How To Determine Support Resistance

accurate support and resistance indicatorsThis article is about How to Determine Support Resistance. This forex support and resistance technique are very important for friends who want to trade forex. But before that, you have to know how to determine this support and resistance. Because how trade with support and resistance will achieve extraordinary profits, we can use the best, best, accurate support and resistance indicators. And also how to make support and resistance with Bollinger Bands.

accurate support and resistance indicatorsBefore we continue, remember that trend lines and channels are also support and resistance. During a downtrend, the trend line functions as resistance. On the other hand, during an uptrend, the trend line acts as support. There are two strategies that you can apply based on support and resistance. The first one is called“bounce trading”, and the second one is called “breakout trading”
Bounce trading

This trading method takes advantage of price “bouncing” when the price has reached support or resistance and bounces from it. The illustration below will explain what is meant by bounce trading.

Bounce trading
You are waiting for a bounce from the support or resistance area to trade. Why not sell right at resistance or buy right at support? Because you need some kind of confirmation that the support or resistance has not been broken.

It could be those price movements up or down are so sharp and fast that they directly break through support or resistance. Well, this reflection is a kind of sign that the support or resistance level is still strong. At a more advanced level of discussion, you will also learn what kind of confirmations you can recognize.

In the world of trading, support and resistance will not last forever. At some point, these levels will break. At times like that, you can still try to find opportunities with a strategy called breakout trading.This breakout trading strategy is one hundred percent different from bounce trading.

If in bounce trading you wait for a bounce to buy or sell, in a breakout strategy you instead take advantage of a break of support and resistance with the assumption that a break of support or resistance tends to be followed by a rally.
The illustration below illustrates a breakout trading strategy by taking advantage of a break of support or resistance.

The strategy described above is an aggressive strategy, where transactions are carried out immediately after receiving confirmation of a break of a support or resistance level. Yep, again confirmation is needed to take action.

A support or resistance is considered a break if it meets at least one of the following two conditions:
1. If you use a candlestick chart, the body of the candlestick must cross/break the support or resistance line.
2. When a breakout occurs, there is an increase in volume. The more significant the increase, the more valid the breakout is. Regarding this volume, we will at another time.
Well, that was an aggressive breakout trading strategy. But some traders choose to wait for further confirmation.

This group of non-aggressive traders applies a rather conservative breakout strategy. To make it easier, let’s call it a conservative breakout strategy. What is this conservative strategy?
This conservative breakout strategy combines breakout and bounces trading strategies.

Here’s the story:
When the breakout is confirmed, you don’t immediately take a buy or sell position like an aggressive breakout strategy, but you wait for a “pullback” to return to the support or resistance area. After a pullback occurs, you are waiting for another bounce to occur from the support or resistance level.

Only then do you make a buy or sell transaction. So that you can more easily understand the explanation above, we have prepared an illustration to illustrate this strategy.

Conservative breakout trading
Both aggressive and conservative breakout strategies have their advantages and disadvantages. If you use an aggressive breakout strategy, the advantage you get is that you can enter immediately and won’t miss the “moment”.

But of course, this strategy has its drawbacks. For example, you have sold immediately when the support breaks, but it turns out that the price has risen again and is back above the previous support.

Well, the conservative strategy has an edge in that regard. By using this strategy, you are less likely to get stuck because you are waiting for a pullback first and looking for bounce confirmation.

However, it should also be noted that PULLBACK DOES NOT ALWAYS HAPPEN after a breakout occurs. This is where the weakness of the conservative strategy is, that you will potentially lose the opportunity to enter because the price has already run.

Every trader has a different style. You can decide whether you will be the Aggressive or the Conservative. For those of you who are patient, a conservative strategy may be suitable for you to apply.

However, if you are agile and like a challenge, it may be more appropriate to use an aggressive strategy. Our education team can later help you choose a strategy that suits your personality.