I believe that one of the most important techniques that traders need to learn is support and resistance. Both beginners and even advanced traders use this to help predict where the market is going. Basically, support refers to the area where prices often bounce upward, while resistance is where prices tend to hit a ceiling and go back down.

As you can see here, once the price touches the horizontal line we created, it tends to bounce upward. If you’re planning to go long (buy), you can set your orders around these areas of value, also known as support zones. It doesn’t have to be an exact point on the horizontal line —what matters is the general area.

SUPPORT

On the other hand, resistance is where prices usually hit a ceiling and start to drop. You can also draw horizontal line in those areas, and again, it doesn’t need to be exact. Resistance often works as an area of value too. Once the price touches the resistance, it tends to go down—like hitting a roof, if we were to compare it. If you’re trading futures, you can place short orders around the resistance area.

Even just using support and resistance alone can help you become a profitable trader because this technique is highly effective in predicting price movement. Personally, I often use this strategy when buying—I simply wait for the price to bounce at support and then sell once it touches resistance.

RESISTANCE

I hope you learned a lot from our lesson today 🙂 More lessons to come in the future!