 Learning to identify support and resistance is possibly one of the most important skills to learn as you become a trader. Supporting resistance zones is the basic foundation of trading. So trying to trade without being a master of finding these is like trying to build a house without, well, a foundation. Today, we are learning exactly how to identify support and resistance in any chart. Let's jump right in. Hey, what's up? Jay here and welcome to Bitcoin Daily bringing you guys the best tips, tutorials, and ideas to help you guys become profitable and successful traders. The goal of this channel, as always, is to empower you guys with the resources and knowledge to help you get to that next level. So if this is your first time watching a video on this channel, make sure to hit that subscribe button. If you've been here before, make sure to put the thumbs up on this video. And if you have any questions, go ahead and drop them in the comments. So let's talk about support and resistance. At first, the explanation and idea behind identifying these levels seem pretty easy, but as you'll find out, support and resistance can come in various forms and the concept is a bit more difficult to master than at first it may appear. So what is support and resistance? Support is a price level where a downtrend can be expected to pause due to concentration of demand or buying interest. As the price of assets drops, demand for the shares increases, thus forming the support line. While resistance zones, on the other hand, arise due to selling interest when prices have increased. Once an area or zone of support or resistance has been identified, those price levels can serve as potential entry or exit points. As a price reaches a point of support or resistance, it will do one of two things. One, bounce back away from the support or resistance, or two, violate the price level and continue in its direction until it hits the next support or resistance. Selling of some trades is based on the belief that support and resistance zones will not be broken. Whether the price is halted by the support or resistance level or it breaks through, traders can bet on the direction and can quickly determine if they are correct. If the price moves in the wrong direction, the position can be closed at a small loss. If the price moves in the right direction, however, the move may be substantial. So let's talk about the basics. Resistance levels are regarded as a ceiling because the price levels represents an area where a rally runs out of gas. Support levels are on the other side of the coin. Support refers to prices on a chart that tend to act as a floor by preventing the price of an asset from being pushed downward. As you can see from this chart, the ability to identify a level of support can also coincide with a buying opportunity because this is generally the area where the market participants see value and start to push prices higher again. So let's jump into the chart real quick. If we look at this Bitcoin chart right here, we can identify really quickly where the price has bounced, which would be the support. So I'm going to just kind of draw a line and we will see that there has been the price has respected it right there. We have seen a bounce. We have seen another bounce here. We've seen a bounce here and we've seen a bounce here. So that's four different touches, making this a very strong support right here. Right. Now, if we zoom in a bit here into the four hour chart, then we can really see exactly where that price just kept bouncing here. Right. We see all these bounces here. Now, remember that support and resistance can be drawn on any time frame. So the time frame doesn't matter. You can find support and resistances in a five minute chart, one hour chart, four hour chart, the daily chart, the weekly chart, the monthly chart, even the yearly charts. So the time frame does not matter. Now, the higher the time frame, the usually the stronger that support and resistance is versus the shorter time frame. So that's one thing to keep in mind when it comes to time frames and charts. Now, here on this chart as well, we can see the resistance right here. So you can see here that this was rejected there, rejected there, rejected there. Right. And then finally, when we finally did break above that resistance, you see this big green candle right here. Right. And you can see also that we got rejected right back down. So we broke through here. We went all the way up here and then we got rejected right back to that same area. So what happened here was it kind of played as a support and, you know, we did grind under it, but then we got right back above it and we continued upwards. So that resistance became a support. So next, let's talk about trend lines. So far, we've shown you guys a few examples of a constant level that prevents an asset's price from moving higher or lower. This static barrier is one of the most popular forms of support and resistance. But prices generally trend upwards or downwards. So it's not uncommon to see these price barriers change over time. This is why the concept of trending and trend lines are important when learning about support and resistance. When the market is trending to the upside, resistance levels are formed as the price action slows and starts to move back towards the trend line. This occurs as a result of profit taking. The resulting price action undergoes a plateau effect or a slight drop off in stock price, creating a short term top. Many traders pay close attention to the price as it falls towards the broader support of the trend line because historically, this has been an area that has prevented the price of an asset from moving substantially lower. For example, as you can see from this chart, a trend line can provide support for an asset for several days, weeks or even months. In this case, notice how the trend line propped up the price of Bitcoin for an extended period of time. On the other hand, when the market is trending to the downside, traders will watch for a series of declining peaks and will attempt to connect these peaks together with a trend line. When the price approaches a trend line, most traders will watch for the asset to encounter selling pressure and may consider entering a short position because this is an area that has pushed the price downwards in the past. The