cfd trading bücher How to Identify and Trade Reliable Support and Resistance

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You will be aware that you need to look through various scales of charts and previous history in order to tie down where the support and resistance levels are for any security. Occasionally the support is referred to as the buy line, as it is the level at which you might choose to buy into the security; and sometimes the resistance level is called the sell line because often you will sell if the price reaches that level.

While this is cut-and-dried, trading is seldom quite as neat as this. It is not an exact science, and so you might find that the values do not exactly match with the established levels. This should not deter you from taking the appropriate action as necessary. It helps if you think of the levels as areas and not as precise values.

Say you have identified a support level of £1.30 on a particular share, and in a bullish market the price has retraced down from £1.40 to £1.31. You fully expect the bullish trend to continue after the price has bounced off support. It would not be wrong for you to place your buy order at a price of £1.31, as if you sit waiting for the price to exactly reach £1.30, you might find that it reverses and you miss out on the trade altogether.

Another reason that you might want to anticipate rather than wait is that other traders are also watching the price, and wanting to make the trade. As soon as they do, the demand will push the price up and that may increase the price so quickly that you do not have a chance to join in and profit.

In a similar way, you can regard the resistance level as general guidance only, and feel free to take the appropriate action if the price draws near. For the sake of a penny or two, you can find yourself missing out on the main part of the move unless you take action.

Often the supply and resistance levels will be at psychologically important numbers, such as those ending in zero, and not at odd levels. Once again, if you wait until the price becomes exactly the target number ending in zero, you could be waiting a long time. The advice in these cases of whole numbers is always to anticipate just before the number is reached so that you can make sure that your trade goes ahead.

While many people will identify support and resistance levels by drawing a single line for each on a chart, as you can see the best representation may be two lines, equally spaced either side of the precise level. This would mark the zone in which you would feel comfortable in opening a trade. For the sake of avoiding missing out on price action, you would be sacrificing a little profit should the price have come down exactly to the line, but given that sometimes this does not happen, the better course may be to trade in the price zone.

cfd trading bücher How to Identify and Trade Reliable Support and Resistance
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