Highlights
①. Gate’s “Basic Futures Courses” course introduces various methods of technical analysis that are commonly employed in futures trading. These courses aim to help traders establish a comprehensive framework for technical analysis. Covered topics include the basics of Candlestick charts, technical patterns, moving averages, trend lines, and the application of technical indicators.
②. This piece will introduce the application of support lines and resistance lines.
1. What are support lines and resistance lines?
A support line is created by connecting a series of low points on a chart, where the price has dipped but not broken through this line. It seems that each time the price approaches this line during a downturn, it tends to bounce back up rather than drop below the line. Below, you’ll find examples illustrating what a support line is.
The resistance line is formed by drawing a line across two or more peak points in the currency’s price path, with no price break through. Throughout the existence of this line, whenever the price trends upward, it consistently reverses course before it can cross above this line.
Besides lines that link up relative peaks or troughs over a period of price changes, there are various patterns that can directly serve as support/resistance lines. These include trend lines, channel lines, golden section lines, edge lines and neck lines of technical patterns, etc.
2. Application of support lines
①. Upward support lines
The upward support line refers to a support line that trends upward.
The features of the upward support lines:
a. It trends upward.
b. It appears in an upward trend or consolidation phase.
Technical meanings:
a. When the currency price rebounds back up before it breaks the rising support line, it suggests a signal for buying assets.
b. If the price falls below the rising support line, it indicates buying power has weakened, indicating a possibility of trend reversal. This change suggests an opportunity to sell assets.
The following exemplifies an upward support line in the BTC candlestick.
②. Downward support line
In technical analysis, a downward support line has a similar meaning to an upward support line.
③. Horizontal support line
3. Application of resistance line
①. Upward resistance line
The upward resistance line represents a resistance line that is sloping upward.
Technical meanings of upward resistance line
a. It trends upward.
b. It appears in an upward trend or consolidation phase.
The technical meaning of the upward resistance line:
a. When the currency price reverses course every time it approaches the upward resistance line, it is a signal to reduce positions.
b. A break above the upward resistance line indicates a strong likelihood of a bullish market trend, signaling to traders that it may be advisable to retain their positions or consider purchasing assets.
The following exemplifies an upward resistance line in the BTC candlestick.
②. Horizontal resistance line
A horizontal resistance line carries the same technical meanings as an upward resistance line. The following is an example of the horizontal resistance line.
③. Downward resistance line
A downward resistance line carries the same technical meanings as an upward resistance line. The following is an example of the downward resistance line.
4. Summary
Support/resistance lines are easily confused with trend lines for some traders. Both as common tools used by traders in trend analysis and determining the entry and exit points, they perform best when used together. Using other tools along with them can also help make better trading decisions.
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Disclaimer
This article is for informational purposes only and does not constitute investment advice. Gate is not responsible for any investment decisions you make. Content related to technical analysis, market assessments, trading skills, and traders’ insights should not be considered a basis for investment. Investing carries potential risks and uncertainties. This article offers no guarantees or assurances of returns on any type of investment.
