Floor And The Ceiling Price In Technical Trading

The binary trading software lets you trade automatically. This means that you do not have to sit in front of the computer every second to spot a trade. The binary trading software makes use of an algorithm to generate trading ideas.

 

The trade plan is fed into the software by an expert and this is what is called the algorithm. The software takes trades after it follows this algorithm step by step.

 

Support and resistance

 

Support and resistance is an important part of trading and when trading using the binary trading software it is good if you know these terms. Find to more what support and resistance are all about and how it works.

 

You would hear the terms support and resistance being used a lot when you read about technical analysis. These are used to find out the entry and the exit points of the stock. The entry and the exit of a particular trade are determined based on the reaction to price. These are important levels that are used extensively in technical trading.

 

Understand S/R

 

To understand support and resistance think of a floor and the ceiling in the room. Imagine a ball that bounces from the floor after it hits it. It drops down after it touches the ceiling.Support is the floor and resistance is the ceiling. So when the price hits the support it will bounce up and when it hits the ceiling it will drop down. Price thus moves between these two levels.

When the price of the stock or any asset falls to a level where there is an increase in demand the price will start to increase and the buyers will be dominant. This is the floor or what is called in technical analysis as the support level.When the price of the stock reaches a level where there is a decrease in demand, at this level the owners of the stock will start to sell and lock their profits. This is the ceiling or what is known as the resistance level.

 

So how do these levels get formed? These levels are formed by traders who have memories. Those who follow just a particular asset or a particular stock remember the price from which it has bounced in the past and the price from which it had dropped. They keep these prices in mind and when the price again reaches these levels they repeat the same action. It is, however, important to know that the support and the resistance levels will not be fixed but there would be breakouts and breakdowns from these levels as well.

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