Hello, my friend, and welcome to this post on Support and Resistance Indicator. In this post, we’ll talk about a support and resistance indicator trading strategy for zones, lines, and levels in the markets when day trading and swing trading to help determine if those levels will hold or will the market break through them.
I hope you enjoy it!
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Support and Resistance Indicator – Video
Today, I’ll discuss a support and resistance indicator trading strategy that helps you determine when price movements will either bounce off support/resistance levels or break through them. This is part of the “Ask Barry” video series where I answer your questions. Several people asked about this topic, so I wanted to address it due to its practicality.
Let’s start by looking at my chart. For simplicity, we’ll use obvious support and resistance levels like swing highs and lows, rather than complex tools like Fibonacci or pivots. The goal is to understand if these levels will hold or if the market will break through them.
Market Momentum – Support and Resistance Indicator
When price reaches a level, we need to determine if it will hold or break through. The key is the momentum of the market as it approaches the support or resistance level. If the market is weak as it approaches, it’s likely to bounce off. If there’s strong momentum, it’s more likely to break through.
To assess this momentum, we can use various tools, but I recommend avoiding bounded oscillators like RSI or Stochastic because they become less effective when they hit their upper or lower limits. Instead, we’ll use the MACD indicator, which isn’t bounded and is widely used.
The dollars are in the details
Barry Burns
In the example, we see a resistance level and need to check if the market has strength as it approaches. If the MACD shows upward momentum (lines and histogram above zero), the resistance is likely to break. However, if the MACD is below zero and rising, it may just be reverting to zero, indicating no real upward momentum.
Final thoughts
Understanding your indicators is crucial. Simply plotting them on a chart isn’t enough; you need to know what they measure. The MACD, for instance, must be above zero to indicate genuine bullish momentum.
This principle of using momentum to gauge support/resistance levels is just one element of a complete trading system. It won’t make you money on its own but provides a piece of evidence. Combine multiple pieces of uncorrelated evidence to build a strong trading case, manage risk, and enhance your probability of success.
If you have more questions for future videos, please post them below, share this video, and have a great day!
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