Transcription
Support and resistance. Once you master them, making money in the markets becomes extremely easy. However, I have discovered that the mass majority of traders out there have no idea how this works. They have absolutely no idea how to interpret them, and even less how to use them to their advantage to make money.
And in this video, I'm going to teach you the most basic thing that every single trader should know: how to use support and resistance to your advantage. I'm going to give you examples of trades that I have personally made, numbers like these, and even these, by simply using support and resistance the right way.
So, we have to really understand what does support and resistance mean. So let me explain. Support and resistance are areas where we are waiting for the market to get there. This is where the areas consist of buyers and sellers. Once price gets to these areas.
So what support looks like is once price is declining into a level of support, and then the buyers come into the market and then push price to the upside. And then resistance is when, when price is heading to the upside, it hits a resistance level, then sellers come into the market and then take price to the downside. It is literally as simple as that. It's exactly what it said in the name. Support is when buyers come in and then hold price up. And then resistance is when sellers come into the market and push price down.
So now that we understand what is a support level and what is a resistance level, why are these areas so important? Why does everybody talk about it? And why are they so important for the basic key foundations of a successful trader? And they're so important because these are the areas where price can have a reaction from in your favor without having any obstacle in its way, not letting it get to your take profit faster than it should be.
Let me explain. So let's pretend that price is heading to the downside, and we have a support level down here. We are destined to wait for price to come to this support level and then have a reaction from it. So then we head up to the upside. This support level, once price gets here and we have a rejection, this support level is going to give us the impulsive move for price to continue to head to the upside without having any slowdown because we have reached the level of support. So now it's going to have a reaction from it and head to the upside faster than if it were to not be at a support level.
And then the resistance is literally the complete opposite. Price is heading to the upside, and then we are waiting for price to hit the area of interest or the zone as resistance, where there's a lot of sellers in the market. Once price hits this resistance level, then we use it as a resistance to then head to the downside in our favor faster than any other way because we are going with the sellers from the market.
Support and resistance might also be known as areas of interest. So let's say you're looking to buy, you would have the support area as your area of interest. And if you're looking to then sell, your resistance would be your area of interest. So area of interest can go for both support, or it can go for resistance. It just depends for what you're looking for. If you're looking to buy, then you have a support as your area of interest. If you're looking to then sell, then you have your resistance as your area of interest.
And to make all this super simple, it's literally the areas where a bunch of buyers and sellers come into the market, and whoever wins then pushes price in that favor. So if you're at a support level, the buyers win, they push price up. If you're at a resistance, the sellers win, they push price down.
Now, are all the supports and resistance the same? And the answer is no. They're actually completely different. Support is used as support, and resistance is used as resistance. You cannot use them against each other. You can't use a resistance level to then buy. You can't use a support level to then sell. Almost think about it as a resistance level as the roof. And if this were to be the roof, how are you going to buy right into the roof? Like, let's say you are 6 feet tall and you have a 7-foot roof, you can't jump because you're going to hit your head. That's not the goal. Let's say you're in a 2-foot pool, you can't dive into a 2-foot pool because you're going to hurt yourself. So you can't sell into support. You need to use them as what they are supposed to be. If you are in a 2-foot pool, this is where then you jump from. If you're at a resistance, then this is where you then go down from.
So now that we understand that we have different types of areas of interest, we have psychological areas of interest, we have strong areas of interest, we have weak areas of interest. All of this falls inside the area of interest category, and it's actually very simple to understand. Let me explain.
Let's first start off with what is and what is not a support and resistance. So first of all, very simple example of a psychological level is literally you go to the chart, you find whatever currency pair you're trading, and then you look at the numbers that are to your right-hand side. And there you find any round psychological level. For example, 17,000, 1.8,000, 1.6,000. Any single number that is a round psychological level is also considered an area of interest. I personally like combining both, but I will show you a little bit more of this later in the video when we actually get into the charts.