support resistance of an identified level, whether discovered with a trend line or through any other method, is deemed to be stronger the more times that the price has historically been unable to move beyond it. Many technical traders will use their identified support and resistance levels to choose strategic entry and exit points because these areas often represent the prices that are the most influential to an asset's direction. Most traders are confident at these levels in the underlying value of the asset. So volume generally increases more than usual, making it much more difficult for the traders to continue driving the price higher or lower. All right, so let's jump into the charts again to go ahead and identify a trend line here in the Bitcoin price. So let's go ahead and use this tool right here that I like to use. If you go ahead and go to your trading view on the left-hand side and click where it says trend line, you can go ahead and click that. And then we're gonna draw a trend from this spot right here all the way basically to the top of it, right? Now, we're gonna see a couple of things here. First of all, this trend line here would be identified as a support trend line, right? So you can see that this trend line has connected here with the price as a support. So the support bounce right at that line, right? Then if you go up higher, you'll see that the price came back down to the trend line on multiple occasions, right? You can see all of these right here where it bounced again until eventually it violated this trend line and got pushed back down, right? So when it violated, you'll see that there was, look what happened here. Look how much volume there was here in order for this violation to occur. So that is what needs to usually happen to violate a trend line, whether not only a trend line, but just any support or resistance level. You usually need more than usual volume in order to push that through. So you'll see that as soon as it violated here, the price tried to jump back up and now this is a resistance. Remember, supports and resistances can flip. So if something was support before, then, and we gets violated, then it could act as a resistance. And the same thing for resistance. If something is a resistance before, then it could flip and act as a support. So because this trend line was flipped, now this trend line will act as a resistance going forward until we're able to flip it again. The same way we were able to identify a trend line going up for support, you can do the same thing for a trend line going up as a resistance. So if we just set our trend line kind of right around there and do something like this, now we can see a trend line that acts as a resistance, right? So you see the rejection there, then it kind of ended up bouncing back to the support trend line. Then over here we had multiple resistant rejections where it got shot back down to the trend line, right? And eventually it ended up violating the lower trend line, which is a support which pushed the price a lot lower. Another thing you can do with trend lines is when you look at them like this, you can kind of pick out a channel and sometimes these channel show you very specific patterns that have certain probabilities. So this obviously goes into a more complicated and in-depth scope that we won't be covering in today's tutorial, but this is how you can start kind of looking at patterns like this one, for example, is a rising wedge. So you can identify this pattern and kind of prepare for that next move. So I obviously know that this pattern here is a rising wedge. If you Google rising wedge and click on one of these images, you can see what this pattern usually means, right? So a rising wedge is usually bearish and can lead to a breakdown. And then you'll see here a falling wedge is usually a bullish pattern and can lead to a move up. So that's when you start putting these things together and that's why it's so important to before knowing the patterns, you know how to draw these lines out. If you don't know how to draw the support and resistance levels, then you will never be able to find these patterns. All right, so now let's talk about round numbers. I know a lot of you hear me talk about round numbers all the time and now you will know why. Another common characteristic of support resistance is that an asset's price may have a difficult time moving beyond a round number, such as $50,000 or $60,000 per share. Most inexperienced traders tend to buy or sell assets when the price is at a whole number because they are more likely to feel that a stock is fairly valued at such levels. Most target prices or stop orders set by either retail investors or large investment banks are placed at round price levels rather than at price levels such as $50,006 or $50,060. Because so many orders are placed at the same level, these round numbers tend to act as a strong price barriers. If all the clients of an investment fund put in sell orders at a suggested target of, for example, $50,000, it would take an extreme number of purchases to absorb these sales and therefore a level of resistance would be created. We call this a psychological support and resistance level. All right, so we're looking at the monthly time chart and each yellow line is going to, it has acted at some point in time as a major either support or resistance for the price of Bitcoin. So if you guys were around in 2017, when we hit our previous all-time high, you will notice that that all-time high was a big whole number. It was $20,000. So that was one of the biggest numbers that was heard of for the last four years in Bitcoin since that was the all-time high that we reached. So of course it was a hurdle to get over right here. You can see that we got to reject it there and we even got rejected on this candle before finally moving up. So it took two months trying to break through there to get through that because it became a resistance level where there were a lot of sellers coming in and taking profits. Now, if you look at some of these other lines, you will see that there was also a lot of price action and either selling or some sort of support there. So you can see here in that same year in 2017 where the candles ended up closing and opening here as a rejection and that was exactly at $14,000. Then if you go a bit further down the