Support & Resistance Levels In
Indian Shares
Determining the support and resistance
levels of Indian Shares is a necessary part of any
trading plan. There are many ways to do this such as
drawing trend lines, using Dow Theory, historical
prices, etc. In this article, traders of Indian Shares
will find a simple method of identifying these levels in
Indian Shares.
Trading Stocks With Support And
Resistance Levels
What is Support and Resistance Levels
in Stock Trading?
Support and resistance are specific price areas or price
levels which either support prices on declines in up
trends or which resist prices on rallies in down trends.
In an up trend, short term and day
traders will attempt to buy at support or at levels of
support. In a down trend, short term and day traders
will attempt to sell at resistance levels or in
resistance areas.
If support and resistance levels cannot be determined,
then you cannot define concise levels in which to
establish entry or exit positions in your specific
trade. It is of utmost importance for traders to develop
effective strategies and methodologies for calculating
support and resistance levels. These levels can be
determined with the use of various trading tools like
Point and Figure charts, Fibonacci numbers and Gann
angles.
Day traders is in a definite advantage when it comes to
the use of support and resistance levels, in as much
that the day trader's trade normally end when the
trading day is over and if a bad trade or decision was
made based on support or resistance levels it will not
be repeated in the next trading day.
Determining support and resistance levels are somewhat
different for the day trader than the position trader.
This is because support and resistance levels for the
day trader must be closer to the current market price
that they are for the long term or position trader.
Markets can only drop so far in one day, and
consequently the determination of support and resistance
levels by the day trader must be realistic in terms of
what can be expected - however this does mean that day
traders must be willing to use realistic technical
support and resistance levels in order to establish
their positions.
The following rule may appear very simple, yet it is
enormously effective at isolating support and resistance
levels and can be applied profitably in any market:
1. Follow a 3-day moving average of the highs, and a
3-day simple moving average of the lows.
2. Take the 3-day moving average of the highs to act as
your resistance level, and the 3-day moving average of
the lows to act as your support level.
3. Add a filter by drawing in the support of the lows if
the trade has made a 3-day high in say, the last 3 days
(you can use four or five days, depending on your
trading methodology) This means that you will only draw
in the 3-day moving average of the highs if the stock
has made a 3-day low in the last three days - this means
that you only want to sell when the short term is down.
This is a very simple method of trading stocks and
commodities on a daily basis, and if calculated
correctly they will work.
By:
E.J Sieberhagen -
Article Directory:
http://www.articledashboard.com
For more online
stock trading information please visit
www.stocktradinginformation.net/ - a popular online
stock trading website that provides stock trading
information for beginner traders.
The Indian stock
market is possibly the world's best investment and will
be for many years to come , this article is one of many
which may assist your trading. SharesDaily.in does not
necessarily endorse the contents of this article.
NSE India
Shares
