[text_block style=”style_1.png” align=”left”]Hey, Hey, what’s up my friend? So let me ask you a question. Have you ever seen the price come into support and you think this is a strong level of support is going to hold?
So you buy
The next thing the price merge through support then you’ve got stopped out.
How about the price came into an area of support and it made a huge rally away from it, huge bullish move.
But the problem is you got stopped out of your trade before you can even take part in the big move.
So has any of those happened to you before? if it’s a yes then today’s training is for you.
Because I’m going to share with you what are some of the most common mistakes traders makes when trading support and resistance and how you can avoid it.
But first, if you’re watching this video for the first time, hit the thumbs up button and subscribe to my YouTube channel,
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Let’s get started.
The first thing for us. The more times support is tested, the stronger it becomes.
‘’The more times it’s tested, the stronger it is’’
[text_block style=”style_1.png” align=”left”]Have you heard of that scene before from textbooks or forums? You see stuff like the more time support is tested the stronger it becomes.
Well, that’s not true.
The truth Is that the more time support gets tested, within a short period, the weaker it becomes.
Let me explain why.
So let me just give you an illustration.
So let’s say this is an area of support and the price goes up, comes down, and you test it multiple times.
So we can see that support is an area where potential buying pressure would come in. Let’s say there is a certain limit order to buy at support, maybe from a hedge fund and institution.
Let’s say it’s worth up $100 million worth of buy orders.
The first time it comes up; it fills up 50 million.
Then rallies it comes back down and it fills up the remaining 30 million, rallies come back up, fill up 10 million, comes back down, fills up the remaining 10 million then eventually there is no one left to buying.
The price breaks down, so we can see that the more times price retest support within a short period.
The more of this buy limit orders get filled. Once all these buy orders get filled, who’s left to buy me?
I don’t want to be buying. So that’s where you get right, the more times price retest support within a short period, the likelihood it will break down.
So this looks something like a descending triangle.
And the opposite is the ascending triangle.
Let me just share with you an example, so over here you can see Bitcoin that illustrate these concepts pretty well.
So you can see that there is support around the 6,000 level. Price came into support rarely once came back down a couple of times and it breaks down.
So just by looking at this price action. You know that this market is getting weak.
You just look at the so-called swing of the rally right the first time is pretty strong, a big bullish candle, second time still strong, but not quite as strong as the first time.
And the fourth time is really weak. All the small range of candles.
So this is a sign to you that the buyers have difficulty pushing the price up higher. And this to me is a sign of weakness, not a sign of strength.
So whenever you see the more time support is being tested within a short period. That’s a sign of weakness.
You can see another example over here:
This is the opposite, you can see that over here, this is resistance, price approach resistance, sold off approach resistance several times and then sold off a little bit.
So now you have a series of higher lows into resistance.
So is this a sign of strength or weakness?
This is a sign of strain. It shows you the buyers are willing to buy at these higher prices and the sellers have difficulty pushing the price lower.
The sellers push the price pretty strongly towards the downside here as well. Then after which the subsequent selling pressure from the sellers got weaker and weaker.
To me, it’s a sign of strength from the buyers they are willing to buy at these higher prices that would lead to a breakup.
Let’s see another example. Bitcoin, you can see a series of lower highs coming to support.
This to me is a sign of weakness right there. The market is about to break down lower.
So let me just see if I can find an example to illustrate this concept, this concept is important.
So now the one over here is not as clean as the Bitcoin example, but still, you can see a series of lower highs coming into support.
Again, it’s a sign of weakness. The market is weakened, is likely to break down.
So the key thing here is again, higher lows into resistance is a sign of strength and lower highs into support as a sign of weakness.