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1652 - Support and Resistance Basics

Support and Resistance Basics

by: Trader Jack

Support and resistance are among the most important technical analysis elements when trading. Support is zone at which a security is likely to stop falling, at least temporarily, and resistance is a zone at which price is likely to stop rising. Trading support and resistance are not precise lines on the chart, but as we said before, are 'zones' within which the market action intensifies. Support and resistance are basically price bands where the price will probably stop falling or rising respectively.
Because of their widespread use in all financial markets, trading support and resistance are usually the best indicators for day trading. Many of the most successful day traders learn how to calculate and use support and resistance exclusively in trading. Support and resistance levels can be applied in any timeframe, and you can often see a long term chart displaying obvious areas beyond which price seems reluctant to venture.
If you can identify the support and resistance levels on a chart while trading, you can figure out where to jump in with the entire weight of the market behind you, should that price be broken. The most well known support and resistance levels are the so-called 'floor traders pivot points'. www.Traders101.com provide a free support and resistance level calculator for these floor traders pivots - unlike the usual pivot calculators which require you to enter open, low, high and close data, the traders101.com version just needs a stock symbol, and will then generate the support and resistance levels automatically (and for free!)

About The Author

Trader Jack writes for www.traders101.com - the free site from traders Initiative helping traders get up to speed fast

This article was posted on January 26, 2005

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