Next is a strong area of interest. A strong area of interest is when you have more than three to four taps at that time frame in that area of interest. The stronger the area of interest, the more taps, meaning the more rejections, meaning the more it's respected. Meaning once price gets that area, the odds of you winning that trade are a lot more in your favor because in the past, it's done it more times than not. And the further you go back into the chart and the more taps and rejections it has, the better.
Next, we have weak area of interest. A weak area of interest is something that it has under three rejections from that area, which is not an ideal area because there's not much data indicating that once price gets there, it's going to have a strong rejection in your favor with your trade.
And lastly, one of my favorites that I use every single day in trading is the break and retest. So it's actually way simpler than you can ever imagine. Break and retest literally consists of price breaking and then retesting the area. It's that simple. Let's say you have a resistance level, and price gets to it, and you don't have a rejection. So not enough sellers come into the market to push price down. Price then breaks that area. It comes back, it retests it, it uses it as support, and then it heads to the upside. It's literally as simple as I'm explaining it, but I'm going to get into more detail now when we get into the charts.
So what is a support? A support is an area that has more than three touches. Now, an area support can be found on any single time frame. Can be found on the 1-hour, 4-hour, daily, weekly, on any time frame. Obviously, the higher the time frame, the more respected this support level will be. Because if price gets to a daily support level and it's had, let's say, five rejections, for example, this is good because the daily time frame takes a lot longer to move, so it's a lot more respected than let's say a 1-hour area of interest or a support level with five touches, because the 1-hour has a lot more movement and it could break and not respect that level compared to the daily time frame.
So a support level is when price has more than three taps of price being held above that support level, as you can see in this example right here. So now, what is not a level of support? And it's literally the complete opposite of what is right here. A level of support is price that does not have more than three rejections. It's that there's no clear indication and clear rejection from this level of support. If price is just breaking above and under the zone and not respecting it to the T in a very tight and square zone, this is not a support level and will not be respected.
So what is a resistance level? Literally the same thing, just flip the chart around. Once price gets to an area and it has more than three touches and it's a very tight zone, that's a level of resistance. And what is not a level of resistance? The same exact thing as support, an area that price is constantly breaking through, not respecting it, and no clear indication that it is respecting that tight box of the zone.
So now let's actually get to the charts where I'm going to show you a strong level of support and resistance, a weak level of support and resistance, a strong level of a psychological area, and then a break and retest, how I personally use it every single day to make a bunch of money in the market. So let me show you guys.
So let's get started here on the charts. So this right here is the Japanese candlesticks form of reading charts. You guys can see right here, these are the candlestick patterns that you're seeing currently right now in the market. And we're going to set up multiple examples on what is a strong level of support and resistance. So before we go into the candlesticks, let me just get started with the line chart so you guys understand very clearly.
So in this example right here, I'm going to be showing to you guys what is a very clean and clear level of support. So this is what we would call an ideal level of support. So as you guys can see right here, this market is obviously headed to the upside, but there is a level of support right in front of your face. And as soon as you spot it, you can see that it is a level of support because it has more than three touches. So this right here is considered a valid level of support, not a strong one, but definitely a valid. So as you can see right here, we have one tap, we also have a second tap, and then this would be our third tap right here, making this a valid level of support. So now we, now that we know that once price comes back into this area, we could be interested in buying a trade because we are because we're having a high probability of this trade heading to the upside from this level of support because we've done it three times in the past. So the odds of it doing a fourth are very high, especially if the trend is heading to the upside. So for this example right here, this is what we would consider a valid level of support, and we would be taking the trade on the fourth touch of the level of support. You're not looking to take the trade on the potential reaction from the third tap. You guys need to be very key with this, be very selective. Once you have a confirmation rejection as the third one, we would then be entering on the fourth one as our area of interest or level of support on the trade.
