5. Day Trading Lesson 5: Support and Resistance

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The fifth lesson in a series on technical analysis for active traders of the forex, futures, and stock markets.

Just as anything where market forces are at play, the price of a financial instrument in the stock, futures or forex markets is ultimately determined by supply and demand. Very simply, if demand is increasing in relation to supply then price will rise, and if demand is decreasing in relation to supply then price will fall.

As we have learned in previous lessons, what you are basically looking at when you see an uptrend on a chart is an extended period of time where demand has continued to increase in relation to supply. Similarly when looking at a downtrend you are seeing an extended period of time where demand has decreased in relation to supply for an extended period of time, causing price to fall. Similarly, in a downtrend, demand is continuously falling in relation to supply which causes the price of an instrument in the stock, futures or forex market to fall.

In this lesson we are going to look at something known as support and resistance which are price levels where the supply demand equation is expected to change, and price is then expected to stop moving in the direction it was moving previously, or reverse direction.

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Education

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• forex
• stocks
• fututres
• trading
• investing
• money
• business
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• informedtrades

[waterpig916]

This is an great demonstration, will inform my collegues of your website.

[InformedTrades]

Hi Waterpig916,  Glad you like them and thanks for helping me spread the word! Best Regards, Dave

[jaguar265]

I am new at trading. Is there a lesson on how to draw trend lines?

[InformedTrades]

Hi Jaguar 265, Glad to have you. What I would recommend if you are new to trading is going to the InformedTrades site and clicking on the "free trading course link" there you will find a free video trading basics course that has all my youtube videos organized by title. The lessons on trends are in the first module. Let me know if you have trouble finding them. Best Regards, Dave

[coltrain210]

Thanks.

[InformedTrades]

my pleasure thank you for the comment. Best Regards, Dave

[darthstarwarsgeek]

I have an investment in RBS on the LSE and am kind of identifying trends and profit opportunities. I'm getting ticker data from my PDA whilst doing my day job, and am getting really frustrated as I'm missing opportunities to make serious money, as I can't watch the figures all day. I am lacking the knowledge and confidence to quit the job and take the plunge, although slowly I'm moving towards making that goal happen. Net based courses like yours are a real help, so thanks so much for uploading.

[darthstarwarsgeek]

Hi Dave, I've recently purchased Technical Trading Tactics by Person, Market Wizards by Schwager, and a couple of Gann books. Are there any other good titles you can suggest for a newbie?

There seems to be so much to learn, it's hard to know where to start, incidentally Investopedia I'm finding is another great net based resource.

[missrosetejano]

can i use the same rules, if im going to do fundamental trading? because i am thinking about buying some stocks. i want to make sure i buy them at a good price (well at least not when its really high) please reply :)

[onkar2510]

okadvisors.blogspot. try this for real results!!!!!!!!!!!!

[Sanderson4030]

I'm not quite sure that I understand, the lines that you can draw won't be lines if you change the scale from logarithmic to linear. The greater the slope of a resistance line drawn while using a log scale the more curved it should appear when using a linear one

[sevaguru]

do u have any module to suit Indian Stock market is yes please send details. regards

[BodyBuildingGo]

Excellent video, and very nice tips! I have been living a very happy life doing forex trading, I learnt most of the stuff from ForexWi.com, but still your videos give good reminders too. Keep up the good work.

[missrosetejano]

thanks for the valuable information