Can you elaborate on the importance of support & resistance in terms of the present & the past.
Support and resistance are important as it gives an indication of potentially how profitable the trade may be.
If you have these close to your entry price or first profit targets, there is a risk that the stock will not be able to break past the support/resistance again and reverses before you reach your first profit target, hence creating a loss or simply break even position.
For example, if your entry price is $20.17, first profit target is $21.17, but there is a resistance at about $21, you may want to make your first profit target just below $21 to ensure you have ringfenced your profit in case the price is unable to break resistance.
Also, it may have an impact on your entry price.
If for example the top of the bull flag is $20.21, you may have chosen to enter at $20.31. However, there may be resistance around $20.40. In this case, you may choose to have your entry price at $20.46 to ensure that the stock is able to break the previous resistance before you enter the trade.
Related Articles
What do you consider a "properly constructed breakout?"
What we mean by that is a breakout that is preceded by a flag pattern, consolidation, or a clear support (or resistance) area. The chart patter should be neat and tidy, and not regularly be subject to gapping or huge daily ranges. This should be ...
I was wondering once Guy checks the top and bottom of the flag how he determines at what level he decides to enter the trade? Sometimes it is 7 ticks above/below the flag other times it could be 9 or whatever.
We try to avoid being caught out by past Support and Resistance areas. Also we look for some clearance beyond the flag or consolidation itself. It can vary according to factors such as other Support and Resistance, and whether we're near a round, ...
Is the direction of the OVI important or just that it is either in positive or negative territory?
It's all about support/resistance and breakouts together with OVI, AND with Big Money Footprints (at least a couple). For guided discretionary trading, you don't read the OVI on its own, it is not a daily indicator. Look for persistence in its ...
How do I spot 'double tops or double bottoms', before they happen?
Anticipating is a double-edged sword! You can anticipate support or resistance as the stock approaches the zone. If you're already in a trade we can use them as a profit target or stop loss. If you're in a bullish trade then you'd have your (first) ...
The trades I have put on have not worked, I’ve made some losses, what am I doing wrong?
The only way you can lose money with these methods (if applied correctly) is on a false breakout. In other words, you get triggered into a trade, and then it retraces and stops you out before P1. This scenario is highly unlikely if: A) The flag or ...