Technical Analysis Training - Explaining Resistance and Support 01/21/2010

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Suport and Resistance

One of the tough concepts that traders need to understand is the concept of support and resistance.   This is perhaps so because support and resistance are invisible until they are encountered , and even then without using multiple timeframes it can be hard to recognize what is actually happening . 

There's a lot of effort that goes into making use oftechnical analysis trainingto find out in the market where support and resistance levels are.   Various tools are used , including moving averages, trend lines, candlesticks, and retracement levels .

There are some that don't work and some that do, and more irritating, some work from time to time but not all the time .   The information on whether or not an indicator or tool is going to work is information that is worth a lot .

Most efforts fall short because they attempt to use a single tool , and try to apply it to a single timeframe , and they try using it in every circumstance .   You reap better results when various tools, every one designed for a specific condition on the market, are used in a program that is organized and thought out that takes into consideration trends and congestion.  Technical analysis training will continue to show that progressing towards precision when applied to various timeframes at the same time will accrue and there is consideration of the various results.

The best results come when you put into play a comprehensive theory of action in the market that can help the trader understand what the market is doing right now , why the market is doing that, what's going to occur rather quickly, and supply the trader with projected levels of support and resistance that as the market goes forward can be monitored .

A tall order ?  Possibly, but it has been accomplished in a number of major technical analysis systems .

The following are several definitions.

Support happens to be something that is below price , and this force when encountered helps to raise prices back up to where they were. This is made up of market buyers that are there but waiting to take action until price reaches a certain level , or of short position holders who may be forced to buy if the market runs against them .   Those buyers that bunch up around a specific price that make support occur .

Resistance deals with something that is above price , and it is a force that when encountered pushes price back down into the range from where it came . It consists of sellers who are present in the market but waiting to take action until the prices go to a particular level, or of long position holders who may be forced to sell if the market runs against them . 

Both resistance and support can be easily identified with regular technical analysis using something such as the 10 period moving average. Or a more involved system can be represented like you learn in technical analysis training such as Drummond Geometry .

A higher level of tool use is used in this method in order to create more time period overlays of resistance and support areas onto a daily chart from the monthly and weekly charts . These more evolved methods provide better support for traders making decisions to sell or buy. With this method you will see that the support and resistance areas are projected into the future , so as the market moves on the trader can be prepared .

 

First Post! 01/21/2010

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