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Support/Resistance Bounce
Trade bounces off established support and resistance levels
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What Is This Strategy?
This strategy trades the tendency of price to bounce off established support and resistance levels. Unlike breakout trading, you're betting price will reverse rather than break through.
How It Works
- Identify horizontal support levels (where price bounced before)
- Identify horizontal resistance levels (where price reversed)
- Wait for price to approach support = potential buy
- Wait for price to approach resistance = potential sell
- Look for reversal candlestick patterns as confirmation
Key Parameters
Lookback Period
Period to identify levels
Zone Width
Width of S/R zone
When to Use
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Best For
- • Range-bound markets
- • Well-defined channels
- • Multiple touches at levels
cancel
Avoid When
- • Strong trending markets
- • During breakouts
- • Near earnings/news
Risks & Limitations
warning
Be Aware
- • Levels eventually break - never hold forever
- • Catching falling knives at support
- • Missing trends by fading them
Example Trade
Scenario
AMZN has bounced off $140 support three times. It approaches $140 again with bullish RSI divergence.
BUY
Reasoning
Strong historical support with additional confirmation. Risk is clearly defined.
Ready to Test This Strategy?
Backtest this strategy on historical data to see how it would have performed.
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