HI, This is my first time on QNA and I hope that someone would guide me in this topic.
I am so confused either methods. Which method works better? I learned about two kind of support and resistance. First, by drawing a horizontal line line at the swing low or high to find a valid support and resistance for a script. Second, to draw a trendline which touches lower lows or higher highs. which one to follow? sometimes one work and sometime other?
if someone has checked to accuracy in percentage for both methods , than plz let me know.
thanks in advance.
you can use both support and resistance and trendlines together, in fact many do it… about accuracy, there is no definitive number which can tell accuracy of support and resistance zones. you can check it out yourself how it works.
The problem using both makes trendline useless ! Suppose a stock is in uptrend and it starts falling before it reaches to horizontal resistance, I could be in one of the position. First that I am having a position than what could be my exit ? shall I count trendline breaking as exit or shall I wait for bounce back till it reaches to horizontal resistance?
Second situation - if I am not in trade and waiting it to reach the horizontal resistance. I become clueless and have to wait till which line to buy ? trendline or horizontal support? which one should I think to enter in trade? because Horizontal support is below the trendline.
I think you should observe price action behaviour when it is hitting this ranges, sometimes price can take turn by hitting trendline, sometimes it will reverse by hitting horizontal support - resistance line, sometimes price doesn’t respect either zones and shoots through them. there is no definitive answer to your query.
If it is a Strongly Trending Market then the Trend Lines can provide a good guidance. You can use ADX > 25 for figuring out if it is a trending market. Second if the stock has reached a new High Post Covid, the resistance (Horizontal line) may be a number in Pre Covid Times. (Which may be too old and in a different world)
Suppose a stock is in uptrend and it starts falling before it reaches to horizontal resistance, I could be in one of the position. First that I am having a position than what could be my exit ?
Check the quality of Both Trend line and Horizontal Resistance line. If the Horizontal resistance line is old and the trend is current use the Trend line. If the Horizontal Resistance is clearly formed (For example every time the stock touches it, the stock falls with good volumes) then use the Trend Line. Like wise check for the Trend Line.
But dont be in an Hurry to exit when it touches either the Trend Line or Horizontal Resistance line. Exit only when you see clear Red Candles with Volume.
Second situation - if I am not in trade and waiting it to reach the horizontal resistance. I become clueless and have to wait till which line to buy ? trendline or horizontal support? which one should I think to enter in trade? because Horizontal support is below the trendline.
I take the approach that I will enter a trade (I mean Buy, I dont short) only if I am sure. In my analysis, he default is no trade. So in that context I will choose which ever line is higher and look fo volumes and one or two green candles before entering the Trade.
Thanks. A few things sorted out by your answer. Helpful indeed.
would you or anyone else help me in respect of suggesting one or two good books where I want to learn why these candlestick patterns and formation are good to take trade. What are there pitfalls and how I can be escaped from them? in other words I want to lean the psychology of these patterns.
you should read “Japanese Candlestick Charting Techniques by Steve Nison”. Steve Nison is the man who made candlestick popular in west, this book will certainly help you understand more about candlesticks.
