Support and Resistance Levels for Trading on BigoMex
The principle of trading is to profit from the price movement of an asset. The saying is to buy low and sell high, whether you do it in the time frame of minutes or in years.
But if you have been trading, or beginning to trade, then you know it’s not as easy as that. When should you buy? When should you sell?
When the price is rapidly moving up, you might feel FOMO (fear of missing out) and want to buy immediately. On the other hand, when the price is falling down fast, you might panic and sell at a loss.
Trading without analysis can become profitable, if you are extremely lucky or when the market is super bullish. Analyzing the situation before opening a trade is useful to make better positions, buy when it’s in a good price to buy and sell when it’s a good price to sell.
Technical analysis in trading is looking at the price movement regardless of any fundamental news or development related to the asset. Traders who rely on technical analysis assume that any news that can have impact on the asset is already contained within the price movement.
One of the most simple tools to use in technical analysis is support and resistance levels. A support level is the range where the price tends to go up after reaching it. Conversely, a resistance level is the range where the price tends to go down after reaching it.
Another way to say it is that support levels are prices where traders tend to buy, and resistance levels are prices where traders tend to sell. The price movement is not precise, therefore support and resistance levels should be considered as areas or zones for price reversal.
A support or resistance level can consist of only one price point, but more points means it is a stronger support level. The more times the price touches a certain price level, then that price becomes a widely used support or resistance level in technical analysis.
You can use the chart tools at BigoMex to draw support and resistance levels. Choose the Professional option so that you can use many charting tools.
As an example, here is the support and resistance levels for the current price range of Bitcoin.
From the chart, we can use the price at $31,706 as a support level and $40,837 as the resistance levels. The most simple trade to make is to buy or go long at support and sell or go short at resistance.
We can see based on the chart that the Bitcoin price has bounced four times when it reached around $31,000, and fell three times when it reached around $40,000.
In this example, you can buy if the price reaches $31,000 and then sell if the price reaches $40,000. Or if the price reaches around $40,000 first, you can open a short order.
The price sometimes goes under the support level and over the resistance level, but then it moves back into the range. This movement is called a fake out.
Another possibility is that the support or resistance level doesn’t hold, so the price moves under support or over resistance and continues. To prevent your positions from big losses, you should place a stop loss.
Support and resistance levels are the most basic form of technical analysis for trading assets. Using the basics until you can profit consistently is not difficult to do as long as you don’t make trading too complicated by adding more complex tools and indicators.