A sharp movement above or below the support or resistance area. When validated it indicates a strong and fast move in the direction price broke through. Breakouts are great to spot when using the rectangle tool to box in price while it is consolidating.
Short for “False Breakout” it is the occurrence of price moving out of a support or resistance only to return. This move targets impatient traders to jump into positions.
An area that price often reacts to.
An area where price always seems to come back to. This can often be viewed as round numbers that act as support and resistance.
A level where price bounces off of, also known as the ceiling. It works hand in hand with Support as it is the opposite but it does the same thing.
A level where price continues to bounce off of, also known as the floor. It works hand in hand with Resistance.
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Support and Resistance
Oftentimes you will hear traders talk about SUPPORT and RESISTANCE, which are essentially key levels.
Essentially, SUPPORT is considered the FLOOR, because price tends to bounce off that area when it reaches it. RESISTANCE will be your CEILING as you will notice price will tap the top and head back down.
Even though key levels can be determined by certain price points, they are never an exact number, but an area. This is why it’s important to take note of the AREA in which price bounces off of. You can always draw a thin line and box around your support and resistance when marking up your chart.
If price breaks a zone of your previous support or resistance, it could create a new one and remain in it. In the illustration below, you can see how support can turn resistance, and resistance can turn support.
Key things to remember when working with SUPPORT and RESISTANCE:
- Support can turn into Resistance
- Resistance can turn into Support
- Not an exact price point, but an area
- Not all Support and Resistance are respected the same