line to 2019, you'll see that the 2019 high of the year was at that same price point, $14,000. And then if you come to 2020, just a few months ago, you'll see that we had some sellers at that same price level because sellers kept coming in, kept rejecting the price and we struggled to get through there. But once we did get through, look how big that candle was because it was a huge, huge resistance and once we broke through, everybody started basically buying at that point. If we go lower, you can see right here, price action there, price action there, that's right at that $12,000 mark. You could also see that price action at that same level right here. Beyond that, you can see lots of price action here and all of these months here and you could also see it as support here. So this was a resistance for all of these months here. And that was at $10,000 level. And you'll see that once we broke out of it, we came back and tested it as a support. So that became a support, remember, supports and resistance, once they get violated, they flip. And lower down, you see all this support right here and we saw it as support here as well and that was that $6,000 price level. And of course, if you come to where we're currently at right now, guess where we have currently been rejected during this month's candle at $50,000? It's a big round hole number. So lots of people are taking profits here. So that is to show you the market psychology behind big round numbers. So this should always play a part in your charts when trading. You should always be using big round numbers as possible support and resistance levels. All right guys, hopefully you guys are enjoying this video so far, like I told you guys before, support and resistance is the foundation of becoming a skilled trader. So it is paramount to learning this. If you guys are enjoying this video so far, make sure to subscribe to the channel. If you're new here, also make sure to like this video. And if you have any questions about anything on here, make sure to drop it in the comments. I'm always happy to give you guys some answers. Don't forget to turn on the notification bell. All right, so let's continue. So let's talk about moving averages. Most technical traders incorporate the power of various technical indicators, such as moving averages, to aid in predicting future short-term momentum. As you can see from this chart, a moving average is a constantly changing line that smooths out past price data while also allowing the trader to identify support and resistance. Notice how the price of the asset finds support at the moving average when the trend is up and how it acts as a resistance when the trend is down. Traders can use moving averages in a variety of ways, such as to anticipate moves to the upside when price lines cross above a key moving average or to exit trades when the price drops below a moving average. Regardless of how the moving average is used, it often creates an automatic support and resistance level. Most traders will experiment with different time periods in their moving averages so that they can find one that works best for them. So again, if we're looking at this chart, you can see right here, there was a support off that moving average. We saw support right here. We saw another bounce here. And then notice that the moving average got violated. So once that happened, look at that. Now it's a resistance until boom, it got violated again right here. And now it has yet again become support. And it just continues doing that. So you have to find the moving average, one that works best for your trading style and for your preference. The moving averages I use are usually 21 and 50. Sometimes I use the eight day moving average. I use sometimes the 200 day moving average. So you have to just mess around with different moving averages and see which ones work best for you. A lot of people put all those moving averages at the same time on their chart. I just like to try to keep a cleaner chart so I don't like to have massive amounts of moving averages, but some people don't mind them. So you can test that out as well. Other indicators. In technical analysis, many indicators have been developed to identify barriers to future price action. These indicators seem complicated at first and it often takes practice and experience to use them effectively. Regardless of an indicator's complexity, however, the interpretation of the identified barriers should be consistent to those achieved through simpler methods. For example, let's go ahead and talk about the Fibonacci Retracement Tool. The Fibonacci Retracement Tool is one of my personal favorite tools to use because it clearly identifies levels of potential support and resistance. The reasoning behind how this indicator calculates the various levels of support and resistance is beyond the scope of this tutorial. But if you're interested in finding out more on how the Fibonacci Retracement works with a full in-depth tutorial, you can go to videos, scroll down the playlist and you will see it right here, how to trade using Fibonacci Retracement Tool. So we posted this one about five months ago and it goes pretty in-depth on the history, the theory behind it and how it works and how you can use it to trade. If we go ahead and pull up the chart here, you can see exactly where there's some support here. So this is how we're using the Fibonacci Retracement Tool to identify supports. So we know that this is a support here because it is one of the Fibonacci Retracement levels. So we're using this right now. As we're trading, as we look for entries, we use this right here as a support resistance level to find an entry. The same way right here, you saw there was a lot of resistance there. Once it jumped over it and it came back down and now it's testing it as a support. So as long as this support holds here, we're expecting a bounce back to the upside. You could also see the levels here as it got close to that Fibonacci Retracement level there, it got rejected down and then it bounced between this support here, this Fibonacci level here and this level here until it got violated. And then it did end up jumping back up though. So you can see how this was just jumping in between these two support levels. And by the way, the 61.8% Fibonacci level is known as the Golden Ratio where most things during a