Yesterday we learnt the the important factor for successful part-time trading is long term support / resistance and price action around that that support and resistance.
Today we are going to learn how to draw those key levels of support / resistance in the long term charts (daily, weekly & monthly time frames)
The trades we are going to look for are, bounce trades, continuation trades or breakout trades.
Support / Resistance (S/R): when you look into the charts, you will see many swings (zig- zag patterns), but you are not going to draw lines for all those highs and lows of the charts but only to the significant highs and lows. Please note not to make the mistake of drawing too many lines as the chart looks ugly (*_*).
If you have two swing points to join together to draw a line then it is a stronger support / resistance (also known as double tops or double bottoms).
Trend-lines: You can only draw trend line (diagonal line) only if you get two swing points in the direction of the trend. If the trend line is below the price then it is up-trend line and if the trend line is above the price then it is the down-trend line. But always keep in mind the trend lines should begin from the very beginning of the new trend. Also you can draw only outer trend lines of a trend.
In both the cases (trend line or simple horizontal S/R line) wait for the price to move towards the lines and based on the price pattern (You will know about it in future posts) you are going to place your trades (entries).
Range Boundaries: Now let us talk about the Range Boundaries. Range Boundaries or Ranges are the price conjunction between the two boundaries or support or resistance. These Ranges can take horizontal levels of support or resistance or triangular shape (One S/R and the other trend-line). But the good quality ranges are horizontal ranges.
Fibonacci Retracements: One more type of drawing the lines are Fibonacci Retracements. There are plenty of videos who show you how to draw Fibonacci Retracements on your charts. But please remember we concentrate only on 38% to 61% area of this Fibonacci Retracements for the REVERSAL so that we can trade in the direction of the trend. Please note that Fibonacci Retracements are only valid on trending in one single direction. If there is no clear trend or swing in the direction of the trend, then there is no valid trade. Please go through the video.
That's all for now.
Good night.
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