Forum Archive Index - February 2002

[Phaedrus <Phaedrus@techemail.com>]

Chris,
      There is no minimum number of lows or highs required to constitute 
support or resistance. One is enough. It is important to appreciate that the 
more trading that takes place in an area of support or resistance, the more 
significant that level becomes, because more participants have a vested 
interest in that area. There are three ways in which the amount of trading can 
be determined. 
(1) The more times that prices respect a support or resistance level, the more 
significant that level becomes.
(2) The more recent the activity, the more influence it has. In other words, 
more recent support/resistance levels are more important than those of years 
before. There is no cutoff period - older levels simply become less and less 
relevant.
(3) Support or resistance levels set on heavy volumes are more important than 
those set on low volumes.

<<< "I'd like to ask how you calculate your support and resistance lines.">>>
They are not calculated as such. You simply draw a horizontal line at the level 
of a previous high or low. The more significant levels will take in more than 
one high or low.

<<<"I understand the resistance is a common high price that has yet to be 
broken ....">>>
Future resistance is anticipated at levels that were peaks in the past.

 A few interestings facts :- Support levels, once broken, tend to become 
resistance levels. Resistance levels, once broken, tend to become support 
levels. 
 Traders tend to think in terms of round numbers, so there is a tendency for 
advances or declines to stop at round numbers. These will often act as 
"psychological" support or resistance levels. 
 The concept of support and resistance levels is simple yet very powerful. It 
forms one of the cornerstones of technical analysis.

         Regards,
                    Phaedrus.




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