In the world of trading, support and resistance are vital concepts used to determine the direction of price movements. Advanced Support and Resistance banks on this concept by identifying key areas of price movement and plotting them as zones. These zones provide traders with valuable information that can be used to make better trading decisions. In this article, we will explore the workings of Advanced Support and Resistance, the pros and cons of using it, and how it can be used to improve trading strategies.
What is the Advanced Support And Resistance?
Advanced Support and Resistance is a strategy used to identify key levels where price tends to bounce off, known as support and resistance zones. These zones are not exact numbers and can be broken, but they become valid if the price bars reach the same price level at least twice. While candlestick charts may show wicks piercing through support and resistance levels, the market may still end up closing back above support or below resistance.
Advanced Support and Resistance can be plotted using a line chart, where traders identify areas of multiple peaks or valleys to create zones of support and resistance. This strategy is useful for traders looking to enter and exit positions at key price levels. The concept of support and resistance is a fundamental aspect of technical analysis that helps traders identify potential turning points in the market. The Advanced Support and Resistance strategy takes this concept to the next level by incorporating multiple price bars to identify valid support and resistance levels. However, traders should also be aware that support and resistance levels can be broken, and the strategy should be used in conjunction with other technical indicators and risk management techniques.
Advanced Support And Resistance Strategy
To use this strategy, traders should first plot a line chart to identify areas where they see several peaks or valleys. Once these areas are identified, traders should mark them as potential support or resistance zones. When the price approaches these zones, traders should watch for signs of a potential reversal, such as a strong bounce or rejection from the zone. A break of the support or resistance zone can also be a signal to enter a trade, as the price may continue to move in the direction of the break. However, traders should wait for a confirmation candlestick pattern, such as a bullish engulfing pattern or a bearish harami pattern, before entering the trade. Stop-loss orders should be placed just below support or above resistance levels to limit potential losses. Traders should also monitor the price action closely and adjust their support and resistance zones accordingly.
Buy Signal
- Wait for the price to reach the support level.
- Look for a bullish candlestick pattern to confirm the potential reversal.
- Place a long trade at the current market price or wait for a confirmation candlestick to close above the support level.
- Set a stop loss below the support level.
- Take profit at the nearest resistance level or use a trailing stop to capture further upside potential.
Sell Signal
- Wait for the price to reach the resistance level.
- Look for a bearish candlestick pattern to confirm the potential reversal.
- Place a short trade at the current market price or wait for a confirmation candlestick to close below the resistance level.
- Set a stop loss above the resistance level.
- Take profit at the nearest support level or use a trailing stop to capture further downside potential.
Advanced Support And Resistance Pros & Cons
Pros
- Can help traders identify key areas of support and resistance.
- Can be used to make more informed trading decisions.
- Can be applied to multiple markets and timeframes.
Cons
- Support and resistance levels are not always exact and can be subject to false breaks.
- It can be subjective to identify key areas of support and resistance, leading to different interpretations among traders.
- Does not provide definitive entry and exit points.
Conclusion
In conclusion, Advanced Support and Resistance is a strategy in technical analysis that helps traders identify areas of potential price reversals. By identifying key levels of support and resistance, traders can make better-informed trading decisions by setting entry and exit points for their trades and managing their risk more effectively. However, like any other trading strategy, it is not foolproof and traders should always exercise caution and use other technical analysis tools to confirm their trades. With a proper understanding of Advanced Support and Resistance and how to use it in trading, traders can potentially gain a better understanding of market movements and improve their chances of success.
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