never trade a resistance/support level multiple times

in #tradinglast year (edited)

The concept of resistance and support levels have a misconception in themselves, which I have seen a lot of confusions in traders. the most common mistaken belief is: more a res/sup level gets touched by price, it will get stronger. this is absolutely FALSE!

The right conclusion in such case is: that res/sup level gets more credit according to times it is touched by prices and reacts correctly. but shall we trade it over and over? No!


So what small but thousand dollars worth lesson we have from this?

  1. you have to spot the res/sup level before the get touched! sounds silly? no it doesn't. there are several tools and ways to do so. Fibonacci retracements, Fibonacci extensions, moving averages (specially the long term and high time frame ones like EMA or SMA 21 in weekly chart), Bollinger Bands and some other indicators can help you with that.

  2. if the price showed you a res/sup level acting to the price, you may want to trade it just one more time and with knowing the fundamental news and the momentum of the market. if there are BIG news coming or the momentum is huge against your trade, don't trade the level twice.

  3. if the level touched twice and you missed both, don't trade it again. wait. you may now find the opposite trend to trade that level again. look at the chart above, it's XRPBTC D1 chart.

you can see the price has touched a support level and had a great pull back. if you have missed the opportunity, you may find the 2nd chance to profit from it. as you see the price reacted to the second touch as perfect as the first time and you could have a 15% profit with no leverage. but the third time, the price reacts poorly and there is no other chance to do it again!

instead, you may find later this support level acting as resistance (and now you know it's credible enough to spot it in the first place)

good luck in your trades and trade respectfully!!

also posted on my publish account