Look at the diagram above. As you can see, this zig zag pattern is making its way up (bullish market). When the market moves up and then pulls back, the highest point reached before it pulled back is now resistance.As the market continues up again, the lowest point reached before it started back is now support.
Plotting Support & Resistance
- Support & resistance levels are not exact numbers, often it appears broken, soon after you find out market was just testing it.
- To help you filter false breakouts, think of support & resistance more of as "zones" rather than concrete numbers.
- One way to find out and find these zones is to plot support & resistance on a line chart rather than a candlestick.
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