Plotting Support and Resistance Levels
So how do we truly know if support and resistance were broken?
There is no definite answer to this question. Some argue that a support or resistance level is broken if the price can actually close past that level. However, you will find that this is not always the case.
line chart rather than a candlestick chart.
These highs and lows can be misleading because oftentimes they are just the reactions of the market.
Looking at the line chart, you want to plot your support and resistance lines around areas where you can see the price forming several peaks or valleys.
Other interesting tidbits about support and resistance:
- When the price passes through resistance, that resistance could potentially become support.
- The more often price tests a level of resistance or support without breaking it, the stronger the area of resistance or support is.
- When a support or resistance level breaks, the strength of the follow-through move depends on how strongly the broken support or resistance had been holding.
With a little practice, you’ll be able to spot potential crypto support and resistance areas easily.