True Support and Resistance.pdf

Synopsis E-book: True Support and Resistance

True Support and Resistance
Support and resistance lines are one of the basic tenants of technical analysis. The method normally used for establishing support and resistance is by finding high and low price levels that the market has failed to exceed previously.
However, this technique has certain failings. One of the more common has to do with the occurrence of what is called “false breakouts”. Quite often the market will just exceed the resistance or support lines and return, fooling a large percentage of traders along the way. Obviously, such lines are important, but they normally are not the true support and resistance lines. This statement may seem strange, considering how pervasive the thought that these lines are all important indicators of market direction. But these lines as static and the markets are anything but static.