You must already know that support and resistance are the keys that influence changes in the investment market. It is supply and demand that investors rely to find the right opportunity to execute their trades. When the demand for a commodity is high, investors tend to go long in their position size. On the other hand, when the demand is low, they tend to hold on to their positions for a shorter period of time and go short.
The supply and demand of any commodity are triggered by several factors and sometimes the zones can be extremely volatile. In most cases, investors are to approximate the position of such levels without any valid confirmation. Since the market is vast and is administered worldwide, it is hard to say what is happening at any single moment. That’s why investors are never sure of what may happen with support and resistance. However, if people don’t speculate on these levels beforehand, it becomes difficult for them to prepare for a trade.
That’s why you will be needing to draw the support and resistance lines so that you can identify them better. But as a beginner, you might face some problems and might not even get fruitful results like other professionals. However, after practicing for some time, you will surely get the hang of it.
What are the support and resistance?
Support and resistance are two horizontal lines indicating the peak moment of a price reversal. Support is the horizontal line where the price gets hit and instead of going lower, it moves up making it a suitable position to take trades in the currency market. To get more info about the trade execution process, you can visit the website of Saxo.
The resistance is the position where the price falls. The place where the price gets hit is the best time to sell some stocks as after that the price will move downwards.
Now, many traders find it hard to distinguish the strong from the weak points. But following the charts and drawing them on your own can help a lot in understanding these zones better. So, here are some of the steps you can follow if you are willing to draw these positions.
1.Pick a chart
The first step is pretty simple and basic. All you have to do is come up with a chart that you feel the most comfortable to work with. It can be a candlestick chart, bar chart, or a line chart; this is completely up to you. but you need to make sure that you have completely understood its anatomy and can interpret every aspect of the chart you are willing to work with.
2. Identify all swing high and swing lows
For this step, you might need to look to the past to observe how the market looked. Based on that, you will be able to identify the highest and lowest price levels. That way, you will have an idea of what the future market may like and it will be easier for you to assume where the price may remain. Now, this step is essential for you to understand trends as well as you get to observe all the swing high and low points.
3. Connect the points
After you have plotted the points in your chart, it is now time for you to connect all the existing points. This is the toughest of all steps and you need to be extra careful about making mistakes in this step. You should connect the dots syncing with the market and your lines should be straightforward for you to understand clearly. After you have finished connecting all the points, you will see your graph display will give you more information.
Now that you are done with drawing the support and resistance lines in your graph, the next thing you need to do is to compare the lines with other charts to check if your drawing matches them or not. There might be some loopholes in the beginning. But don’t pay too much attention to them and keep practicing to get a perfect result.