Trade The Journey

Trade The Journey

Support and Resistance

Finally, I have begun to look into technical analysis. I always thought that technical analysis was too complex for me to understand. I saw these confusing charts with confusing terms which scared me. In some charts, there were more than one chart within one.

There were multiple lines indicating moving averages and various ways to design the averages to be taken at multiple time frames. There are many indicators you can add to your stock chart to compare the price. The relative strength indicator (RSI) comes to mind, indicating whether the stock is overbought and oversold.

Most of the technical analysis from what I have seen is an effort to identify patterns and to use these patterns to predict price movement. Fundamental analysis is more about the internal production, profits, financing, and development of the internal company or country.

The graph I included shows the resistance level as the red line, which is the ceiling the price hits as it tries to breakthrough. The support level is the green line, which acts as a cushion when the price attempts to fall through the support. Supports and Resistance lines can be broken and reestablished. For example, if the price breaks the resistance, the resistance can become the new support level.

You can even use the moving averages as support and resistance levels. The strength of the support and resistance levels are based on how many times it has been tested. I am now learning how to draw resistance and support levels on my own which has helped me to better understand price movements.

Technical Analysis will be a useful tool in my arsenal. I am beginning to realize that I can learn and apply all of the technical indicators with an astute assessment of the fundamentals, and still be incorrect. This is why the proper mindset is needed to invest. Knowing most of the answers and still failing the test is a lot for most people to take.

But was it really a bad bet or was it a great bet with a bad result?

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