The market sometimes goes up, sometimes goes down, sometimes goes sideways, sometimes following the rules but sometimes breaking the rules. However, there is also a way to understand market movements, which is to analyze the price action as well as the key levels of the market where the price will bounce higher or reverse lower we call them support and resistance levels.

In this article, I will introduce you to 6 important support and resistance levels, understand how the market has been, is and will go, from there how to set stop loss, take profit and how to manage it. effective risk management.

Traditional previous highs and previous lows

Perhaps the most important support and resistance levels are the previous highs and the previous lows. These are the levels that you will see when looking at the weekly or monthly charts. This way we can see the big picture of the market and the key reversal points. Simply identify the levels where the price has reversed higher or lower and mark with horizontal lines as shown below:

Then, to be more sure, you can draw more support & resistance lines on the daily chart, as shown below, the old levels also stay in place, but new levels appear that are not visible on the weekly chart. OK:

Previous tops/bottoms form a ladder pattern

Have you heard the saying “Old support becomes new resistance and old resistance becomes new support”? This is a type of market where higher highs & lows form, or lower highs & lows form, in an up or down trend. Mark these levels again, and when the price breaks up or down we can wait for a pullback trade, also known as a pullback trade. When you see this phenomenon, you can tell that a trend is definitely present.

Previous peaks/lows for risk management

In the example below, you notice the price broke lower, went below support, then it stayed below that level, and since then this level has become resistance. We can sell at this level or just below it if the price stays below. This way we can know where to wait for the next trade, and if the price breaks through that level our idea is completely useless, then it makes sense to place a stop loss just above that level. . In addition, we can use previous neighboring peaks/lows as profit-taking points.

Volatile support and resistance levels

Volatility here is the levels that have a move, or in other words a moving average. An up or down moving average shows price action. Here is an example of a 50-period exponential moving average (EMA) used to spot downtrends and entry points:

The 21 ema can also be used in a similar way, remember that the shorter the period ema, the more often the price interacts with the ema, so in a less elastic market you should use a short period ema like 21 term:

Trade range by support & resistance levels

Trade range by support & resistance levels can give us many valuable entry opportunities for a price action Trader. The main idea is that we first look for a range (price just bounces up and down between certain parallel levels), then look for price action signals between these levels.
In the example image below, we have a fairly large range because the price only fluctuates between support & resistance:

Event-driven support & resistance

Event zones are the key levels of the market when a price action event occurs. It can be a strong reversal or a clear price action signal, both of which lead to a strong direction in price.

On the example image, you can see an event level formed after a strong bearish reversal candle on the weekly chart (there was also a strong bearish pin bar on the daily chart there). You need to mark this level again because it is an important level to wait for a sell order at the blind entry or a sell signal on the 1H or 4H or daily chart.