Hi, I’m new to trading. I am not clear how to judge the strength of a resistance zone from the earlier candle stick pattern, when the price is going up. How should the earlier candles look like for it to be a strong resistance now. Similarly for support.
Another question I have is that, when the price is going up, I some times see that they take profit at a price that coincides with lower most point of an earlier green candle. Some times it is at the starting price of an earlier green candle or at the topmost point of it. Some times it matches with these levels of an earlier red candle. How do I judge where exactly they would take profit.?
Strength of a Resistance or Support zone are tested by price and in the process this zones are tested! When we see the price is struggling to break a zone and go through it in the same direction, its (the Zone) strength is tested to be strong enough!This can happen several times! in such situation, we think/expect of a reversal… and when we want to trade with the trend on the same direction, we wait for the price to break that zone and then enter our trade thus testing the strength… and vice versa
Thank you very much for your guidance. I think I still need some clarity. I will put my question in a slightly different way: Given 2 types of candle stick patterns at a particular price zone (say, 1.3400 to 1.3420 for EURUSD), is it possible to determine which is stronger in resistance/support than the other. Of course, if there is lot of buying/selling, then price might pass thru either of them.
Personally, I look at how price past action was at those resistance/support levels. I look at the number of times they have been tested in the past. In addition, I look at confluences… For instance, 1.3400 lines up nicely with a Fib level and is also a behavioral level (two 00s). I consider these factors when I decide which of the levels is stronger.
Huck seems to have provided a great reply. Long trend lines with several touches show strength… use plenty of trend lines to locate support and resistance and combine those with the fibs and you will have located the points you seek
Agree with Huck, how many times the zone was tested and what was the result! This works unless otherwise stated…(lot of buying/selling or action taken by big boys that can reverse any trend!)