Hey hey, what's up my friend, so in today's episode I want to talk about the truth about support resistance. There. Nobody tells you so here's the thing right. It doesn't matter whether you're a swing trader, a day, trader position, trader counter trend, trader support resistance is one of the most commonly used tools in technical analysis, and I find it's important to really understand right.

How this particular tool works and what's funny is that it is very popular, but it's pretty done difficult to do a PEC test on it because support resistance. Let's be honest, it is subjective. So what I'm about to share with you is based on my experience, based on my experience years of trading support resistance in peace of mind beliefs. I could be wrong, so what I'm about to share with you right? Take the concepts take the idea validate for yourself and find out whether it's true for you or not.

So the first thing I wan na share with you is that supporting resistance, it uh the more times right, utensil port within a short period of time, the weaker it becomes. For example, let's say you know the shares of MacDonald a huge institutions that want to buy shares of MacDonald at 50 or less. Let's say they wan na buy a hundred million shares of McDonald's. So, what's gon na happen is that whenever price retest 50 dollars at McDonald's, you can you can imagine right that out of this hundred million shares, so a number of them is gon na get few.

So let's say 50 million shares of McDonald get fill on the first test. Then the price bounce higher then a retest back $ 50, maybe say thirty million shares can fill the price really higher. Then the price came back, maybe after a few days and fill up the last remaining 20 million of shares and any bounce higher and imagine this right once all the hundred million shares are filled and let's keep things simple and let's say no new order. Flow comes in and the price retest $ 50 once again, do you think there will be a bounce or will the $ 50 level the price level brick? Well? The price is likely to break right.

So this is why I say that the more times price tests write a level within a short period of time, the weaker it becomes because order flow gets eaten up alright and if no new order flow comes in right. That's where the level breakdown it doesn't happen. All the time, but generally this is the case, so this is why patterns are like ascending triangle. It's a bullish, chat pattern because traders who are wanting to sell the resistance once all these selling pressure resistance is used up.

This is where price makes a break up. Likewise, for this ending triangle, descending triangle is just the example of the Macdonald one we talked about earlier. Whenever price retest support, a bunch of autoflow get filled up if no new order flow comes in you retest, multiple times. This is where the support level or area is about to break down.

Okay, so that's the first thing right, the more time supported resistance is tested within a short period of time, the weaker it becomes - and I know this goes against most textbooks. That tells you the more times it it's being tested, the stronger it becomes, but, based on my experience, yes, that's not the case number two, the longer the price is away from a level the most significant it becomes. Okay. So, let's me take you back to 2000 right at the dot-com bubble right Nasdaq approach just approached near 5008 collapse all the way down, and he only received revisited leave $ 5,000 mark almost 20 years later or 20 years later.

So you can imagine a $ 5,000 level has held up for close to 20 years. It is a significant level, okay and and once the level is significant right, you want to be paying attention to it, because a lot of traders will be watching their level. For example, those who bought in 2000 near the $ 5,000 ma they watch the SN price collapse for good close to 20 years, and it's only after two years do they see right the price revisiting right, the highs after 20 years, so they feel a lot of Pain, okay, magic in the rate for good 20 years, so that level becomes very significant. I'm not saying that the more significant in is right.

The more the reversal will occur. That's not true, because if it breaks out of it right now, you can imagine it at the pond right. The price is now trading at all-time highs and it's a good chance that it will follow through higher. But if you look through the charts again right off nest day, okay, the recent times when in retest at $ 5,000, sorry for the first time in close to 20 years, you noticed at the price it didn't just break out of $ 5,000.

Just like that, it came into the 5000 level $ 5,000 level and any hesitated it consolidated for what, because his hesitation in the market, people are people know right at this level right in 2000, there was a heist right, Willie breakout hire there has hesitating. So that's why the price consolidated for a good few weeks, alright, before we finally broke out of 5000 into to where it is right now, okay, so the more time the longer right in the price is away from a level the more significant it becomes, and this Brings me to my point: support resistance are when support is broken, it becomes previous support becomes resistance when resistance is broken, it becomes previous resistance becomes upon and there's a couple of reasons for this. So let's say back to to a typical stock. Again, let's say the shares of Apple right as a resistance hundred dollars when the resistance has been in play for, let's say five six months.

So when the price breaks our own resistance and her dollars and let's say quickly, move up to 120 130. There will be a group of traders who miss the move and it kind of regret I mean - should have bought a hundred dollars right. Look, you know know now that the share prices take off and I'm not in the tree. So there is this regret over there.

So what they'll do is they'll place a buy limit order in herre dollars right, hopefully, if the price does retest it right, this time around, they managed to catch a piece of the move. Okay, so that's the kind of like the first group of traders who are who plays right buying pressure at $ 100 level. On the other hand, that could be also be a group of traders who are, you know, notice that you know Apple shares, always retest hundred dollars couldn't break out any sell, shot eight hundred dollars, then the price broke out and they are there in the raid they're Losing money first, they are feeling the pain right now see I mean I shouldn't her dollars. The price now he's hurting Sweeney dollars.

I mean the rate and you know, if only I could get on a pretty even right, I'll, be content that Oh a lot. Please please please or I let the price is gon na, come back to my original entry price or I don't have to take the loss. So what would they do? Well, if your shot and her analyst and you want to get off the trade and the same price, you will place a buy limb in order at their level again right to get out of the existing shot trade. So, with this tool to group of traders - one, you know with the fear of missing out and the other group of traders who are you know one thing to get out of at breakeven.

This ends right by Lehman orders or or buying pressure right at this hundred dollars level, and that's why know when price breaks out of resistance, it tends to become support again, doesn't happen, always all the time right, but more often, no okay and finally, the last thing That I want to share with you is that supported resistance? They are areas on your chart. I know I use the word lines a few times, but really they are an area on your on your chart and the reason is simple. Let's say we use an example of, let's say Coca Cola. Let's say you know, there's a support of $ 70 at Coca Cola and when a price you know Richard Zeile at 71 $ 72, there will be traitors right who are eager to buy in right, because you know price is really almost approaching support right.

Let me buy right now in case you're on the market. Doesn't you know hit down low? It makes a quick reversal right. At least I am on bought the move right, so they are what I call the traders who are. You know I was a tamarind traders who are 2 inches over inches to buyer, Saudi buyers just slightly in front of support right because they don't want to miss the move.

On the other hand, there's another group of traders who are what I call the cheapskate traders. They want to get the best possible price, so, for example, if let's his support is a $ 70, they work use Meghan, maybe $ 69 and 90 cent to get the best best, lowest absolute best price of support and EQ at $ 69 90 cents and here's The thing right in the markets, you have no idea which group of traders is dominant, whether is that the ancient trader, who can't wait to enter a trade or is it a cheapskate trader who wants to get a best possible price? And that's why sapore is an area on your Chinese anywhere between 172 dollars to maybe $ 69. That is your area of support, and this concept is the same as resistance, so don't treat them as lines on your chart. Okay, they are not lines Mirada and area on your chart.

Okay, so with that said, a quick recap number one, the more time support resistance is tested within a short period of time, the weaker it becomes number two, the longer the price is away from a level. The more significant the level becomes because there's a lot of emotional baggage right at a price point level and number three: when support is broken, it becomes or it tends to become resistance, and when the resistance is broken, it tends to become support and number four. Finally, support reasons: the resupport a resistance. They are an area on your chart, so we then said right.

I have come towards the end of today's episode. I wish you good luck and good trading and I will talk to you soon. You.