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Can you elaborate on the importance of support & resistance in terms of the present & the past.
Posted by Charlie Trader on 30 March 2018 05:02 PM

Support and resistance are important as it gives an indication of potentially how profitable the trade may be.

If you have these close to your entry price or first profit targets, there is a risk that the stock will not be able to break pass the support/resistance again and reverses before you reach your first profit target, hence creating a loss or simply break even position.

For example, if your entry price is $20.17, first profit target is $21.17, but there is a resistance at about $21, you may want to make your first profit target just below $21 to ensure you have ringfenced your profit in case the price is unable to break resistance.

Also, it may have an impact on your entry price.

If for example the top of the bull flag is $20.21, you may have choose to enter at $20.31. However, there may be resistance around $20.40. In this case, you may choose to have your entry price at $20.46 to ensure that the stock is able to break the previous resistance before you enter the trade.


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