Understanding Support and Resistance Basics: A Beginner’s Guide to Smart Trading

Support, the level at which an asset will typically stop going down (forex) and may bounce off the ground or up, is a price level that will usually attract enough buying interest that the selling pressure will lose its strength and therefore not be able to push down the price anymore. The buying interest will be greater than the selling pressure.

Key Characteristics of Support

•  A Support level creates a “floor” for price action
•  Buyers dominate near a Support level
•  Multiple touches will create a stronger Support level
•  A break below a Support level may indicate further downward price movement.

What is Resistance in Trading?

Resistance is a point where traders struggle to push the price upward, and they typically will turn around and push the price lower; the sellers are succeeding in pushing the price lower than buyers are achieving their goal of pushing the price up. In this case, the selling pressure will exceed the buying interest, causing the price to turn around and head down. 

Key Characteristics of Resistance

•  A Resistance level creates a “ceiling” for price action
•  Sellers dominate near a Resistance level
•  Resistance levels are formed when a price continues to have multiple rejections, therefore creating strong Resistance levels with each rejection
•  A break above a Resistance level may indicate strong upward price movement.

Support and resistance provide traders with the tools to:

•  find the best entry points for trades;
•  determine where to set stop-loss orders;
•  develop a realistic profit target;
•  prevent making emotional trading decisions.

All of these tools are what professional traders use instead of random indicators to create their strategies.

When traders choose to learn about support and resistance levels at the Best Trading Institute in Malappuram, they gain a significant advantage in the markets.

How to find support and resistance levels

1.Historical Price Level

Identify historic price level(s) where the market frequently reverses or consolidates.

2.Trendlines

An upward-sloping trendline will act as a support level and a downward-sloping trendline will create a resistance level.

3.Moving Averages

Popular moving averages, such as 50 and 200 SMA’s, tend to behave like a dynamic support and resistance level.

4.Psychological Price Levels

For example, in the Forex market, 1.2000 will often be viewed as a psychological level. In the stock market, a price level of 18,000 (or any round number) would likely be a psychological level as well.

Support and Resistance in Forex Trading

In Forex markets, support and resistance are extremely effective due to high liquidity and institutional participation. Currency pairs respect these levels very well, making them ideal for:

•  Intraday trading
•  Swing trading
•  Breakout strategies

At NXT Institutions, the Best Institute of Forex Trading in Malappuram, students are taught how to identify and utilize support and resistance levels in real trading conditions.

Top Mistakes to Avoid

•  Drawing too many levels
•  Treating levels like precise prices and not understanding that they are not ‘exact’ but rather levels that need to be treated as zones
•  Not recognizing significant higher time frame levels
•  Positioning yourself against strong trends

Understanding these nuances will differentiate you from an amateur trader and make you a professional trader.

 Learn Support & Resistance at NXT Institutions

Here are a few reasons why you should consider NXT Institutions:

•   Real-life practical live market training
•   Experienced, knowledgeable mentors who have real-world experience
•   Structured course material with step-by-step instructions from novice to the most advanced traders, and a successful track record of development through many traders who have passed through our program.

This is why NXT Institutions is the leading institute for trading in Malappuram, as well as the best institute for Forex Trading in Malappuram.