Understanding and Importance of Support and Resistance (SnR) in Binary options trading.
Understanding Support and Resistance is one of the most important concepts of price action. Support and Resistance are the areas that actually turn or hold the market in any of the directions such as UP or DOWN.
In short, Support is the area where buyers buy the asset, forex, stock, or commodity, and Resistance in the area, where sellers sell the same assets.
A common mistake that most of the new traders do is they think and see support and resistance as points or lines. That's not at all true. Forget that concept.
SNR is NOT a point or line but an AREAS.
Having said that, we should understand that buyers and sellers are present in all parts of the chart, that's the reason why the price keeps moving down or up every moment. Generally speaking, these are all support and resistance points.
However, these are not areas that have the volume of strong buyers or strong sellers.
We can find the clear Buyers and Sellers are in the chart where price exactly reverses in up direction or down direction respectively. Note: the reversal could be for some time or longer time depending on the strength respective buyer or seller area.
In the following image, the blue line represents the support line whereas the area below it is the buyer's area and the red line is the resistance line, and the area above it is the seller's area.
Not to forget, the support or resistance cannot be measured with line alone. The purpose of using the line in the above image is just for illustrative purposes. Whereas you should observe these as buyers area from where the price goes up and sellers area from where the price goes down.
Importance: Trading is all about predicting the direction of price. isn't it?
Let's say we want to drive somewhere but we do not know the way to reach that destination. What is the best thing to do?
Yes, we have to ask the way from a person who has already gone there. Now that's the best reference you have. A similar reference is what the support and resistance areas provide when you see the price reversing from that area.
If you see an area from where the price has reversed the first time it hit and the candles that formed after the reversal (tells you the strength of the area). you can use it as a reference point to buy or sell when the price hits the same area a second time depending on the direction the price took when it hit the area the first time.
Let's say the price came and hit the support area for the second time.
The candles' strength, size, wicks, and how price came and hit the area.
You should wait for at least one candlestick to confirm if the buyers are entering from the same area. This confirmation candle is basically the response of buyers as soon as the price reached the support levels. stronger the candle or wick stronger are the buyers.
If the bullish candle from the buyer's area is stronger than the last bearish candle by candle body size or bottom wick which is pressure?
As shown in the below image
⛔ This is not investment advice, your capital is at risk. You should never invest the money that you cannot afford to lose ⛔
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