What makes a Resistance Potential One
Resistance and support are faces of a same coin the concept is same , if price reverses its direction after getting closer to a particular level or zone we call it resistance or support level or zone.
When you start learning about it more you will find that it is the most basic approach to analyze a price action, then you mix it up with trend line which is again nothing but a tilted support and resistances, concept is same.
Trading such levels & zone require an approach where you can benefit maximum from the upcoming move and the trade you take should have the potential to give you a good risk to reward ratio.
If you see, resistance and support are everyday happenings , they occurs so much times that taking a bet on every setup will make our trading random ,so filtering those blurry , OK-ok, less potential setup is very very important .
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Here I am giving you some of my observation over filtering such setups.
First do not try to make support and resistance everywhere , try to avoid making inside a range , can only make such resistances and support if they form on a large time frame or over a long period. This will filter out your 40% setups.
Second Let the support and resistance test 3 or more touches , when price behaves in an ideal way more than three times the level or zone become very crucial and price can tend to give you a big and sharp rally (see the direction still can be any side as it is not always breakdown it can also be a big reversal).
Third See the overall trend and recent price pattern , better if the setup is in order to the overall trend, reversals should also be in sync with overall trend as in this USD/INR chart the overall trend is bullish & the pattern is a bullish flag which is again a bullish one.
Fourth Volume formation when price reaches to a support or resistance if a spike in volume is there then you can say a big players is also betting on those levels or zones in big quantity (note : they betting in which direction you can't guess like that).
You can take entry at breakout and make your stop loss at the support simple....
When you start learning about it more you will find that it is the most basic approach to analyze a price action, then you mix it up with trend line which is again nothing but a tilted support and resistances, concept is same.
Trading such levels & zone require an approach where you can benefit maximum from the upcoming move and the trade you take should have the potential to give you a good risk to reward ratio.
If you see, resistance and support are everyday happenings , they occurs so much times that taking a bet on every setup will make our trading random ,so filtering those blurry , OK-ok, less potential setup is very very important .
---------------------
Here I am giving you some of my observation over filtering such setups.
First do not try to make support and resistance everywhere , try to avoid making inside a range , can only make such resistances and support if they form on a large time frame or over a long period. This will filter out your 40% setups.
Second Let the support and resistance test 3 or more touches , when price behaves in an ideal way more than three times the level or zone become very crucial and price can tend to give you a big and sharp rally (see the direction still can be any side as it is not always breakdown it can also be a big reversal).
Third See the overall trend and recent price pattern , better if the setup is in order to the overall trend, reversals should also be in sync with overall trend as in this USD/INR chart the overall trend is bullish & the pattern is a bullish flag which is again a bullish one.
Fourth Volume formation when price reaches to a support or resistance if a spike in volume is there then you can say a big players is also betting on those levels or zones in big quantity (note : they betting in which direction you can't guess like that).
You can take entry at breakout and make your stop loss at the support simple....
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