Foreword
Do you know what support & resistance lines are? Support & resistance line It is the basics of technical analysis. Knowing how to draw a support/resistance line is essential when it comes to trading. In this article, I will teach you how to draw support & resistances line step by step.
Support & Resistance
Support and Resistance is one of the most common technical analyzing methods that traders or investors use when spotting and interpreting breakout, and reversal of the price of a security.
What are they?
In theory, support and resistance are the same things. They both refer to a price level where a trend (up/down) is expected to be paused. In other words, the stock price is expected to bounce when it touches either a support or a resistance. If the stock price didn’t bounce and keeps its trend, the resistance/support it breaks will turns into support/resistance.
A support line usually forms when the buying interest increases after the drop of security price.
A resistance line usually forms when the selling interest increase after the rise of security price.
By drawing and elongating the support or resistance lines, traders or investors could then try to predict the reversals of trends or breakout of stock price.
How to draw support/resistance line? (Step by step)
1. Find a chart (Day chart/1-min chart/ 5 min chart…)
2. Locate crests and troughs on the historical price action
3. Try to connect as many crests as you could to draw a resistance line
4. Try to connect as many troughs as you could to draw a support line
It may take you plenty of time and effort to learn how to draw a support/resistance line, so please try more when you are free. More, the line that everyone draws may not exactly be the same, so you don’t have to worry that you have drawn the wrong one.
| Steps | What you should do to draw a Support/Resistance line |
|---|---|
| 1️⃣ | Find a chart (Day chart/1-min chart/ 5 min chart…) |
| 2️⃣ | Locate crests and troughs on the historical price action |
| 3️⃣ | Try to connect as many troughs as you could to draw a support line |
| 3️⃣ | Try to connect as many troughs as you could to draw a support line |
Little tips:
1. Sometimes you may not be able to connect all crests or troughs, it is normal. Keep in mind, just try to connect as much as you can.
2. Often, resistance and support lay on round numbers such as $0.5, $1, $1.5, and more.
3. A short-term resistance/support line is much stronger when comparing to a long-term one (e.g., Intraday resistance vs. Intra-year resistance).
(Bonus: You can Tradingview.com, a online free chart website to practice how to draw these lines)
Final Thought
Understanding how to do technical analysis of security is essential when it comes to trading or investing. In this article, I have briefly illustrated what Technical Analysis is and teach you how to draw support/resistance lines. Hope you find it helpful.
[Next Lesson: Technical Analysis: Pattern & Indicators]
About Post Author
