Technical Analysis Guide - Day Trader Masters

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Technical Analysis Guide, Support and Resistance are the 2 most important feature in Technical Analysis. It can be seen as the backbone of the trading approach. Almost everything revolves around those 2 lines, and they are the basis from price action. However, not many people understand their formation, says Mark Sachs. Supports and Resistances are formed out of supply and demand drives in the markets. As traders, we are all familiar with these concepts. At Right Line Trading By Mark Sachs , we work with these concepts on a daily basis. We will explain them further in this article. Essentially, the market revolves around the concept of supply and demand. If supply increases, price is supposed to go down, and demand goes up. If a gold mine is discovered somewhere, the amount of gold in the world increases. Supply for gold increases. Therefore, prices of gold goes down, and demand goes up. The support line is the “concentrated” demand zone. Price can’t go over that line because people are not willing to sell it anymore. There’s some “demand” at that level. It can’t go any lower, temporarily. The more times price reaches that “demand zone”, but fails to penetrate, the stronger the zone is. It means that there are no people willing to buy at a lower price than that. It’s time to review the market, and get out trades. Technical Analysis Guide Similarly, the resistance line is the “concentrated” supply zone. Price can’t go higher than that line, because people are not willing to buy it anymore. There are enough people “selling” the asset to stop it from rising. Therefore, the value of the asset can only reach that level. Although at first these levels may seem arbitrary, they are a wonderful indications of market sentiment. For example, if price has dropped to one support level 3 times, but hasn’t been able to penetrate that level, it is sure that it is strong support level. It means that there are not enough, or no traders willing to pay at a lower price. From a supply and demand perspective, it means demand is strong enough to stop the price from falling lower. Best Way To Learn Day Trading