How do you enter a trade safely? Every new trader knows the situation. He sees a green candle, goes long and price retraces. The new trader exits the trade but then price continues higher.
Price seems to interact with certain levels. It touches a level several times before and after passing it. Obviously this would be a good spot to enter a trade. What are these levels?
Support and Resistance
If a level stands out, like a swing high or a swing low, when price returns there, it usually reacts with that level. A level like that is called support (if price approaches from the top) or resistance (if price approaches from down below). If a level is touched more than once it becomes more and more obvious. Orders start piling up around that level and price will react more heavily if it returns. If a level is touched from one side multiple times these orders get eaten up every time price comes there and eventually all orders are gone and price will break through that support- or resistance-level.