INTRODUCTION TO SUPPORT AND RESISTANCE.

It is no new thing to say we experience losses in our everyday buy and sell, most especially
when trading a highly volatile market like crypto assets.
While many get beaten down by bear markets, disheartened by their losses, I see them as
opportunities to learn. When the market isn’t treating you the way you’d hope, look to self-
education. The greatest weapon you can arm yourself with after experiencing large capital
losses is the knowledge necessary to never let it happen again. Well, at the very least lower
the chances of it happening again.
Everyone experiences losses, if you’re watching your altcoin (all cryptocurrencies which
are not Bitcoin) holdings dwindle into nothingness — just know that it happens to the best
of us.
I have NEVER met a trader who hasn’t experienced several great losses throughout their
career. It’s a part of the game.

You don’t play football thinking you’ll never get tackled. Don’t trade crypto
thinking you’ll never take a loss.
Now…
In order to determine a cryptocurrency market’s price trend, key peaks and troughs must
be identified. Peaks are reached at areas of resistance, troughs are reached at areas of
support. Support and resistance are central themes to interpreting not only charting
patterns, but also a number of Mathematical Indicators.
Support and resistance lines particularly within recent price actions help you determine
trade entry and exit levels, by providing estimates on the upper and lower trading range

Figure 1.0
Though support and resistance are one of the most important technical trading concepts
that you'll learn.

But most traders tend to get it all wrong!

Here's the thing…

They can't even draw their levels correctly.

For example, this is a chart that I've seen people posting:

Figure 1.1

And if you look at this…

There's just way too many levels, right?

Where do you want to buy?

Where do you want to sell?

Can you see that if you have too many levels on your chart, it will clutter your mind?

That’s why in today’s topic, we are going to share you with three things.
Number one…
Identifying Support and Resistance
There are a few ways to identify support and resistance levels. It’s quite easy to spot these
levels, but they can be very useful in helping you choose the best time to enter a market,
as well as where to put your stops and limits. To identify support and resistance levels,
traders can look at:

1. Historical price data

The most reliable source for identifying support and resistance levels is historical prices,
making them invaluable to traders. The key is to familiarize yourself with past patterns –
sometimes from very recent activity – so you can recognize them if they appear again.
However, it is important to remember that past patterns may have formed under different
circumstances, so they are not always a reliable indicator.

2. Previous support and resistance levels

You can use previous notable support or resistance levels as markers for possible entry
and exit points, as well as indicators of future movement. It's important to note that major
support and resistance levels are rarely exact figures. It's unusual for a market to hit exactly
the same price time after time before reversing, so it's probably more useful to think of
them as support or resistance zones.

3. Technical indicators
Technical indicators or trend lines – such as the ones covered later in this article – can
provide dynamic support or resistance levels that move as the chart progresses. Support
and resistance levels for different markets will often be based on different factors, so
developing the ability to recognize which levels are going to impact a market’s price can
take time. For that reason, it is important to practice identifying support or resistance
levels using historical charts.

Number two is understanding how to draw support and resistance…

How to draw Support and Resistance?

Now you have understood how support and resistance can be identified, we would
like to walk you through how you can now draw them after being identified.
Don’t get frightened yet…

Drawing support and resistance is not that hard and doesn’t take much time.

But again, it’s very, very importance to pay attention to

Whenever I want to draw a support and resistance, I usually make use of three simple steps
and I’m going to share it with you.

• You want to zoom out your charts. You want to see the bigger picture, once you can
see the bigger picture, it’s much more obvious to your eyes which key levels you
should be paying attention to.
• You want to draw the most obvious level. If the level sticks out, that level matters,
if you are squinting your eyes asking if it is a level or not? Then ignore it.
• You want to adjust your level to get the greatest number of touches.

I will explain each in details with images to illustrate them.

Zoom out your charts

Over here, this is a typical trading view chart:

Figure
1.2
Now to zoom out chart, you can hold your two hands on your tab trader screen and drag
it back and forth. I’m sure most of you are familiar with zooming in and out with your
phone.

Secondly, You Draw the most obvious levels

Figure 1.3
It’s very simple!
I can plot it pretty quickly, there’s no need to ask yourself or second guess.
If the levels are there, you will see
If they are not there, you will still see
Thirdly, adjust your levels to get the greatest number of touches
What this means is that you want to shift your support or resistance where the price hits
the level the greatest number of times.

