Support and Resistance

Another week, another free bot!

Imagine you're dropping a ball, and it bounces back up after hitting the floor. In trading, the "floor" is called support.

It's the price level where a lot of buyers think, "Hey, this is a good deal!" and start buying, stopping the price from falling further.

Now think of the ball hitting the ceiling and coming back down. That's resistance in trading.

It's where the price of an asset goes up, but then a lot of sellers think, "This is as high as it goes!" and start selling, stopping the price from rising more.

Why Does It Matter?

Understanding support and resistance is super important because it helps you as a trader make smarter decisions.

By looking at past prices, traders can guess where the support and resistance levels might be. This helps you figure out good times to buy or sell.

One tricky part is that seeing these levels isn't always clear-cut. It can be subjective, meaning different traders might see different support and resistance levels on the same chart.

Plus, when you’re using bots to trade for you, they can't "see" these levels as we do. They use past high and low prices to figure it out.

When programming such a trading bot, one key thing is deciding how far back in time to look on the chart.

For example, looking back 50 bars on a 4-hour chart shows different support and resistance levels than looking back 100 or 200 bars.

That’s not all!

The timeframe you choose (like 1 minute, 4 hours, or 1 day) changes how far back you're looking, which affects the support and resistance levels the bot uses.

While setting up this bot, we had to tell it a few things, like how many bars back to look for support and resistance, what timeframe to consider, and other details like how much to trade and where to set stop losses.

Finding the perfect settings is still a bit of an adventure for now.