retracement end up bouncing. As you can see, ended up happening here. It ended up, that ended up being the bounce to where we currently are now. So remember how we use the terms floor for support and ceiling for resistance. Let's continue to use the house analogy and let's look at price as a rubber ball that's bouncing in a room from the floor or support and then rebound off the ceiling or resistance. A ball that continues to bounce between the floor and the ceiling is similar to a trading instrument that is experiencing price consolidation between support and resistance. Now imagine, okay, let's close our eyes and imagine the bouncing ball between the floor and the ceiling. Let's imagine that that ball in mid-flight changes to a bowling ball. This extra force if applied on the way up will push the ball through the resistance level. On the way down, it will push the ball through the support level. Either way, extra force or enthusiasm from either the bowls or bears is needed to break through the support or resistance. A previous support level will sometimes become a resistance level when the price attempts to move back up and conversely, a resistance level will become a support level as the price temporarily falls back. Like we told you before, support and resistances always flip. Price charts allow traders and investors to visually identify areas of support and resistance and they give clues regarding to the significance of these price levels. More specifically, they look at, one, the number of touches. The more times the price tests a support or resistance level, the more significant the level becomes. When prices keep bouncing off a support or resistance level, more buyers and sellers notice and will base training decisions based off these levels. Next is preceding price move. Support and resistance zones are likely to be more significant when they are preceded by steep advances or declines. For example, a fast steep advance or uptrend will be met with more competition and enthusiasm and may be halted by a more significant resistance level than a slow steady advance. A slow advance may not attract as much attention. This is a good example of how market psychology drives technical indicators. Next is volume at certain price levels. The more buying and selling that has occurred at a particular price level, the stronger the support or resistance level is likely to be. This is because traders and investors remember these price levels and are apt to using them again. When strong activity occurs on high volume and the price drops, a lot of selling will likely occur when price returns to that level. Since people are far more comfortable closing out a trade at break-even point rather than at a loss. And last but not least is time. Support and resistance zones become more significant if the price levels have been tested regularly over an extended period of time. So we can see here number of touches. There was a whole lot of touches here which kept bouncing the price up but eventually the price did get violated and we saw a big move down. Now with the big move down came a rapidly big move up. And we yet again got back on that same support level. So you saw that support level here. You saw it here. Eventually it was strong enough where everyone was just entering at this level and that inspired the takeoff. So proceeding price movement, remember fast up means fast down. So you saw how fast that went up and you saw how fast it came down. The same thing here. When it went down really fast it also went up really fast. You'll see volume here. If you look at this $10,000 mark every time it was in this area look how much of volume there was there. And the same thing here when we look at this right here when this move finally ended up really taking off look at all that volume. So remember a lot of volume usually comes in at certain support and resistances and also a lot of volume comes in when we break certain support and resistances. The bottom line. We have finally reached the end guys. So let's do a recap of everything we've gone over today. Support and resistance levels are one of the many key concept that are used by me and many other technical analysts. It forms the basis of a wide variety of technical analysis tools. The basics of support and resistance consists of a support level which can be thought of as the floor and a resistance level which can be thought of as the ceiling. Prices fall and test the support level which will either hold and the price will bounce back up or the support level will be violated and the price will drop through the support and likely continue lower to the next support. Determining future levels of support can drastically improve the returns of a short-term investing strategy because it gives traders an accurate picture of what price levels should prop up the price in the event of a correction. Conversely, foreseeing a level of resistance can be advantageous because this is a price level that could potentially harm a long position. Signifying an area where investors have a high willingness to sell. As mentioned before, there are several different methods to choose from when it comes to identifying support and resistance levels but regardless of the method the interpretation remains the same. It prevents the price of an underlying asset from moving in a certain direction. So as mentioned before, there are several different methods to choose from when it comes to identifying support resistance but regardless of the method, the interpretation remains the same. It prevents the price of an underlying asset from moving in a certain direction. That is what support and resistance is all about. So that is it guys. We have covered everything that there is to know for the most part as basic as possible for support and resistance zones, how to identify them, how to identify trend lines, how to use different tools in order to identify support and resistance. So hopefully you guys have found the value in this video. If you have, and if you're new here, make sure to hit that subscribe button for us guys. Make sure to also like this button. And if you are uncertain about anything that we went over in this video, go ahead and drop it in the comments. We're always happy to answer your questions. Thank you so much guys. I will see you guys on the next video. As always, peace and love.