Sell on Resistance area
In the same way, resistance levels can be used to enter into new short positions.
The illustration below depicts, a a resistance level has been established.
The price may fall when the price comes back up to this price level.
A new short position can be entered at this price.
The stop loss is placed on the other side of the resistance level.
Number 1: Resistance level
Number 2: Price finds resistance at this level
Number 3: Short entry after price level successfully holds as resistance
Number 4: Stop loss is placed above resistance level
An overview of the lesson discussed so far….
At the support level, there are adequate buyers to stop the price from falling further and reverse the price to the upside.
At the resistance level, there are adequate sellers to stop the price from rising further and reverse the price to the downside.
Place horizontal lines on a chart where the price seems to stop repeatedly to find the support and resistance levels.
When our approach is stable, we can use the wicks or the bodies of the candlesticks to draw support and resistance.
Support can become resistance and resistance can become support.
We need to be careful to avoid false breakouts.
The price may pretend to break through support or resistance, but will reverse again in the opposite direction.