Things You Need to Know About Support and Resistance Level

The support and resistance level is the most important part of your trading business. Without having strong knowledge about these terms it will be hard to find the perfect entry point. Support is a place in the market where the price of a certain asset starts rallying higher. On the other hand, resistance is a place where the price of a certain asset starts to drop. In the support zone, you should be looking for long trade setups. To find a short trade, wait for the price to test the critical resistance level.

So, you know how the support and resistance level allows the traders to find trade setups. But do you know the majority of the traders don’t know the proper way to draw the support and resistance level? If you are one of them, there is nothing to worry about.

Drawing the support and resistance level

To draw the support and resistance level in the price chart, you have to select a higher time frame. Usually, the noise is filtered in the higher time frame and the traders get a clear clue about the direction of the trend. To find the support, you need to contain a minimum of three major swing low. On the other hand, you need to connect a minimum of three highs in the market to find your desired resistance level. The fourth point is your trade execution point.

Major breakout

Never think the support and resistance level are absolute numbers. It’s more like a zone where the traders look for reliable patterns to place their trade. Ask the professionals of Saxo Hong Kong community, you will know how to place the trade. They use the Japanese candlestick pattern to execute long or short trades at the critical levels. But trading the critical levels is not enough to secure earnings. You have to be prepared to deal with the major breakouts.

At times the critical support level often breaks due to the extreme selling pressure. On the other hand, when the buying pressure is insane the resistance level might break without giving you any prior notice. So, never place a huge risk while trading the critical support or resistance level. In fact, risk management is one of the core factors by which you can save your trading capital. Taking an aggressive approach to trade this level is one of the key reasons for which the traders blow up the trading account.

Use a low leverage account

Before you start trading the market as a fulltime trader, you have to use a low leverage account. Trading with high leverage allows you to trade with big volumes. Eventually, you start placing big trades to earn money. Things might go in your favor, but a few losing trades can ruin your career. You should think about the safety of your investment before placing any trade. Unless you can do so, trading is not the right profession for your personality. Find a reputed broker like Saxo and start trading the market with them. Most of the time, the highly regulated broker never offer insane or unlimited leverage to retail traders since they care about their clients.

Trade with reason

When you trade the support and resistance level, you should have a valid reason. If you trade without having any reason, you are not going to succeed at trading. The trading business greatly depends on your approach. If you can take smart steps and use a conservative method, you can become a skilled trader without having any hassle. On the other hand, if you start dealing with emotions soon you will be overtrading the market. The moment you start overtrading, you will kill the risk to reward ratio in each trade. Think like a smart trader so that you can earn a big profit without taking a high risk. Use a safe approach to change your life.