From zero #04 · Read a chart
Do support and resistance hold?
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What you will learn
Draw a level objectively (last 20-day high/low) and see how often it actually holds.
What the episode says
Last time: a trend is a rule. Today: the lines traders draw. Support below, resistance above. Do those lines really hold?
The 20-day high is the highest price reached in the previous 20 days. We draw a horizontal line at that price: our resistance level. Price returns to the line from below. A bounce means it touches the line but closes back below it: resistance held. A break means price closes above the line: resistance did not hold. The closing price is what separates these outcomes.
We found 158 touches on Bitcoin and Ethereum. Price touched the line and closed back below it 47% of the time: a bounce. It closed above the line 53% of the time: a break.
About as often as a coin flip. A level is a place where something may happen, not a wall. Next: does volume tell you which way?
Watch first: 01. What does one candle really tell you? · 03. What is a trend, really?
Next episode: What does volume tell you?
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Education about how markets and tests work. Not financial advice.