![]() ![]() The trouble is, these zones are very subjective, and in most cases, traders can only approximate where these levels may be. Support and resistance zones are key when determining the price area that a security will move in. As a result, we refer to these as zones because they are the general area around which support and resistance can be found. Since support and resistance levels are formed by large amounts of traders congregating around similar price points, it is very unusual for the price to hit the same level time after time before reversing. NOTE: You can get the best free charts and broker for these strategies here. Traders will then use these levels to plan both their entry and exit points for trades. Therefore, support and resistance levels result from market psychology, human behaviour, and wider market forces like supply and demand. Support and resistance levels are, therefore, the result of large amounts of traders congregating around the same levels. ![]() Herd instinct is observable as traders tend to congregate around these levels, further strengthening them as a result. Meanwhile, the short traders will buy to cover their positions out of fear of losing money. The traders who are already long will add to their positions to increase their long-term profits. Therefore, we can view chart patterns as visual representations of the optimism and pessimism being experienced by the three types of participants mentioned above.įor example, fear and greed can be seen when the price falls back to a support level. It is important to consider human behaviour when trying to understand support and resistance levels because this is an important factor influencing the price actions that we can observe in the markets. The terms fear, greed, and herd instinct are all terms that are regularly referenced when discussing human behaviour in financial markets.
0 Comments
Leave a Reply. |
Details
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |