Trading from levels: what you should know before applying it
One of the most popular types of market transactions is trading based on the level analysis. The essence of this technique is to open speculative positions based on the formation of support and resistance zones. These levels indicate the fix api trader that the quotes have reached these values, after which they have repeatedly shown a reversal. To understand the principle of work, I propose to consider the meaning of each level in more details, as well as the principles of working with them.
Support and resistance levels are the key areas on the chart, when the quotes of the financial asset repeatedly reach these values and unfold. The principle of the resistance level is that when the value of an asset grows and reaches these markers, many fix apitraders expect a rebound of the given level and place their pending orders, as well as stop loss. If the price breaks through the resistance level and is fixed above it, then this indicates the uptrend formation. In turn, the principle of supporting work has the same meaning, but it is taken into account for graphs, on which on the contrary the quotes are reduced. And just like that, the majority expects a rebound upward, while consolidation below the support level is a signal for anew downtrend formation.
Proceeding from this, there are two methods of trading with the help of levels: on release and at the breakdown. After all, if the quotes have broken through these levels, then a new trend has been formed. Therefore, it is necessary to trade according to the market movement. If the quotes are repulsed, the level has worked and you should expect a turn by setting stop loss after the level.
Trading from the levels is a qualitative tool for determining the Stop loss parameters. This allows you to more accurately enter the market and limit the potential risk, because it is at these levels that a huge number of pending orders accumulate, and the market makers keep the value of the asset no higher or lower than these values, which allows you to be in the market immediately before the trend changes.