Intraday Trading Strategies Using Prior Support Levels

Have you ever used intraday trading strategies based on prior support levels? If not, you may want to consider doing so and see if it can help produce profitable trades for you.

Of course using any single method cannot guarantee profitable results. There is much more to the complete trading plan.

Things such as Risk Management, Position Sizing, Trader Psychology are just a few things to master, off the top of my head.

Any one of these can make or break and single trade, or the entire year in some cases.

Below we'll be taking a look at one way you can look for good entry prices for potential new long positions. While this post is being directed towards intraday trading strategies using prior support levels, the same methods can be used for swing trading on longer term charts.

Take a look at the first chart below. From the low near $2.60 in the morning there was a big move higher up until about 10:30 a.m., before pulling back some.

Intraday Trading Strategies Prior Support

This would have been a beauty of a trade, but we all know that many times we find these big movers after they've already happened. If you're like me, you've probably ran across some of these and got sucked in to buying as it was thrusting higher, near 10:30 a.m. in our example.

Let's say you came across this chart after the market closed for the day, while you were looking for stocks to watch. In this case, you could add support and resistance lines on your chart that may appear to be obvious, as in our example.

On occassion, these price levels may not be obvious, if not, just keep the stock on your watch list and see what happens in the next day or two. Many times clear support and resistance levels can be seen after the first day of a big move as well.

Getting back to our chart above, you can draw the upper resistance line at the high of the day, and a lower support level at the price where the largest amount of reversals occurred. This is showing where buyers are stepping in, more than the sellers, and therefore providing a good support level to keep an eye on.

Now let's take a look at how prices reacted the next day. Take a look at the next chart:

Intraday Trading Strategies Morning

You can see that prices made two attempts to breakout higher in early trading, and failed both times. Because you had put the stock on your watch list the day before and added intraday support and resistance levels on your chart, you knew that the area near $3.60-$3.70 was a strong resistance level.

This would have been your potential first trading opportunity: to go short at the previous resistance level. Note: I'll discusss this more on a separate post as this one is primarily directed towards intraday trading strategies using prior support levels, not resistance levels.

After the failed breakout, prices moved lower, by over 10%- another big move. Enough so that many people looking at this chart would be shorting after such a move lower.

Now let's take a look at one more chart showing both days combined:

Intraday Trading Strategies 2 Days

Since you had drawn upper resistance and lower support lines on the previous days chart, you would have known that the $3.20 area was a key support level. Instead of shorting around this level as many people looking at a one day chart would do, you would have yourself a high probability trade going long, based on intraday trading strategies using prior support levels.

Because prices had reversed from this lower support level the prior day, there is a consdierable probability taht they may again. NOTE: Remember that this is not always the case. Prices very well could have plunged from here also. Make sure to use good position sizing and risk management such as having a stop loss somehwere below the prior support level, just in case. Better to be safe than sorry.






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