance-9b367877cd1f

How to use them to predict the price?

Many analysts use these levels to predict the paths of the market and because these levels are psychological and determined by market interactions in the past, they are ideal regions for large traders (or whales) to enter or exit, which means more liquidity flows to these areas.

the risk levels are higher and hence the profit is greater, it is an ideal opportunity for those who want to achieve a quick profit because when the price reaches those positions either it bounces back up or down.

If you are afraid of losing, you can place a stop loss order (OCO order.) If the area is breached, a buy or sell option is executed, thus traders can reduce their losses and exit with a small loss.



OCO order with support and resistance levels


It is one of the options that enable you to execute a pair of orders to buy or sell at the same time. to activate the option on Binance, click on "Stop-limit order" to open a dropdown menu and select "OCO."

A practical example Let's say you just bought 2 LTC at 0.004 BTC because you think that the price is close to a support level and is supposed to rise. The problem is that you are afraid that the price will bounce and lose a lot of money.

In this case, you can use the OCO feature to place a profit order at 0.005 0 BTC along with a stop limit order at 0.0039 BTC

After that you search for the required support or resistance area and change the settings as shown in the picture.

Source: https://blog.goodaudience.com/oco-orders-binance-explained-92f3636364e9

What is support-resistance flip?

Source: https://www.tradingsetupsreview.com/swing-trading-flipping-support-resistance/

This pattern occurs when a resistance or support area is broken so that when the resistance area is broken and retested, it may turn to a support level later, and vice versa.
In this type, the retest zone is ideal for anyone who wants to make a profit.



Strength of a support or resistance area

The strength of the support or resistance area represents the number of times the retest of that point is made so that the higher the price and the retest of the support area, the more likely it will be broken and thus expect a price drop that is likely.

The higher the price price and retest the resistance area, the more likely it will be broken and thus an expected price increase is likely.

Source: https://www.investopedia.com/trading/support-and-resistance-basics/

Psychological support and resistance

It is not related to any technical analysis, but a physical explanation, which is that the human mind tries to understand things in an aggregate form so that it is easier to assimilate the information. Suppose, for example, that people love numbers like 10 15 20 25 instead of 12 17 21 28, so rounding up these numbers will give you a higher marketing opportunity.

The same applies to digital currencies, many prefer buying and selling at prices such as 9200 and 10700 and others instead of 9340 or 10670 and so on.

Source: https://tradingsim.com/blog/finding-psychological-support-and-resistance-levels/

Sources
https://www.youtube.com/watch?v=PuboYnBc0t8
https://www.youtube.com/watch?v=B8-_Mxz0Weg
https://www.investopedia.com/trading/support-and-resistance-basics/
https://www.dailyfx.com/education/learn-technical-analysis/support-and-resistance-trading.html
https://academy.binance.com/economics/the-basics-of-support-and-resistance-explained

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[VanityWallets2015]

Thank you this is very helpful some people didn't use the very basic supports and resistance and this are their mistake even if they are basic they shouldn't be ignored. I just wanted to add about the support or resistance there is no such thing as exact price for the support or resistance most of them are zone so for example the support is around $38k that doesn't mean it is exactly $38k but around that zone.

[Zilon]

Very useful guide watching out for multiple retesting and flipping to form new support and resistance zones could be powerful handy tools if traded in patience to allow this formation set in. I have gone through almost all trading techniques and i came to understand nearly a handful of them points towards support and resistance zone making it obvious this analysis in ones toolbox could be a bit reliable when making analysis.

[palle11]

Very useful guide watching out for multiple retesting and flipping to form new support and resistance zones could be powerful handy tools if traded in patience to allow this formation set in. I have gone through almost all trading techniques and i came to understand nearly a handful of them points towards support and resistance zone making it obvious this analysis in ones toolbox could be a bit reliable when making analysis.

There are no certainty in the market. No strategy is a guarantee all still basing on speculation if the indicators are those moving after the market. Most of the indicators in platforms move after the price action so we only can move by sentiment and speculation using the indicators. However we call some spots resistance and some support because of what we make out of them through the lines we draw and based on strong time frame. Most times everybody support and resistance don't become exactly the same point but range. We still require care despite support and resistance.

I just wanted to add about the support or resistance there is no such thing as exact price for the support or resistance most of them are zone so for example the support is around $38k that doesn't mean it is exactly $38k but around that zone.

Your submission is right. Yes exactly my point.

[Ararbermas]

Support and resistance is a very common thing and very useful strategy for every traders especially daily traders which to identify the respected level and to have a good set up for entry.. For me it's a good idea to have a demand supply as well because its the most respected level also like support and resistance wherein they're both useful even you used 1 indicator only such MACD surely you have a good win rate.

