Technical Analysis Training - Explaining Resistance and Support

One of the most difficult concepts for beginning traders to grasp is the concept of support and resistance. This is perhaps so because support and resistance are invisible until they are encountered , and even then it's still tough to realize what's going on without going with multiple timeframes .

Enormous amounts of time and effort are spent trying to use technical analysis training to determine where support and resistance levels are in the market . A variety of tools have been put to use, including retracement levels, trend lines, moving averages, and even candlesticks .

There are some that don't work and some that do, and more frustrating , some may not work all the time, but some of the time. Knowing when a tool or indicator will be reliable is information worth a lot of money .

Because many people only use one tool, their efforts may fall short, and one timeframe is used in application, and they try using it in every circumstance . Better results come when a variety of tools , each optimized for particular market conditions , are used in a program that is organized and thought out that encompasses both trends and congestion action . Technical analysis training will show that further progress towards accuracy will accrue when these tools are simultaneously applied to several different timeframes and various results are considered .

Top results occur when a comprehensive theory of market action is employed that aids the trader in knowing what the market is currently doing , and why it is doing it , what is probably going to happen in the near future , and to give traders a look at what levels of support and resistance may be that can be monitored as the market goes forward in real time.

Sound tough ? Possibly, but it has been accomplished in a number of major technical analysis systems .

Let's start with some definitions .

Support is something below price , and this force can push prices back up from where they fell when it is encountered . Support involves buyers that are in the market but waiting to take action until the price gets to a certain point , or of those short position holders that have to buy if the market begins going against them. It is this bunching of buyers around a certain price that cause support to actually support prices.

Something above price is resistance, and it is a force that when encountered pushes price back down into the range from where it came . It consists of sellers who are present in the market but waiting to take action until price reaches a certain level , or of those long position holders who must sell if the market goes against them.

Both resistance and support can be easily identified with regular technical analysis using something such as the 10 period moving average. Or this can be represented with a system that is more evolved that you learn about by technical analysis training like Drummond Geometry .

A higher level of tool use is used in this method in order to create more time period overlays of resistance and support areas to a daily chart, coming from the weekly and even the monthly charts. These more evolved methods give the trader a lot of support in his buy-sell decisions . When using this method you can project into the future areas of support or resistance, so traders can be prepared as the market goes on.

Author:
Peter Markham is a Forex and financial futures trader with 30 years practical experience in the markets. He received his education in Sydney and Los Angeles and has been a trading consultant worldwide. He has written widely on Technical Analysis Training. Among many possible technical analysis courses Peter recommends www.drummondgeometry.com for an original and productive trading approach.