EDUCATION: Simple Support Line

3 thg 12, 2020Hello, dear subscribers!
Today we start our Educational series. We are going to public some elements of technical analysis every day.

Definition
The support level is the level which is likely not to be broken down by the price. It is a high probability of the bounce off this level. It occurs because when the price decreases, the demand is rising and the supply is decreasing. As a result the higher demand push the price up.

How to trade with support
We can get into the position on the support line level. For example, at the point (D) we already know that blue line is support (because of points (A) and (B). Also we have to use the stop loss level, if the price will substantially break this level down. If the price broke down the blue support (G), we can wait the yellow line price level to enter the position (3). It is also widely known that the price is likely to return back to the previous support (H)

Summary
1)To define several support levels
2)To get into position on the first one
3)To fix a profit in case of price bounce
4)To fix small stop loss in case of huge breakdown
5)To buy again at the lower support.

It is very effective strategy but there are a lot of cases, when support level definition is impossible.