Sabtu, 19 Desember 2009

Factors Affecting Support and Resistance Strength

Factors Affecting Support and Resistance Strength
  1. Support or Resistance's Length
    The longer the time or the number of hits it got, the stronger it is. For example, a week's support or resistance creates a minor support or resistance, a month's support or resistance provides an intermediate level support or resistance, while 1 year's range will become a major / strong support or resistance. But you should keep in your mind that there is a point, where these levels are gradually become weaker when they get older. This is caused by fading people memories along with time.
  2. Support or Resistance's Height
    The wider support and resistance zone, the stronger it is. A wide congestion zone between support and resistance acts like a higher barrier, and serves as a stronger level. The strength of this zone can be calculated by a percentage of current market value.
  3. Support or Resistance's Trading Volume
    The higher the volume in a specific support and resistance zone, the stronger it is. A higher trading volume in a support or resistance zone, it means more traders involved in that zone. This scheme represents a stronger level of support or resistance area.