How to Trade Support and Resistance?2 min read
The basic trading method for using support and resistance is to shop for near support in up trends or the parts of ranges or chart patterns where prices are moving up and to sell or sell short near resistance in downtrends or the parts of ranges and chart patterns where prices are moving down.
It helps to isolate a longer-term trend, even when trading a range or chart pattern. The trend provides guidance on the direction to trade in.
For example, if the trend is down on the other hand a variety develops, preference should tend to short-selling at range resistance rather than buying at range support. The downtrend lets us know that going short features a better probability of manufacturing a profit than buying. If the trend is up and then a triangle pattern develops, favor buying near support of the triangle pattern.
Buying near support or selling near resistance can pay off, but there is no assurance that the support or resistance will hold. Therefore, consider waiting for some confirmation that the market is still respecting that area.
If buying near support, wait for a consolidation in the support area and then buy when the price breaks above the high of that small consolidation area. When the price makes a move like that, it lets us know the price is still respecting the support area and also that the price is starting to move higher off of support. The same concept applies to selling at resistance. Wait for a consolidation near the resistance area, then enter a short trade when the price drops below the low of the small consolidation.