2023-11-02 04:00:41
[Why support and resistance are not lines on your chart]
Let me share with you a story…
In my early days of trading, I used to think my support and resistance lines are the best and the market will respect it to the pip.
But it didn’t take me long to realize my support and resistance levels keep getting breached, and I thought it was a breakout.
So I traded the breakout.
The next thing I know, the price quickly made a swift reversal in the opposite direction and I got stopped out.
So, I looked back at my charts and asked myself:
“What the hell went wrong?”
Well, it seems the levels I drew did hold up, albeit not to the exact pip.
And that’s when I had an “Aha!” moment…
I realized support and resistance are not lines, instead, they are areas on my chart. Here’s why…
There are usually two groups of traders in the market:
- FOMO traders
- Cheapo traders
I’ll explain…
Traders with the fear of missing out (FOMO) would enter their trades the moment price comes close to support.
And if there’s enough buying pressure, the market would reverse at that location.
On the other hand, some traders want to get the best possible price (cheapo traders), so they place orders at the lows of support. And if enough traders do it, the market will reverse near the lows of support.
But here’s the thing:
You’ve no idea which group of traders will be in control. Whether it’s FOMO or cheapo traders.
Thus, support and resistance are areas on your chart, not lines.
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