The Art & Science Of Support & Resistance. Resistance or Supply Of Price Action Concept. Part 2

Trading Education #3

Resistance or Supply Zone

Hey there, TraderSaan is here.
Today I am going to share one of my favourite Price Action(PA) concept of Resistance or Supply Zone which is very effective concept for PA Traders. Well, I will go through step by step process of this strategy or concept.

I am actually a swing trader, meaning I hold my position for 2-3 days or more. So I usually trade at the timframe of 4 hour (H4), 1 hour(H1), or occasionally at 30 miniutes (M30). And one more thing is that I analyze the chart in tradingview and take trade in MT4(for forex) and Binance( for crypto).

The Science Behind The Resistance Zone:

• Resistance zone is an area from where price usually goes down when it touces this zone once, and also the Resistance Zone is called the Supply Zone which means, in this zone or area, supply pressure comes to the market and price likely goes down. And basically, Resistance or Demand is not a line or exact level in the chart, it's a zone or area.

• There are two types of Resistance or Supply zone - 1. Horizontal 2. Trend.

1. Horizontal Resistance :
Horizontal Resistance zone is a zone horizontally in the chart. When price comes to this area, it goes down. So now question is - when we know that it is a defined Resistance zone, usually after two touces or tests, a zone become Resistance area. This means, in a certain area, market gets supply from traders and investors and price depreciates and goes down. More the price touces Resistance area and bounces back down, more the zone become important Resistance area.

The Resistance or Supply zone, price touces the zone, goes down

Image source: tradingview, prepared by me

EURGBP, this is how a horizontal Resistance zone looks like in the technical chart

Image source: tradingview, prepared by me

2. Trend Resistance :
Well, I assume you know what downtrend is - price makes lower lows, lower highs, breaks support again and again etc. Anyway, price sometimes goes down or resist by a resisting area or an slop area. That line is sometimes called downtrend line. Well, this is what I call Trend Support or Demand zone. Look at the diagram below, how price touces that zone and comes down again. More the price touces this zone and comes down, more the area becomes significant.

Downtrend Resistance or Supply Zone

Image source: tradingview, prepared by me

AUDCAD, H4, this is how a downtrend resistance or supply zone looks like in the real chart

Image source: tradingview, prepared by me

Now I will talk about Major and Minor Resistance or Supply zone
Well, not all resistances are equally significant. Usually, the Resistance zone in the bigger timeframes is more important than lower timeframe's resistance zone. When price touces and goes down in an area more than two or three times, that area is usually called major Resistance zone. And when price touches and goes down in an area not more than two or three times, that area is called minor support zone. The demonstrations below will make it clear.

Price is resisted by a minor resistance zone as well as a major resistance zone

Image source: tradingview, prepared by me

EURGBP, H4, this is how a major and minor resistance zone looks like in the real chart

Image source: tradingview, prepared by me

Well, this is a textbook description of Resistance or Supply zone and market does not always care what textbook says. So One needs to understand the concept behind this Supply or Demand. And in more advance way to take trade with this concept is to add some fundamental confluences which I will be talking in my upcoming post, so stay tuned.

Here is the link of the concept of support or demand zone in price action (details)
https://steemit.com/hive-108451/@sanjibmondal99/the-art-and-science-of-support-and-resistance-support-or-demand-of-price-action-concept-part-1

I always take a trade when my fundamental and technical analysis say the same thing. As follows:

Case I
Fundamental = buy, Tchnical = sell, that implies Not To Trade

Case II
Fundamental =sell, Technical = buy, that implies Not To Trade

Case III
Fundamental = buy, Technical = buy, that implies Jump In For Buying

Case IV
Fundamental = sell, Technical = sell, that implies Jump In For Selling

Disclaimer: This is not any financial advise or trading mantra. My purpose is to help traders to learn. This post is made for completely educational purpose. Hope it helps.

Thank you very much if you make it to the end. Happy trade.