Finding a winning trading strategy can be a very difficult thing. Although there are many techniques that traders use to profit from swing trading stock and ETF price movements, it appears lately that the most popular method is technical in nature. Computers and computer trading software - many people are simply not aware that the new and improved professional computer software algorithms dictate stock price directions and levels. To find a winning trading method, is to understand that you are tracking computer models and their outcomes.
Millions of shares of Apple stock are traded each and every day on the markets, by millions of people...it would take an incredible, coordinated effort to hold the stock price on a perfect trend line over a long time period - computers must be heavily involved in controlling the price movement.
Since computer trading systems actually guide market price levels, a well known method of tracking stocks and ETFs is to follow support and resistance levels in the market. In other words, to follow the trend of the market, until that trend changes.
Understanding Support and Resistance Levels
What exactly are support and resistance levels of a stock or ETF? They are imaginary, pre-traded price levels where professional computer systems put a weight on as being "important" to future price levels, and increase or decrease buying and selling accordingly.
Once Resistance is breached, it becomes Support...and vice-versa.
Support is a previously traded price level of a stock, ETF, commodity, or entire index that will hold that price level intact - in the past trading history of the security, that stock or ETF was traded and bought enough to hold that price level.
Support becomes resistance when a support level is broken. Resistance acts like a barrier holding prices in check, until that price level is broken then it becomes a support level.
Common swing trading stock strategies try to capitalize on the trend changes between the support and resistance levels of a stock, such as in the SLV ETF chart above.
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