Figure 1.4
Noticed that I can get more number of touches even though some candles exceed the level
quite a bit.
Now you can adjust your chart to get more number of touches on the resistance level
 Figure 1.5
And also more number of touches on the support level

Figure 1.6

Now noticed that I got nine touches which is quite a number of touches right?
In the figure 1.6, you can see that is how I adjusted it to let the price touch the greatest
number of times.
You can now go and apply, draw the levels and trust me, you will see the market in different
light.

Resistance is the opposite of support, representing a price level or area where selling
pressure overcomes buying pressure, stalling or ending a price advance.
The strength of a support or resistance level generally increases the more time it has been
successfully tested, and the greater amount of time in between market attempts to break
below support or above resistance. Oftentimes, once the support or resistance level is
broken, the former support becomes resistance and former resistance becomes a support.
Number three is telling when the price will reverse at support or resistance…

How do you tell when the price will reverse at support or resistance?

How do you know the level will hold?

So, I want to share with you a few tips to bear in mind.

The first thing is that you want to see a power move into market structure.
What this means is that if you have drawn your area of support or resistance, you want to
see a strong move into the level!

Big or large-bodied candles.

That's what I mean by a power move, a very strong momentum moves!

Number two, you want to see strong price rejection.

This can be in the form of a shooting star!

Where you see a long wick and price gets rejected.

The stronger the rejection, the better.

That's what you want to see.

The third thing is that the larger the candles are, the better.
You want to see a strong momentum move, power move!

And another thing is that the longer the time that the price is away from the market
structure or support resistance the better.
Let me explain first why you want to see large bodied candles into a level.

Let’s say that when you look at resistance, and when you have a strong move coming into
that level…

At this point, ask yourself where will you want to go short (sell):

Answer: The circled area.

Because there is definitely an opposing pressure, buyers who want to come in and buy at
good prices.

Where is a good price that buyers would come in?

Well, if you look at this chart, chances are that buyers might cue in this area of support:

Figure 1.7

Because there is an obvious market structure where they can wait for the price to retest and
go Long!

However, if you didn't get a power move, you didn't get a clean move.

Instead, you get a very choppy move like this

Now ask yourself…

If you're going short on the resistance.

Where would the opposing pressure come in?

Well, this time around bias could potentially be at these swing lows:
Often, traders will just look to buy the breakouts.

When there is a strong momentum move you might be thinking, "Oh, let's buy the
breakout, the market is rallying, right? Let's buy!"

Then where will you put your stop loss? (To be covered in later topic)
Chances are you put it under the resistance, maybe in the middle of the range,
somewhere lower in the range, or even below this area of support:

What this means is that if the breakout fails, it's going to hit all these clusters of stop-loss
orders over here:
And if you think about this, what are these clusters of stop-loss orders?

They are simply orders to exit the market from the Breakout traders who are long!

This means that these are actually sell stop orders, which would induce further selling
pressure.

The more bullish or the more you get a power move into market structure.

The more breakout traders will hop on board and get on the move!

The more buyers hop on board, the stronger the reversal will be.

Because when it reverses back towards the downside, you’ll know that it hits the sell stop
orders of the breakout traders.

This is why you want to see larger candles into the market structure or a power move into
market structure.
And finally, the longer the time away the better.
Why is that?

Simple, right?

The Longer the price is away from a level, the more it would attract attention from
the higher timeframe traders
For example, if the price has not retested the $100 price level on the daily timeframe for
the last six months or one year...

You can be sure that that level can also be seen on the weekly time, or even the monthly
timeframe.

And this will actually attract more traders from the higher timeframe to pay attention to
that level.

And that's why you can get a stronger so-called "price rejection," or a reversal at that level
when there has been a long time away from the level.

Alright?

I know I've covered a lot of theory here, so let's have a look at the examples, shall we?

No doubt this took a while for it to reverse, but eventually, it did reverse towards the
downside:
Another example is this one over here, a strong bearish momentum or a power move into
this area of support:

Trust me…

Some traders are new.

They are unaware.

They buy the Breakout and think, "Oh man, the market is going to the moon let's buy
the breakout!"
And then bam! It reversed at the next candle, which did a strong reversal.

