How To Draw Support And Resistance Lines In Zerodha

HOW TO DRAW SUPPORT AND RESISTANCE LINES?

Finance School Blog

DEAR INVESTORS AND TRADERS IN THIS ARTICLE YOU ARE GOING TO READ ABOUT SUPPORT AND RESISTANCE LINES.
AFTER READING THIS ARTICLE YOU WILL GET TO KNOW SOME IMPORTANT CONCEPTS LIKE DRAWING SUPPORT AND RESISTANCE LINES ETC... ALONG WITH THIS YOU WILL GET TO KNOW SOME USEFUL CONCEPTS.

SUPPORT:

WHEN ANY COMPANY IS LISTED IN THE STOCK MARKET THAT COMPANY'S SHARES WILL BE AVAILABLE TO TRADE IN THE STOCK MARKET. WHEN THE TRADING GOES ON THE SHARE PRICE MOVES BY FORMING SOME PATTERNS. GENERALLY, THE SHARE PRICE MOVES IN UP'S AND DOWN'S. SO WHEN A STOCK PRICE IS MOVING. THE SHARE PRICE WILL REPEATEDLY MOVES UP BY TOUCHING ONE PRICE POINT. YOU HAVE TO DRAW A LINE BY TOUCHING THAT PRICE POINTS AT THAT LEVEL THAT LINE IS CONSIDERED AS SUPPORT. WHEN THE SHARE PRICE IS GOING TO TOUCH THAT LINE AGAIN IN FUTURE THAT MEANS THERE IS MORE PROBABILITY TO THE SHARE PRICE TO BOUNCE BACK FROM THAT LEVEL. THESE LEVELS CHANGES FROM TIME TO TIME YOU SHOULD ANALYSE CAREFULLY.

WHEN A SHARE PRICE IS MOVING UP. AT A PARTICULAR PRICE POINT THE SHARE PRICE WILL BE REVERSED MULTIPLE TIMES TO DOWNWARDS. THAT LEVEL IS CONSIDERED AS RESISTANCE LEVEL. WHEN THE SHARE PRICE TOUCHES THAT LINE IN FUTURE THERE WILL BE MORE CHANCES FOR GETTING THE TREND REVERSAL. WHEREAS THESE LEVELS CHANGES FROM TIME TO TIME BASED ON DEMAND AND SUPPLY OF SHARES IN THAT PARTICULAR STOCK. SUPPORT AND RESISTANCE LEVELS VARY ACCORDING TO YOUR SELECTED TIME FRAME.

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TIME FRAME:

THE MOST CONFUSED THING WHILE DRAWING SUPPORTS AND RESISTANCES IS TIME FRAME, MOST PEOPLE GET CONFUSED ABOUT TIME FRAMES BECAUSE THEY DON'T KNOW WHICH TIME FRAME TO USE. THE ANSWER FOR THIS QUESTION IS THERE WERE NO FIXED TIME FRAMES OR FIXED RULES TO USE PARTICULAR TIME FRAME. WHEN YOU ARE TAKING POSITION IN INTRADAY YOU SHOULD CHECK ALL THE TIMEFRAMES UPTO 1D TIME FRAME. WHEN YOU ARE INVESTING FOR LONG TERM AND SHORT TERM YOU SHOULD CHECK THE REMAINING TIME FRAMES WHILE DRAWING SUPPORT AND RESISTANCE LINES. BECAUSE THIS IMPROVES THE PROBABILITY OF YOUR PROFITABLE TRADES.

DON'T USE ONLY ONE TIME FRAME. CHECK THE REMAINING TIME FRAMES ALSO FOR CONFIRMING THE TREND EITHER IT IS UPTREND OR DOWNTREND.

HOW TO DRAW A SUPPORT LINE?

YOU KNOW THAT SUPPORT MEANS THE PRICE WILL BE REVERSED UPWARDS WHEN TOUCHING THAT LEVEL. THAT LEVEL IS CALLED AS SUPPORT. WHEN DRAWING SUPPORT LINE IN A PARTICULAR STOCK OR SHARE YOU SHOULD USE LONGER TIME FRAMES BECAUSE AT THAT TIME ONLY THERE WILL BE MORE PROBABILITY TO DISCOVER THE CORRECT TREND. WHEN THE SHARE PRICE IS MOVING UPWARDS BY TOUCHING ONE LEVEL MULTIPLE TIMES THEN YOU HAVE TO DRAW SUPPORT LINE AT THAT LEVEL.

HOW TO DRAW RESISTANCE LINE?

RESISTANCE MEANS THE PRICE WILL MOVE DOWNWARDS WHEN TOUCHING ONE PARTICULAR LEVEL THAT LEVEL IS CONSIDERED AS RESISTANCE. YOU CAN FIND THESE LEVELS BY CHANGING THE TIME FRAME TO LONGER TIME FRAMES. YOU SHOULD DRAW RESISTANCE LINE BY TOUCHING ALL THE RESISTANCE POINTS. THE SHARE PRICE WILL BE REVERSED WHEN TOUCHING THAT LINE IN FUTURE ACCORDING TO YOUR ANALYSIS.

HERE IS AN EXAMPLE:

IN THE ABOVE SHOWN IMAGE THE RED LINE REPRESENTS THE RESISTANCE LINE AND THE GREEN LINE REPRESENTS THE SUPPORT LINE.

UPTREND:

WHEN THE SHARE PRICE IS MOVING BY FORMING HIGHER HIGHS THEN THAT TREND IS CALLED AS UPTREND. THAT MEANS THE SHARE PRICE WILL INCREASE IN FUTURE WHEN IT IS IN UPTREND, UNTIL IT, TOUCHES A RESISTANCE LINE.

YOU CAN OBSERVE IN THE ABOVE IMAGE THAT WHEN THE SHARE PRICE TOUCHED THE RESISTANCE LINE, IT IS REVERSED TOWARDS DOWNSIDE.

DOWNTREND:

WHEN THE SHARE PRICE IS MOVING BY LOWER HIGHS THEN THAT TREND IS CALLED AS DOWNTREND. THAT MEANS THE SHARE PRICE WILL DECREASE IN FUTURE UNTIL IT TOUCHES A SUPPORT LINE. YOU CAN OBSERVE IN THE ABOVE IMAGE THAT SHARE PRICE WHEN TOUCHED THE SUPPORT LINE IT IS REVERSED TOWARDS RESISTANCE LINE.

I HOPE YOU GOT SOME KNOWLEDGE ABOUT SUPPORT AND RESISTANCE AFTER READING THIS ARTICLE. THANK YOU FOR READING THIS CONTENT.