Well, in this blog, I am going to explain support and resistance in such a way that you will understand once and will not forget it for a lifetime. In fact, you will be able to guide other people as well. What is support and resistance and how to trade according to it. Well, you want to learn how to trade.
Look, I will tell you in simple language. The first thing is support and resistance is a zone. Zone means that it is a level. What are the levels on which the simple meaning of support is where the buyers are sitting?
You understand that support means where the buyers are sitting. Where are the buyers sitting? At what price are the buyers ready to buy? So we will say this, you understand that the buyers are sitting here.
For example, you say that gold is running for 50,000 today, but if it becomes 25,000 for just one day, will you buy it? For example, I am just asking you, you say yes, maybe I will buy it. You will not buy it.
Many people in the world will go crazy to buy it because they know that if the price is falling, then we are getting it at a low price and we will buy it. Whenever any assets bought, simple economics, whenever something is bought, then there is a limited supply of everything in the market.
When we are talking about buying shares, then shares are not unlimited, gold is not unlimited, then simple demand and supply principle works. As soon as it is bought, then the demand has increased. The demand is that we will buy it and the supply has decreased, then the price shoots up.
So what is the support where the buyers are sitting and when the price will increase, now you have bought it. Legit be the price of 50,000, you bought gold at 25,000, now gold is of 70,000. So at some point, a person will want to book a profit that the price has increased, now we sell its soon as we sell, there will be a supply in the market.
Earlier the supply was less, now the supply has come. As soon as the supply comes, the prices go down. That is why the price goes down. Thesis the simple logic. So what is the support where the buyers are sitting, what is the resistance where the sellers are sitting?
Whenever something is sold, then its price will go down. Example, today there will be a lot of properties around you that are sold. You will also have a house that will be sold. Now everyone will say that we have to sell the house. If everyone wants to sell the house and there is no buyer, then what will happen?
Let’s say you live in a house of 1 crore, for example, you may live in a house of 10crores, so you live in a house of 1 crore. The neighbor’s house is also of 1 crore. You say that I will sell it for 1 crore. The neighbor said that give80 lakhs, take it. Now as soon as a buyer finds out that in 80 lakhs, the house next door, which is of equal size, is being sold, then he will say that I will take 80 lakhs.
If the neighbor says that Aim selling for 70 lakhs, then he will say that if I sell for70 lakhs, then you will not sell. Then you will say that I will also sell in less. Bassoon as you say that I will sell in less, the price will continue to fall. And this is what happens.
This is human psychology. Human psychology also works in the share market. Although I have studied it, I will tell you that this is human psychology. Support means buyers, resistance means sellers. If you understand this, then what will happen with it? Now what will happen with it? There is an advanced version of this that you have to understand.
Thesis understood that support means buyers and resistance means sellers, but this does network. Now we have to move little further. Whenever the price breaks its resistance, that is, the sellers sold, they tried to lower the price, but the buyers said that it is cheap, buy it. So the price goes up more because when the thing is bought, it will go up more.
So the sellers tried to lower the price, but if more buying comes, the price goes up. So when the price breaks its resistance, it tries to meet the next resistance, where the sellers are sitting on the next resistance.
For example, gold went from 50,000 to70,000, from 70,000 to80,000, so more people say that we will also sell at 80,000. So the price can go down from here, but if it breaks this too, then the price can go up. Thesis a hypothetical example.
So I was taking the example of gold. Now you should get clarity from this example that if the resistance breaks, then the sellers have become weak. Understand the psychology only.
The sellers were here, they sold, but the buyers were strong, they took the price up to the second level. There are also sellers sitting there. If that price breaks, then the price will go up. Simple logic.
So if the resistance breaks, then the price will go up to the third level, but what is our analysis that resistance, because there is no line, there is a zone, then the price can get rejection from the surrounding of the resistance and the price can fall down and if the price falls, then how far will it fall, it will fall to its support.
So I have written R1 and R2 in front of you, but it is important for you to understand that if the price goes up, then it can go up to R3. How do we know the resistance separately, we can also plot? Now I will explain it in this way, you will know how to plot and if the price is falling, this is the resistance, this is the support, the price is falling, then how far will it go, our analysis says that it will go to its support.
The buyers are sitting on the support, they will try to take the price up again, but if the price still falls, then the sellers are in the advantage. Sellers are saying that sell at any price, we have to sell and get out and after that the price will go from support 1 to support 2. If the buyers support it again from here, then the price will run up, otherwise it can fall down, it may go up to S3.
Now we do this on a different timeframe. Now what I have said, I will show you, then I will tell you such an easy way that it will be automatically plotted. You have to learn to plot manually first and then we will learn automatically. My job is to make your work easy, sowed are going to do that now.
