❌❌Price “overshoot” and you assume SR is broken

This happens when the market breaks your SR level and you assume it’s broken.

Thus, you trade the breakout… but only to realize it’s a false breakout.

So, how do you solve these two problems?

Simple.

Treat Support and Resistance as areas on your chart, not lines.

😳😳 Why SR are areas on your chart

Because of these two group of traders…

👉🏾 Traders with the fear of missing out (FOMO)
👉🏾 Traders who want to get the best possible price (Cheapo)

Let me explain:

Traders with the fear of missing out would enter their trades the moment price comes close to Support.

And if there’s enough buying pressure, the market would reverse at that location.

On the other hand, there are traders who want to get the best possible price, so they place orders at the low of Support. And if enough traders do it, the market will reverse near the lows of Support.

But here’s the thing:

You’ve no idea which group of traders will be in control. Whether it’s FOMO or Cheapo traders.

Thus, Support and Resistance are areas on your chart, not lines.

Make sense?

📌📌📌 Truth #3: Support and Resistance can be dynamic

What you’ve learned earlier is horizontal SR (where the areas are fixed).

But it can also change over time, otherwise known as, Dynamic Support and Resistance.

Now:

There are two ways to identify Dynamic SR.

You can use:

👉🏾 Moving average
👉🏾 Trend line


Let me explain…

How to use moving average to identify dynamic SR

I use the 20 & 50 MA to identify my Dynamic SR.

Here’s an example:

However, it’s not the only way. You can use 100 or 200 MA, and it works fine .

Ultimately, you must find something that suits you (and not blindly follow another trader).

📌📌 Trend line

These are diagonal lines on your chart to identify dynamic SR.

Here’s what I mean:

📌📌📌Pro Tip:📌📌📌

Treat Support and Resistance as areas on your chart (and not lines). This applies to both horizontal and dynamic SR.

📌📌📌📌 Truth #4: Support and Resistance are the worst places to put your stop loss

I need not be an Einstein to guess where you’ll put your stops.

Below Support and above Resistance, right?

An example:

And why is this worst place to put your stops?

It gets hunted.

So… how do you avoid it?

Well, you can’t avoid it entirely.

But here are two things you can do…

👉🏾 Set your stop loss a distance from SR
👉🏾 Wait for candle to close beyond SR


Let me explain…

Set your stop loss a distance from SR

You can do this by using the Average True Range (ATR) indicator.

Here’s how to do it in:

👉🏾 Identify the low of Support
👉🏾 Find the ATR value
👉🏾 Take the low of support minus the ATR value

If you want to learn more, go watch this training video below: