Understanding Support and Resistance in Trading

Sep 29, 2024

Lecture Notes on SNR (Support and Resistance)

Introduction

  • Recording the video for the second time (previous upload had issues).
  • Topic: Creation of SNR (Support and Resistance) and different types of SNR.
  • Presenter shares personal experiences and insights that were not taught by mentors.

Objectives

  1. Understanding how SNR is created.
  2. Differentiating between fresh and tested levels of SNR.

Creation of SNR

  • Key Definitions:

    • Support: Formed by a sell candle followed by a buy candle.
    • Resistance: Formed by a buy candle followed by a sell candle.

  • Important Note:

    • Both support and resistance require only two candles to be established.

Drawing SNR Levels

  • Resistance Creation Process:

    • Identify the buy and sell candles.
    • Once the sell candle closes, it creates resistance.
    • Draw a horizontal line from the body close of the first candle, extending it out.

  • Support Creation Process:

    • Identify the sell and buy candles.
    • Once the buy candle closes after the sell candle, it creates support.
    • Again, draw the line from the body close of the first candle and extend it out.

SBR and RBS Concepts

  • Support Breaks (SBR):

    • Support becomes resistance after it breaks.
    • Determined by candle body closing below the support level.

  • Resistance Breaks (RBS):

    • Resistance becomes support after it breaks.
    • Determined by candle body closing above resistance.

Break Definition

  • A break occurs when the candle body closes above (for resistance) or below (for support) the established SNR level.

Rejection

  • Rejection refers to when price touches the SNR but fails to close beyond it, indicating that it has not broken the level.

Fresh vs. Tested Levels

  • Fresh Level:

    • A level that has not been touched before.

  • Tested Level:

    • A level that has been touched multiple times.
    • The more it is tested, the less "fresh" it becomes, but still might hold importance in trading.

  • Storylines and Candlestick Patterns:

    • Price can test a level multiple times without breaking it, but if a storyline starts (indicating repeated testing), it can influence trading decisions.

Patterns in SNR

  • Key Patterns to Recognize:
    • Left Shoulder, Apex, SBR, and RBS formations.
    • These patterns provide insight into potential price movements and trading strategies.

Conclusion

  • Recap of how support and resistance are created and differentiated.
  • Understanding of break structures, rejections, and the significance of fresh vs. tested levels.
  • Emphasized the importance of recognizing patterns within SNR for trading decisions.