So now that we understand what is a valid level of support, what is a valid level of resistance? It is literally the exact same thing, just flip it around. So we're going to do a quick flip around right here, which we're going to invert the scale. And as you can notice, it's literally the same exact price. All we simply have done is invert the scale. A lot of you guys out there might be better at identifying support or identifying resistance. If you ever have any trouble, right-click on this line right here, and you just simply click invert scale.
So for this example right here, it's the same exact thing. Once you have one, one tap, two taps, three taps, we'd be looking to then sell on the fourth tap because the odds of it going down from here are a lot higher because we've had multiple rejections from this area. So this is what we would consider a valid area of interest because it has had more than three taps from the level of resistance. So this is a valid and respected level of resistance.
So now moving on, we understand what is a valid level of support. Now I'm going to be showing to you guys what is a strong area of support. This is what you want to see. The more of this that you see, the better the odds that you're going to win the next trade. So this right here is our same chart that we were looking at earlier. And let's just draw more price through it. Let's just simply come in through here, and let's just look messy how the charts would look to a newbie, and it'd be a bit confused, right? So this right here is what we would consider a strong area of interest. Why? Because we are having more than one tap. So for this example, you can see how we have one tap right here. We then have our same exact second and third tap. And you can tell right here, things get a little bit different. Now we are having a resistance be considered a tap. And you may be asking yourself why. And this is because it is confirming that this is a strong support. Support level used as resistance in the past. And whenever we are under, it's used as resistance. Whenever we are above, it's used as support. So for this example, we have 1, 2, 3, 4, 5, 6 rejections from this level of support, also known as area of interest. And the simplicity of it is that the more taps, the better. The more rejections and reactions you have from the zone, the better it's meaning that it is more respected. If you can go up to 20, 30 rejections, the better. That means that you are having a very strong and valid level of support.
Now, do the resistance taps count as taps towards the points of the level of support? And the answer is yes, because this is a respected movement in price and data. So whenever price is under, it is rejecting. And whenever price is above, it is rejecting. And for this example right here, we are clearly above the level of support or the area of interest. So the odds of it going up are very high because whenever we are above, we're rejecting. And whenever we are under, we are rejecting. So for this example, the odds of it going up are much higher than going down, simply because we are above it. So the more taps you get into the area, the better. The taps could be under it, or it can be above. You just have to make sure they are tight in this zone. This right here would not be considered a tap. This is way too far from the area of interest. So this would not be considered six taps. This would only be considered four taps towards the area of interest because there is clearly only four rejections. So the more taps that you get of this area, the stronger and the better, and the odds are you succeeding and making money with this trade.
Now, what is a very strong level of resistance? The same exact thing, just flip it around. We're going to right-click on these buttons here, going to simply click invert scale, and it is the exact same thing. The more taps we have of this area. Now, this is an area of interest to then sell because we are obviously in now a downwards market. So you can see here. And now since we are under this area, we're going to be looking to then sell. When we are above this area, we're looking to buy. When we are under this area, we are looking to sell. It is literally that simple. You put the zone, the more taps it has, the stronger. If you are above that zone, you like to buy. If you are under that zone, you like to sell. It's that simple.
Next, I'm going to be talking to you about the round psychological areas of interest or support and resistance. A lot of people use this more on the lower time frames. I personally use it in correlation with the area of interest on the higher time frame, but more on that later in this video. And it's very simple. This is probably the simplest thing I can ever explain. It's literally around psychological level. So you can get a line and throw it anywhere in the chart. Literally, I can just look random, just boom, just throw it in the middle of the chart. And your goal is to get this number right here as close as you can to every 500. So for example, this right now is 171,441. If you simply delete the 441 and you put a 5, 71,500, that is considered a round psychological area of interest. Can also come into here, just throw it randomly, double-tap the chart, and let's just do a round psychological level, 171,000. We can also come into here again and put one at down here, doesn't matter. Throw it anywhere in the chart. For example, right here, the nearest 100 is 172. And now this is the area of interest. A lot of people use this because banks and institutions, they close their positions at these round psychological levels. Think about it, if you're going to be closing multi-billions of dollars, you're not going to do it at a random price point of let's say 171,532. Makes no sense. You want to close all of your positions on a round psychological level like this one. So traders use that in their advantage because now they can mix that with the level of support and resistance. And at those areas, a lot of positions are being closed because banks are liquidating their orders, and that's where the sellers come into the market and then move price down. So let's say you're having a movement to the upside like this, all the banks close their position, so now the sellers come into the market and boom, it pushes the price down. And once price comes down here and bankers liquidate all their positions, new buyers come in and then push price to the upside. So this is just an added confluence that it is to support and resistance.