They got caught on the wrong side and then what happens?

The market goes lower hitting their stop loss and the market pretty much has a swift
decline over here:

When do you trade breakouts at support and resistance?

This is actually pretty much the opposite of what you’ve just learned earlier.

So, you know that the price is likely to reverse at support and resistance when you have a
power move into market structure and a price rejection.

When you are looking at it from a breakout standpoint, you don't want to see a power move
into market structure.
What you want to look for is price action that shows:

• Higher lows into resistance looking somewhat like an ascending triangle. (Later
topic (Chart patterns))

• Lower highs into support somewhat like a descending triangle. (Later topic (Chart
patterns))

• A build-up supported by a moving average. (Later topic (Indicators))

If all this is foreign to you, don't worry…

Let me share you with few examples.

Now higher lows into a resistance looks like this:

This is significant because it's telling you that the buyers are willing to buy at higher prices.

Lower highs into to support are just the same thing, telling me that the sellers are in control,
willing to sell at these low prices:
And on top of it, from a price action standpoint, it is telling you that the buyers are also
getting weaker.

Because this is a condition where buyers barely pushed the price higher.

And build-up supported by a moving average.

What this means is that aside from ascending and descending triangle, there's another
variation is what I call a build-up.

The price could just come to a key level of resistance or support, and it just consolidates.

If you pull up a moving average like the 20 or the 50-period moving average, you notice
that the price supports it pretty nicely!

It's like the market is really respecting the moving average and getting ready to break out.

This moving average support can be applied to higher lows and lower highs into support
as well which I'll share that later.

But these are the key concepts that I want to share with you that alerts you that the market
is about to break out of either support or resistance.
Let’s throw more examples about moving average (MA) before we conclude on this topic.

Now believe me, you don't want to be shorting at resistance because, number one, you don't
have a power move into the resistance structure.

And number two, if you were to go short into resistance, this level over here is where
buyers could potentially come in:

This is a sign of strength that the market could possibly Breakout higher.

Notice, right?

This one is a bit different from the ascending triangle, but the concept is the same.

You have this build-up formed at resistance telling you that buyers are willing to buy at
higher prices.

They are willing to buy in front of resistance!

And the MA part where I mentioned earlier, is that if you look at it, the price is somewhat
being supported by the 20 MA already:
You might be wondering, "Hey Kingsley, you seem to be really good at identifying all
these cherry-picked charts.”

Yeah, it's because I have actually traded all of these setups, it’s all in my head.

That's why it's all very fresh.

You must have seen in the area of resistance…

You have this build-up forming and notice how nice the moving average supports the price
higher.

So, when you see this price action, please!

Don't short the markets...I repeat, DO NOT SELL THE MARKET

This is a signal that the market wants to Breakout higher, this is a sign of strength!

Don't just blindly shout, "Oh, prices at resistance, right? Textbooks say short!"

It's going to be painful, alright?

Trust me, don't do that.

Now that you're more proficient in price action trading, you notice that there is a build-up
forming at resistance.
The 20 MA is supporting the action, telling you that the market is likely to breakout higher.

Talking about lower highs…

Now look at this chart below:

With lower highs into support, do you think or should I say, let me ask you…

Do you want to be buying at this point?

Do you want to buy into this area of support?

I hope not, right?

Because after what I've just said, lower highs into support is usually a sign of weakness.

If you ask me, the market is likely to breakdown lower.

Can a market breakout higher?

Of course!

The market can do anything, but we're dealing with probability here my friend!
So, from the looks of it, the market is showing a sign of weakness and there's a good chance
it would breakdown lower.

If you look at it from a price action analysis standpoint, notice that the buyers pushed prices
higher, made a pretty strong move, then it got weaker and weaker:

Summary
The identification of support and resistance is a prerequisite for establishing an effective
cryptocurrency trading plan. Support and resistance lines not only assist trade entry, but
also in providing the more critical exit levels for minimizing risk or locking profit.

In addition to being able to recognize and interpret additional charting patterns and
mathematical indicators, you should try to familiarize yourself with general trading
principles and market fundamentals. Not to worry, we are still going to cover topics like
chart patterns and indicators of which should be studied in combination with the core
concepts of trend, support and resistance.

Thanks for reading!