As a trader, one of the most important skills to develop for success is the ability to identify major support and resistance levels. You’ve probably heard the cliche “follow the trend,” which emphasizes that long-term success is found in trading with a trend. However, from my experience, identifying the trend is just the beginning. Once you’ve identified the trend, you need to know the best levels to buy or sell, and that’s where learning to draw major support and resistance levels comes in.
In this article, I’ll share the benefits of developing this skill and how it has been at the core of my trading success.
High Probability Entry Levels
The first benefit of learning to identify major support and resistance levels is that it will help you pinpoint high probability entry levels. Even if you correctly identify the market trend, entering at the wrong price could still result in a loss. By mastering this skill, you’ll be able to get trade entries with the highest probability of being profitable.
Better Stop Loss Placement
Another advantage of developing this skill is the improvement of your stop loss placement. When you know the major support and resistance levels, you’ll be able to place your stop losses beyond these levels. This helps prevent the market from shaking you out of a profitable trade before it moves in your favor.
Improved Take Profit Targets
Lastly, identifying significant support and resistance levels will help you determine the best levels to place your profit targets. It’s a best practice not to place your take profit targets beyond a support or resistance level, as there’s usually a high probability of the price pulling back after hitting one of these levels, even in trending markets.
Over the years, I’ve developed this skill, and it has been at the core of my trading success. If you’re serious about improving your trading, I encourage you to focus on developing the ability to identify major support and resistance levels.
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