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The beginners’ guide to trading: support and resistance

The beginners’ guide to trading: support and resistance

For beginners

Buy low, sell high. Easy, right?

 

Trading isn’t as simple as it seems, otherwise everyone would be doing it and winning all the time. Which is impossible, of course, because for every buyer there’s a seller and for every winner there’s a loser. So, if you’re starting out in this space: be warned. It’s not easy. According to the disclaimers on forex and other trading sites, around 90% of daytraders lose money.

 

So, how do you learn what you need to without getting burned?

 

Firstly, we would strongly recommend the site BabyPips, which teaches forex trading strategies and techniques – equally relevant to crypto. You’ll find all you need here about all the major indicators and approaches.

 

Support and resistance

We’re going to start with one of the simplest and most important ideas, though: support and resistance. As you can see from this link, it’s not hard to understand. When the market heads higher and then pulls back, it has hit resistance. When it drops and bounces, that’s support.

 

Once an area has proven to be support or resistance in the past, it will very likely do so again – either bouncing or pausing at that level. That gives traders a piece of information that can lower their risk.

 

If price is approaching support, then it might be a good time to buy – certainly a better time than if it is approaching resistance (which might be a better time to sell). And if price does break through support, then there’s a good chance it will continue lower, potentially to the next support level. The same is true of resistance.

 

None of this gives any guarantees: there are no guarantees with markets. But it reduces your likelihood of placing a losing trade, and shows you which areas should be of most interest.

 

One concrete example. If bitcoin breaks down below the $5k zone, there is a good chance it will continue to the next support level. There’s some support in the mid–$4k range, but the real opportunity would be at $4,200, where bitcoin paused many times before finally breaking up at the beginning of April.

 

In any case, take a look at BabyPips, talk to other traders, learn other strategies – but, most of all, keep your emotions out of it. That’s about the surest way there is to lose on a trade.

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