So now I'm going to show you some examples of a strong level of support or resistance on the candlestick chart. Obviously, we're going to be trading on candlesticks. I just was showing you guys very simply what it is like on the line chart. So let me show you what it looks like on the charts.
So this right here, this is what is considered a strong level of support and resistance. So let me show you how I would actually mark up the points or the taps of this area right here. So for example, this right here would be one tap, this right here would be a second tap, so then this would be a third tap, this right here would be a fourth tap right here, this right here would be a six, seven, and then eight. So all of these right here, well then nine, we can't miss this last one, right? So this right here is a strong level of support and resistance. And you can almost tell every single time we get to this zone, we have a reaction immediately when we're above and immediately when we are under. Now you may be asking yourself why. That is because we are on the daily time frame. The higher the time frame, the more respected the zone is going to be. Literally, every single time we come to this one, we're above, we head to the upside. If you notice here, when we were above, we reacted, but then we completely broke through it after and then we rejected to head to the downside. We came to it again, rejected to the downside. So whenever price is under, it's going to then sell. Whenever price is above, it is going to then buy. The higher the time frame, the better.
Now let me show you what is a weak level of support and resistance and how it is not respected. So this right here is not a strong level of support or resistance. As you can see, there's maybe one clear rejection, maybe two if you want to get pushy, and then three. It's not ideal because they're not clear points. And look how something so simple as moving this box up or down can make a complete and total change on the area of interest. So as you can see right here, it doesn't look clear. Doesn't look like there's a lot of nice rejections. If I simply move this box slightly down, you can see how now everything completely changes. You can see how now we have 1, 2, 3, 4, 4, 5, 6, 7, 8, 9, 10 taps from this area. That is all you guys are missing, just a little bit more of clarity and looking at the markets in a very simple and effective way so you can spot areas of interest like this all of the time. This is a great example. Whenever we are under, we are selling. Whenever we are above, we are buying. Whenever we are under, we are selling. This is a classic strong level of support that is also used as resistance. So as you can see, support and resistance is not anything difficult or something you should be scared of in the market. It's something you need. And as you can see in that last example right there, the simpler you make it, the better. And you can see how something so small, by simply moving the area of interest just down by a little bit, you can have so much more clarity and looking into the market.
And that is what I do with all of my students inside the Set and Forget, where they're making anywhere from $1,000 to $11,500 a week as a beginner Set and Forget trader. They come not understanding anything. And by simply getting on the weekly calls with me and all of the other students, I bring so much clarity to any questions or concerns you may have because it's what I do. I change people's lives with Set and Forget, that's making students have anywhere from $1,000 to $11,500 a week in the first three months using the Set and Forget strategy. If you want to know more about what is Set and Forget and how would this even make sense for you, I have a link in the description below where it explains to you what Set and Forget consists of completely. Because I know it might seem intimidating seeing students leaving their jobs and making anywhere from $1,000 to $11,500 a week, but it has completely changed my life and taking me from Dunkin Donuts to the life that I'm living like today. So you want to know more about what Set and Forget is and how you can use it to either make an extra side income from trading or to become a full-time trader, watch the link in the description below. There's a video there for you that explains everything about what Set and Forget is and how you can become part of the Set and Forget family. Thank you guys for watching the video all the way to the end. Make sure you like, comment, and subscribe, and I'll see you guys in the next video.