Two of the most commonly used concepts in this type of trading are support and resistance. When you see the market move upward and then see it pull back in a type of zigzag pattern, the highest point that was reached before the market pulled back is referred to as resistance.

As the market continues to move upward once again, the lowest point that is reached before the market began to pull back then becomes what is known as support. It is in this manner that resistance and support are formed continually. The reverse would also be true for a downward trend.

One important point to keep in mind is that support and resistance do not form concrete, exact numbers. In many instances you might notice a resistance or support level that would at first appear to be broken, but later you might discover it was only being tested by the market.

You will most commonly see such tests for support and resistance depicted on candlestick charts. This is precisely why it is so important to remember that support and resistance are really more representative of zones instead of exact numbers.

A line chart, rather than a candlestick cart, can assist you in plotting support and resistance. While candlestick charts add in rather extreme highs as well as lows, a line chart will only depict closing prices.

Viewing highs and lows can be somewhat misleading because they are really only what are known as knee-jerk reactions from the market. They’re just a reflex but they can cloud the overall picture when what you really need to be looking at are the intentional movements of the market.

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