Support and resistance (SAR) is generally considered to be one of the foundations of technical analysis. In my personal trade, I give it the highest level of analysis at the SAR level, as most of the very good professions I have performed are created by judging the market price direction at the SAR level. Of course, all of this may sound good, but determining these significant price levels and determining their importance, compared to other SAR lines, are really meat and potatoes for learning to trade mini electronics. Let me ask you this; how to know which lines are the most important and which can be discarded? I will try to help you with this decision throughout this short article.
One of the truest statements that any trader has dared to make is based on an idea that if you draw enough lines on a chart, it is imperative to stop price action on a certain line. The idea is to identify useful lines and avoid spurious signals generated by market noise. Market noise is the basic function of the exchange, as non-professional traders enter and exit at random intervals. Note: I recommend a good understanding of the random and market price movement. This is a topic that negotiation educators generally exclude.
Let’s get a viable definition of support and resistance: the price movement of an e-mini contract is likely to stop, reverse, or cross pre-determined price levels. These levels make stops and returns at a pre-determined price. I am a reactive vendor because I do not use support and resistance lines derived from SAR predictive tools; Murray math lines, floor traders pivots, any calculated pivot lines or levels generated by the Market profile. I like to create my lines during daily negotiation so that I can determine how, when and why these lines are formed and the reason for their creation. I have real confidence at the price level that I can actually see the SAR form, and I can better understand why it was created at some point.
After marking the table with SAR, assign the first importance to each line. It gives me the highest priority to identify a significant increase in volume, previous closures, daily highs and lows, and night highs and lows. You will need to identify which lines are most important to your trading style; these examples are fundamental to my personal trading style.
I hope I have shed some light on this issue for new traders. Aid and resistance must be part of an effective trading plan.