Support and Resistance in Crypto Trading: Concepts and Applications

1. Understanding Support and Resistance

Support: A price level where buying pressure exceeds selling pressure, causing the price to rise when it reaches this level.

Resistance: A price level where selling pressure exceeds buying pressure, causing the price to fall when it reaches this level.

2. Characteristics of Support and Resistance

When the price decisively breaks through a resistance level, that level can become new support, and vice versa.

Support and resistance levels are not exact prices but zones where buying and selling pressures contest.

3. How to Identify Support and Resistance

Step 1: Determine the main price trend on larger timeframes like Daily or Weekly.

Step 2: Identify peaks (highs) and troughs (lows) on the price chart.

Step 3: Filter out insignificant peaks and troughs, focusing on key levels.

Step 4: Draw support and resistance zones based on candlestick wicks and closing prices at identified peaks and troughs.

4. Trading Strategies Using Support and Resistance

Trading when price bounces off support or resistance zones: Wait for confirmation of price reaction at these zones before entering a trade.

Trading breakouts of support or resistance zones: Place trades when the price decisively breaks through these zones.

Trading retests of broken support or resistance zones (Backtest): Wait for the price to return to the broken zone and confirm its reaction before entering a trade.

5. Considerations When Using Support and Resistance

Avoid drawing too many support and resistance zones on the chart to prevent confusion.

Combine with other technical analysis tools to increase accuracy.

Always set stop-loss points to manage risk.