In this article, you will be able to find information about this wonderful strategy that will help you achieve your financial goal in a safe way because you will not make the common mistakes that a trader who starts using a new strategy can make.
What is support and resistance strategy?
This strategy is based on levels where the price stops for a few moments and then continues with a different movement than the one it had been doing before. The main difference that it has support and resistance with the other strategies is that it also focuses on the direction of the price. The more times the market respects the trend we can obtain satisfactory results; it will be much easier to understand how the market works and predict the directions of the candles with high accuracy. You must also remember that for this strategy to work properly, you must place the highest and lowest levels with a fixed line to visualize in a more exact way how the market moves and to visualize if the market is responding respecting the strategy.
What does support and resistance mean?
If you are a beginner trader, it is likely that you do not know exactly what these 2 words that make up this wonderful strategy mean. Now, you will be able to find out what they mention and how you can interpret them in the broker that you are operating.
- Support: It means when the price stops for a few moments after touching the lowest line where you place your support, then it will go up until it touches the highest line you have with your broker.
- Resistance: This means that the price, being at the highest point of the graph once the candle touches the line, will stop for a few moments, and then change direction and head downwards until it touches the line again lowest line.
Types of Support and Resistance
There are 3 types of support and resistance in which we can classify this strategy and you must choose one which best suits your needs as a trader. Now, you will find out in detail how each of them works.
- Fixed: The levels of this type of support and resistance will be in a fixed zone that will not be possible to modify. In other words, the level will always remain marked regardless of the movements made by the market. For you to identify this strategy you should pay attention to:
-Psychological price levels.
-Annual maximums and minimums.
-Highs and lows of candles.
-Opening and closing of candles.
- Dynamic: Dynamic levels are treated in zones with support and resistance that have the possibility of constantly changing. If you are a beginner trader and you still cannot identify this strategy exactly, when a new candle is formed it will appear on the chart, this resistance will be recalculated automatically. This feature will be available if you use indicators such as: Moving Average, Parabolic SAR, or Keltner Channel.
- Semi-dynamic: This type of level is in the middle of the fixed and dynamic levels of the market. The difference between the dynamic levels is constantly changing and updating, the fixed levels will stay where you place them, but the semi dynamic ones will change at a constant rate. In a nutshell, this type of level causes the trend line to change at a fixed rate for each candlestick the market puts out.
Support and resistance with Fibonacci
Fibonacci is a series of numbers that must result in a number to the sum of the two previous numbers. These numbers have been used to calculate targets and entry levels, it is a more accurate way to identify the support and resistance levels that arise in the pair you are interested in analyzing. All the retracements that occur with Fibonacci can act as support and resistance, but you must remember that Fibonacci deals trading with trending markets and that they are drawn from left to right. I recommend that this type of strategy can be used by traders who have more experience in the world of trading because they know how the market will move.
How to trade support and resistance?
The most suitable method for you to trade reliably and safely will be to use support and resistance levels with various multiple time frames. Remember, that you can configure the time frames yourself, but many traders focus on working with three charts. Now, you will find each one of them explained in a detailed and easy to understand way.
- Superior: It means the line that is at the highest level of your chart, that will be able to indicate the exact moment when the price is going down.
- Middle: If you want to use this strategy in the binary options market, you will have to place a line in the middle so that you can be clear about the exact price where you want to enter in the direction you think it will go.
- Bottom: It is the lowest point where you will have to place your line, and this will help you know exactly when the price will rise so you can bet in that direction.
My experience using support and resistance to trade in the binary options market has been good because I have been able to increase my live account over time. I recommend that if it is the first time that you use this strategy before trading with real money, you use a demo account so that you can understand how the market works with this strategy. Remember that no matter what market you want to trade, this strategy will work with any type of market you are interested in trading.