[palle11]

even you used 1 indicator only such MACD surely you have a good win rate.

Honestly MACD is one most confusing indicator and difficult to interpret accurately. It is better to use MACD with other indicators like RSI but support and resistance combination is best for it because it goes after the price too. It is not to be trusted being used alone, doing a taste combination can help to find the better one.

[Hamphser]

even you used 1 indicator only such MACD surely you have a good win rate.

Honestly MACD is one most confusing indicator and difficult to interpret accurately. It is better to use MACD with other indicators like RSI but support and resistance combination is best for it because it goes after the price too. It is not to be trusted being used alone.

Been using MACD with RSI plus having support and resistance and some moving averages with my trading analysis even though its a little bit messy towards my chart but at least you do know on how to read up them which this would be the most important thing to have as a trader.

You could even do naked trading with having those imaginary support and resistance lines.You could eventually able to spot it out without putting it literally on your chart.
@OP, thanks for sharing this guide, it would be helpful to those who are just starting up.

[GreatArkansas]

Who else here that first fundamental that has to learn on trading is Support and Resistance? It seems most of the traders started here, as we all know that support and resistance is huge help to identify price action or next move of the asset that is applicable in most of the timeframes.

This fundamental on trading is a MUST for me especially if you are just starting, you should start with basics or on the core of trading, just like this, support and resistance.

[Coin_trader]

Who else here that first fundamental that has to learn on trading is Support and Resistance? It seems most of the traders started here, as we all know that support and resistance is huge help to identify price action or next move of the asset that is applicable in most of the timeframes.

This fundamental on trading is a MUST for me especially if you are just starting, you should start with basics or on the core of trading, just like this, support and resistance.

Yes, This is the most basic but I hope the OP add the use of Fibonacci level to determine possible support and resistance when there's an active trend in crypto. The sample is from the stock market which often do sideways that typically create easy to spot support and resistance. In crypto market sideways is rarely to happened because there's always a trend here with fast movement. Double bottom/multiple bottom and vice versa is only happening on short time frame which only create a temporary suppport and resistance. Using a fibonacci level is vital when determining possible support and resitance on crypto market.

[Peanutswar]

It's a nice topic many members now are looking how to start with their trade and this is one of the ideal ones because even though it's basic but it's very helpful also OP you can add to the Break of structure and Change of order so they have an insight after the support and resistance break what are the next ideal pattern to buy or to sell their assets.

Who else here that first fundamental that has to learn on trading is Support and Resistance? It seems most of the traders started here, as we all know that support and resistance is huge help to identify price action or next move of the asset that is applicable in most of the timeframes.

This fundamental on trading is a MUST for me especially if you are just starting, you should start with basics or on the core of trading, just like this, support and resistance.

Yes, This is the most basic but I hope the OP add the use of Fibonacci level to determine possible support and resistance when there's an active trend in crypto. The sample is from the stock market which often do sideways that typically create easy to spot support and resistance. In crypto market sideways is rarely to happened because there's always a trend here with fast movement. Double bottom/multiple bottom and vice versa is only happening on short time frame which only create a temporary suppport and resistance. Using a fibonacci level is vital when determining possible support and resitance on crypto market.

Its a good topic too if OP add the Fibonacci, to the people who don't know commonly the use of the Fibonacci is for retracement it when is the ideal to make a confirmation of the position you want.

[Mpamaegbu]

There are no certainty in the market. No strategy is a guarantee all still basing on speculation if the indicators are those moving after the market.

Even when the indicators move ahead of price (Leading Indicators), it's still a speculation. What you described here in yours is "lagging indicators". There's no certainty that Price Action (PA) can't be halted or distracted by news on its way, even with leading indicators of trendlines and support & resistance. That's why we see price breaking these lines from time to time and then retracing. There's nothing as sure as 100% when it comes to trading.

Most of the indicators in platforms move after the price action so we only can move by sentiment and speculation using the indicators.

Trendlines are also on platforms by default and these are leading indicators. I encourage new traders (even old ones too) to use leading indicators more.

[hugeblack]

Determining points of support and resistance is essential if you want to analyze the price or build a trading strategy, which is the only technical measure that works well and has a better prediction rate.

The problem is, will the price break those points or not? Failure to do so will determine whether you will achieve profits or losses.
The benefit also lies in buying and selling a little bit of Bitcoin at those points that determine how the user will place orders on the platforms.

Failure to understand the points of support and resistance is fundamental to the failure of the trading strategy and therefore profit will depend on luck.

We do not forget the bitcoin halving effect on the price.

