Types Of Support And Resistance?
Although there is no such classification but to make the things easy, we have classified it into 4 categories. These are.
1. Demand and supply zones
2. Psychological levels
3. Trendline
4. Dynamic levels
5. Previous day high and low
Demand and supply zones:
As the names suggest, these are the zones from where the trend is likely to change. The area or zone where price took support is called Demand Zone whereas the area or zone where price takes resistance is called supply zone.
Psychological Levels:
Many a times, stock prices do take support and resistance at round numbers. The logic being is that most biggies enter or exit a trade at such psychological levels thus making it crucial support and resistance.
Trendlines:
If we draw a line connecting the swings highs or lows, we call it as trendline. To draw a trendline we need at least two swings. After drawing a line connecting these two points, we can expect that the third point at which it touches will likely to be act as support or resistance.
Dynamic Levels:
As the name suggests, these levels keep on changing along with the price yet act as a good support and resistance. In the above three types you have seen support and resistance at fixed price point but here it keeps on changing with the price. The best example of this is Moving Averages. The moving Averages of 21/50/100/200/400 act as a very crucial support and resistance. Whenever market hit these moving averages, it bounces back
Previous Day high and low:
Many a times, the low and high of the previous day also act as a major support and resistance. So, we should always keep these levels market while taking trades
