Does Support and Resistance Work?

Support and resistance is the beginning frame of drawing out market structure. Support and resistance are also referred to as levels in the market. Picture an elevator. As it goes up and down it goes to different floors or levels. This analogy represents support and resistance.


SLFX uses support and resistance for trend continuation. As price goes up with trend it creates higher lows and higher eyes bouncing to and from levels. When it reverses, price tends to repeat the levels.



Drawing support and resistance from the higher timeframe such as the daily and weekly timeframe gives traders a great advantage in the market because it allows price to breathe. Think about it like this, when you eat and get full, what's the best way to relieve the pressure? Unbutton your pants right? So that is exactly what we are doing here. Allowing price to breathe means there are more pips for the taking.


In order to draw support and resistance you have to look left. Most traders get confused with this statement because they don't know how far to go back. My answer is, go as far back until you have enough data to draw out your levels. You don't need to see the whole chart. You just need enough data that will make the levels make sense.


There are a few pros and cons. Let's go over them:

Pros:

-Easy to determine next price level

-Great rejection and reversal points

-Simple rules needed to enter into the market


Cons:

-Price may not always hit levels accurately

-Can sometimes be confusing to plot

-Easy to get stopped out

-Market Stop hunts most traders at these levels


As you can see there are a few pros and cons when trading support and resistance. Setting up rules are these levels are essential. For example, one of my rules is to wait for price to reject the level or break and retest the level. Keeping this simple rule allows me to trade smartly at my levels and not be in a rush to trade.


Remember, support and resistance do work as long as you can plot them accurately. It takes time to get use to plotting the levels. It takes even longer to learn how to trade it. Remember the rules I mentioned earlier, this is where trading at these levels comes in handy. All in all, trading support and resistance works. Make it work for you and the market will reward you.


-Shaquan Lopez

SLFX Mentor


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