How do you trade successfully? Is it possible to trade without any knowledge of technical analysis? It is a good question and I am not trying to say that you cannot learn technical analysis without any help.
The main goal of a trader is to make profits and to trade is the easiest way to make profits. If you have a good understanding of technical analysis and its tools, then you are more likely to make more profits. In my opinion, traders need to know about various types of technical indicators to be successful in trading.
The most important and common technical indicator is the support and resistance levels. We can use these levels to know when to enter the market and when to exit. The levels are dynamic and can change as per the market condition.
If you are a new trader and you don’t know how to use the level then it is time to start learning. I have mentioned below some of the reasons why it is important to use the support and resistance indicators.
1. Identify the trend
By knowing the current trend, we can identify the right timing to enter or exit. Let us say we are following the trend of an upward moving market. If we are expecting that the trend will continue to move up then we can enter the market when the price is near the support level.
If the trend is moving down then we can exit the market when the price is near the resistance level.
2. Moving average
Moving average is a very simple and powerful indicator which is used to measure the movement of the stock or the index.
When the moving average crosses the price line, it is a very good sign that the price will move in the opposite direction.
The best thing is that you will get the exact result as the moving average is very accurate.
3. Reduce the risk
If you have identified the right level, then you are reducing your risk.
4. Make a profit
If you are holding the position and you are seeing the prices going up towards the support level, then you will make profits. It is very easy to see the price going up near the support level and making a small trade.
Similarly, if you are holding the position and you are seeing the price going down towards the resistance level, then you will make profits.
Technical analysis is an important tool in the trading arena. If you are trading online then you will see many indicators. Some of them are simple and some are complex. The most common one is the support and resistance level.