i have a question regarding a topic in babypips school. Its titled Trading the lines under support and resistance level section.
1)Firstly when we say we are making a “selling entry” does that mean we are short selling? selling entry is done during a downtrend right?
2)Secondly, under “Trading the lines” topic, its mentioned that when a support level is broken convincingly, you wait for the price to pull back to the support and resistance level and enter order once it bounces off. The entry order here is referring to the short selling order right? in that sense we are hoping that once the price bounces of the pull back, we make an short selling entry and hope that the price lowers even more before closing the trade to collect profits?
times1000 thanks in advance for clarifying my doubt and enlightening me. Looking forward to answers
A lot of traders we speak with consistently mention the importance of support and resistance - so you’ve got some important questions there.
When making a “selling entry” this simply means a Sell Trade / Short Position. You’re right - if you were selling or going short during a downtrend, potentially you would be doing the right thing if the market to continues to trend down.
Yes, in the example provided in the Trading the Lines page, under “The Conservative Way”, the example shows price action breaking through a support line, convincingly, and then pulling back to where prior support was shown. This then becomes the entry point for a Sell / Short trade as prior support has now become new resistance.
Many thanks for your explanation. Appreciate it much!. So am i right to say the sell trade/short position is also called short selling?
Moreover, at that same page of that topic, there is a picture where by the price bounces of the trend line resistance and there is a entry order line below and a stop loss line above the trend line. Are they trying to imply that once the price bounces of the trend line, we can short sell it and hope the price lowers? else if the price rises instead then we will stop loss at that stop loss point?
Yes, you are correct, that is usually what is meant by short selling - the terms are generally interchangeable. A [B]short[/B] position is a [B]sell[/B] trade, and a [B]long[/B] position is a [B]buy[/B] trade in trading.
That is how I understand the guide also - this is to avoid selling in to a fast moving market, such as during a news release, in which the resistance line may be less likely to hold. By waiting for the trend line to hold and price to begin moving down again, you can avoid situations like this. However that is no guarantee that the resistance line will hold, it is merely one way to try and move the odds in to your favour and avoid slippage and losses due to strong buying pressure.