[rhomelmabini]

Its my first indicator used when I started trading few years ago a very simple indicators yet really effective. The most common reason why most new traders who are using this is not successful is because they have NO patience, too early to buy and sell even indicators are clear, I sometimes fall for this one but proper timing and following this indicators can give you great result.

Not my first but when I learn it, it use to be my favorite since it's easy to understand. I use to identify this during breakout then waiting for a retest on those support levels I use to chart. I use to pair it with volume and Fibonacci indicator since I try not to clog my chart since it was difficult to read and messy.

[Maus0728]

[...snip...]
The strength of the support or resistance area represents the number of times the retest of that point is made so that the higher the price and the retest of the support area, the more likely it will be broken and thus expect a price drop that is likely.

The higher the price price and retest the resistance area, the more likely it will be broken and thus an expected price increase is likely.

Not only that, the strength of your levels (support or resistance) has a relationship to your timeframes.

Levels relative to higher timeframes (HTF) are more difficult to reverse and may act as a catalyst for larger moves, whereas levels relative to lower timeframes (LTF) are weaker and may only cause minor reactions.

As a result, a weekly level is far more powerful than a daily level, and an hourly level is far more powerful than a 15M or 30M level. This then creates a hierarchy in your mind to determine which level will be hit during that time period, which is extremely useful when looking for an entry and exit point, as well as in trade management.

[palle11]

even you used 1 indicator only such MACD surely you have a good win rate.

Honestly MACD is one most confusing indicator and difficult to interpret accurately. It is better to use MACD with other indicators like RSI but support and resistance combination is best for it because it goes after the price too. It is not to be trusted being used alone.

Been using MACD with RSI plus having support and resistance and some moving averages with my trading analysis even though its a little bit messy towards my chart but at least you do know on how to read up them which this would be the most important thing to have as a trader.

Yes just like as I said it that to get fair good trading result with MACD is to have a combination of other indicators in your trading tools and you have rightly mentioned them too. A combination with support and resistance will guide every trader irrespective of the indicators you are using. Some people do combine with Elliott waves but not certainly a clear signal trading.

[Ararbermas]

even you used 1 indicator only such MACD surely you have a good win rate.

Honestly MACD is one most confusing indicator and difficult to interpret accurately. It is better to use MACD with other indicators like RSI but support and resistance combination is best for it because it goes after the price too. It is not to be trusted being used alone, doing a taste combination can help to find the better one.

yeah RSI is very useful as well to see if the coins growth rate is over sold and over bought especially when it comes divergences wherein very common strategy . For sure it will become more easy with the combination of support and resistance wherein no need to apply more indicators especially if you're a swing trader and scalping. But for me i will still gonna add 20 and 50 moving average because they're very respected as well..

[palle11]

even you used 1 indicator only such MACD surely you have a good win rate.

Honestly MACD is one most confusing indicator and difficult to interpret accurately. It is better to use MACD with other indicators like RSI but support and resistance combination is best for it because it goes after the price too. It is not to be trusted being used alone, doing a taste combination can help to find the better one.

yeah RSI is very useful as well to see if the coins growth rate is over sold and over bought especially when it comes divergences wherein very common strategy . For sure it will become more easy with the combination of support and resistance wherein no need to apply more indicators especially if you're a swing trader and scalping. But for me i will still gonna add 20 and 50 moving average because they're very respected as well..

If you add 20 and 50 MA you are still going to get the same result too. I think MA and RSI function the some way, they are to reinforce , strengthen your confirmation. However more traders depend on RSI more compared to MA. About the RSI too sometimes it stays on overbought for a long time or over sold and market price is going other direction, this is confusing at times .

[hyudien]

This is very useful, I want to hear what traders have to say with very useful speculation. To be honest, what I prioritize the most are the support and resistance levels whenever I try to trade. Although I am more used to being a long-term holder and not paying much attention to trading strategies from time to time. I am often outside the market so I will be very new to the various types of indicator indicators.

[Johnyz]

Great thread highlighting the importance of support and resistance level. Every time I trade, I always look for this signal because you can know when to buy and sell once you understand support and resistance but of course you still need to use other indicators so you can be more effective on trading. Learning trading is not easy, but it can really be rewarding.

[sheenshane]

This fundamental on trading is a MUST for me...

I tend to agree, it's good if you will combine the fundamental and technical analysis with the support and resistance prediction.
It's hard for me to draw technical support and resistance prediction IMO but seeing a thread like this will be a great opportunity to learn something about technical prediction or much better if we look also the fundamental side.

It's very helpful to the traders who understand the support and resistance, it gives a signal when you will execute the buy and sell action.