Stock Market Trading: Practical Support andÂ Resistance Techniques You Can Use In Real Trading
The video below demonstrates how to use support/resistance levels in your stock market trading. BTW, these also work for trading futures, E-minis and Forex.
Support and resistance levels establishes the price at which you may want to buy, sell or take profits in your stock trades. For best results, you’ll want to also incorporate a timing tool (that measures cycles) and look for the confluence of time and price.
You can email me at firstname.lastname@example.org and I’ll be happy to refer you to some free videos on how to time your entries, and even provide you with my Free Cycle Indicator to help you with your stock market trading.
Enjoy the video and please leave your comments below.
Youâ€™ll find the text below this video if you want to follow along.
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Hey everyone. Doctor Barry Burns here with Top Dog Trading. And today Iâ€™m going to share with you a stock market trading strategy that is very simple, but very, very good. And you know, lot of times, the simple stuff is the best. I think we try to overcomplicate things, so today, letâ€™s stick with the basics, but give you something that actually works.
So letâ€™s get into it. What we are looking for are major swing highs and major swing lows. Now, I have this automated. I created an indicator here, Top Dog Swings, and itâ€™s got a very specific mathematical formula to it. It automatically draws these horizontal blue lines on my stock market trading chart. So itâ€™s beautiful, because itâ€™s automated. I donâ€™t even have to think about it.
THE LOGIC BEHIND SUPPORT/RESISTANCE FOR TRADING THE STOCK MARKET
The basic premise behind it, the logic behind it, is to find major swing highs and major swing lows. Like that major swing low there. This major swing high here. That would really stand out visibly to anybody trading this particular timeframe, this happens to be a 30 minute chart. But you do this on a daily chart, weekly chart, 2 minute chart, 1000 tick chart. Whatever timeframe youâ€™re trading, the concept is to mark the visible highs and lows that really would standout to just anybody looking at a chart.
So those are what I call horizontal support resistance levels or swing, highs and lows. And then those becomes supportive resistance. So, now here is what happens in real life, okay. Letâ€™s talk about, that all sounds great to trade support resistance but hereâ€™s what happens in real life.
So we got this swing low here, that low definitely stands out very dramatically. And then youâ€™re going to say, okay well Iâ€™m going to buy when the market comes down to that support level. And then guess what, they gap the market through it. This by the way, very very common. And itâ€™s the professionals who do this.
The reason is because they see that, they see that support level, and they basically just donâ€™t want to deal with it, because they know when lot of people see that support level, people will be buying off of it, or taking profits into it. And that will reduce the energy, the selling energy coming into it, and if they would want to create a lower price for this stock, they just donâ€™t want to deal with it, so they gap it through the next day. Isnâ€™t that nice? Yeah, they’re nice guys.
So it looks like itâ€™s an untradeable situation and essentially that is. But thereâ€™s still a trade opportunity and that is the very basic principle, lot of you have heard of which is support becomes resistance. So now its overhead resistance, so we can still use it to trade, we still keep our line on there. And we wait for the market to come back into that, what was supporting this, now resistance.
So now we can take a short trade off of that. And we’re going to need some other things because we need to look at trend, momentum and cycles but that is one of the energies, that we look for support resistance. We look to short off resistance and buy off support. So thatâ€™s how we trade that type of dynamic when they gap it through the major support level. Weâ€™ll look to buy off of that same level, or in this case, short off of that same level, but as resistance.
STOCK MARKET TRADING – “THE PRINCIPLE OF 3”
Now, let me teach you one more technique thatâ€™s also very very powerful. This technique is called the Principle of 3. This is a little different, but equally as important. So here we go.
The market has come up. We have, well actually here with the high little bit, but this is our real major swing high here. Now, will this resistance level be broken and market go above it or will it hold and the market move back down? Thatâ€™s the question.
So one of the things we do and again there is a market psychology behind this. when I talk about market psychology by the way, what Iâ€™m referring to is that the market is not all about mathematics. Itâ€™s about how human beings and the computers that theyâ€™ve programmed behave in an auction place. The bid and ask auction place that’s the basis of stock market trading.
Thereâ€™s a mass psychology element to it, and yes even with trading programs there is, because it’s people who program them, use it personally strategy for that. That they believe has a logic to it.
Here we put in a major swing high. Alright, we come back to test it. Here and here. And this is the principle of 3. So market comes up, initiates the swing high, comes back down. Retest that price and its same now, essentially itâ€™s the next day.
Hmm, yesterday the market said, now the stockâ€™s not worth more than you know dollar 98 and a few cents. What about today. And then, when the market comes back down, they say, oh I guess it didnâ€™t. And then they try one more time.
Thereâ€™s the third time at this price level, and if the market, meaning the masses, the thousands, the millions of people who are all trading this and their little computers and their big computers. All say no. No, we are not paying more than that. After the third time, the market gives up. Everybody kind of, thereâ€™s a collective movement of people saying, â€˜Alright we get it. Weâ€™ve tried 3 days in a row, 1, 2, 3.â€™
This a 30 minute chart but these are 3 separate days, delineated by these vertical lines here. And they say, â€˜Gosh! Okay, I guess nobody is going to buy at this higher level.â€™ and therefore what, People get a bearish sentiment.
And so therefore the market goes down and people will short, and yes. Thatâ€™s what happens. Glad that happened. Okay, indeed it gapped down even here. Didnâ€™t it? So we get another gap and see what happens. Comes right back to that level, and provides a resistance level. And then we gap up above it.
So again these gaps, they like to gap above and below the supportive resistance levels. Remember thatâ€™s principle number 1 today, thatâ€™s lesson number 1. Got 2 lessons today, our stock market trading video. And then the other is the principle of 3, for whether to determine if support resistance levels are going to hold, or if they are going to be broken.
Also, I am giving away one of my favorite trade strategies. Itâ€™s called the Rubber Brand Trade. It has an extremely high win loss ratio. And Iâ€™ll give that strategy to you absolutely free. You can learn it about in 20 or 25 minutes. Itâ€™s really quick. Iâ€™ve made a video explaining this trade strategy. You can get it absolutely free, by clicking on the image in the top left corner. Or if you are on a mobile device, then click the little â€˜Iâ€™, with a circle around it, at the top right hand corner of this video. And once you do that, I will personally email the video to you.
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