So we understood support and resistance basically. Now let’s see here, okay, now this Nifty 5-minute chart is open in front of us. Now what I have to see here, you simply see, whenever you plot support and resistance, we talked about trend before,
we talked about plotting trend line here, now we will take horizontal line heretic am taking line, youkan also take rectangle, so here I have taken for you, you can see, I have taken this line here, but instead of line, you will get brush tool here, so you get rectangle below the brush tool,
so ideally you should take rectangle, I will show you both, so I have taken horizontal line here, you see, to plot resistance and support, we need last swing, swing means from where the price changed, it was falling, it went up, it was going up,
it came down, it became swing, simple last swing, so last swing, here if Isere from this, then you will say that the price was going down here, it went up from here, before that you will say that it happened here, as soon as I plotted here,
a horizontal line was plotted, as soon as a horizontal line was plotted, this was the area from where the price fell, here buyers said that we will not let it fall anymore, they bought and the price went up, this is support, this is ideally your support number one, but what Isai support and resistance are zones,
so better what you do, you take a rectangle and make this rectangle like this, so you will see that this is my support, the price comes anywhere around it, so this is my support, now in the same way, what is the resistance, last swing, you will say that this is the area that I can see here, again and again,
let’s do it from the computer, we take a rectangle and you make a zone of resistance, so as soon as you made a zone of resistance, now you know that the last swing has happened from here, the price went up, but the sellers pushed it down, then it went up, now it icon resistance, now my point number one, if the price falls from here, then how far will it fall, you will say that first of all, it will fall to support level 1,
very good, this is what you had to understand that if the price falls from here, then it will fall to support, if it keeps going in the middle, then you understood the trend in the last blog, which trend will happen, sideways trend will happen, now if it breaks the support, one second, this is done, after this I say that this support is broken, the price keeps falling, keeps falling, keeps falling,
so how far will it fall, you will say that here also a swing seen, here the price was falling, then from here it is going suddenly see such a big green candle has been made, so this is our one more support, which is probably your support number 2, so you will plot it like this and this will be your support number 2.
Now you know that you have two supports, support1 and support 2, if up. The price falls, then the first support will go to 1, if it falls below it, then it will go to support 2 and if it falls more, then you will say that it came a little near hereto, after that you see this directly, a very strong support has been found from here, the price started running,
so definitely what will happen to us, this will become a very strong support zone for us, so we have some supports, we have plotted the support here, now what will be the benefit of the support we have plotted, just a second, so this Isa zone for us, you can make it a little wider for your accuracy, it is definitely your choice and we can also do it a little further,
so now I told you that will make your work little easier, here I have taken an indicator, you can also use this indicator, here you see pivot points, here you go to the indicators, you search pivot,
so pivot point standard will come in front of you, you use this indicator, let’s do it once again, it will be refreshed, so now you see some important lines have come here, one we have manually plotted a support here, and here a P is written and there is a line with P
, so it is known as your pivot point, this is the line of pivot, now below the pivot you automatically see your S1, now have plotted it manually, but it is automatically, S1 automatically line is visible here, which means it already has support, after that here is a pivot, if the price is on its support, then it will reach its pivot first, or you can say it will reach its first resistance, if it breaks the resistance, then it will try to reach its resistance,
if it breaks the resistance, then where is its next resistance, we are looking at the time frame of 5 minutes, see around 17400, you see resistance level 2, if the price breaks this resistance, then it will go up,
now when you have plotted this support and resistance manually, and you have used the pivot point, there is a difference, you have used it manually, you must be using lot of indicators, most of the indicators follow the price, pivot point does not follow the price,
I will show you by cleaning the chart, so we will just clean up the chart, now you can see here that these pivot points are automatically plotted, they are basically quantitative, they are formed according to the data, in this, the last day’s data playas very big role for these pivot points,
so when they come in front of you, then you automatically know the support and resistance, and this is not only for Nifty, you talk about any stock, you talk about Reliance, you want to put pivot points here, see your pivot points will be easily put,
so what do you know from the pivot point here, you saw that S1 had very high price, if it would have broken, it would have gone up to S2, but it did not go up to S2, it tried to come up, now if it is up, then what will be our next target, our next target will be to go to the pivot, if you cross the pivot, it will go to R1,and if you cross R1, it will go to R2,
this is a simple thing that teaches you how to trade according to support and resistance, so you know how much the price will go, and you also know your stop loss, how is the stop loss, if you have entered somewhere here, I am not telling you in detail to enter, why I am not telling you, because I am going to tell you in the coming blogs,
so let’s say you have entered somewhere here, if you have entered, then you know if the price has not gone, then it will go to S1, suppose you had bought the call option in options and you had bought,
so you wanted the price to group, the price is going up, but if the buy chance does not go, then you know your stop loss is S1, if you are entering somewhere here, then also you know where your stop losses, so you are taking your stop loss on the basis of support and resistance, and what is your target, you know the target,
so according to this, youkan find the risk to reward ratio, that how many points I am taking risk and how many points reward, it is very important to identify this, if your entry was somewhere around here, then your stop loss was very small and your reward was very big, understood, that is it, thesis support resistance, now if you know this much concept of support and resistance,
so you have understood this concept and according to this, you can also trade and you will know that in which zone are the buyers and in which zone are the sellers, that is it, now if you understand, then document and tell me, so that I will get to know that what I am telling you, you understand or not, and if you still have some questions, then ask, in the coming blogs, we will try to clarify them,
finally I will see you in the next blog, please share this blog and this crash course, tell people about it, you share this with more and more people, so that valuable information reaches people, now people give a lot of money to learn this, we are trying to teach for free, if you are not sharing it, then you understand that information will not reach many people and we want it to reach people.