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The concept of Support Levels and Resistance Levels as discussed in the previous blog entries, can also be applied to price movement that is bound between diagonal support and resistance lines.

A trend line is a bounding line for the price movement of a security. A support trend line is formed when a securities price decreases and then rebounds at a pivot point that aligns with at least two previous support pivot points. Similarly a resistance trend line is formed when a securities price increases and then rebounds at a pivot point that aligns with at least two previous resistance pivot points. The following chart provides an example of support and resistance trend lines:

The use of trend lines is a simple and widely used technical analysis approach for judging entry and exit investment timing. If a securities price is moving between support and resistance trend lines, then a basic investment strategy, is to buy a security at support and sell at resistance, then short at resistance and cover the short at support. The belief behind this trading strategy is that when the price pulls back to test a support level, or rises to test a resistance level, the trend line will hold and the trend will continue to bound price movement.

Support and Resistance Levels or Trend Lines do not continue indefinitely. When the price movement breaks through a principal trend line of an existing trend, it may be evidence that the trend may no-longer continue. Therefore an alternative strategy is to take a long position if the security breaks through its resistance level and hold until such a time that there is a price pull back, or short if a security trades below its support level and cover the short when the price starts to rebound.

You can use timetotrade to notify you when UK and US stocks tests support and resistance levels. If the price movement breaks through a support or resistance level, then you can use the breakout or pull back timetotrade alerts to notify you of a change in price movement. For example if a stock’s price breaks out above a resistance level and you decide to take a long position, you can set up a timetotrade price alert that will notify you if there is a 1% price pull back within an interval period such as 1 hour or 1 day; alternatively you can set up an alert that will notify you if the stock price pulls back by for example 10 pence/cents within a interval period that ranges from 1 minute to 1 month. Any sudden pull back in the price that meets your alert conditions would trigger and alert that can be sent to you as an email, text message to your mobile phone or instant message. If you receive a text alert, you can then log on to timetotrade via a mobile phone or PDA that has a web browser and review the securities price and technical analysis charts.

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Continuing on from the previous blog entry on support levels, a resistance level is the highest price that an equity trades at, over a period of time, as opposed to a support level, which is the lowest price that an equity trades at. A support or a resistance level is formed when you can draw a horizontal line between two or more price pivot points i.e. a price point where an equity’s price pivots and changes direction.

A resistance level can become a support level if the price of the equity increases above the resistance level; similarly a support level can become a resistance level if the price of the equity falls below the resistance level as illustrated in the Paychex (PAYX) price chart example in the previous support level blog entry.

If a stock price is moving between support and resistance level, then a basic investment strategy commonly used by traders, is to buy a stock at support and sell at resistance, then short at resistance and cover the short at support.

As with support levels, when judging entry and exit investment investment timing using support or resistance levels it is important to choose a chart based on a price interval period that aligns with your trading strategy time frame. Short term traders tend to use charts based on interval periods, such as 1 minute (i.e. the price of the equity is plotted on the chart every 1 minute), with longer term traders using price charts based on hourly, daily, weekly or monthly interval periods.

Typically traders use shorter term interval charts when making a final decisions on when to invest, such as the following Paychex example based on 1 month of historical data with price plotted every 1 hour. In this example the early indication of a change of trend was when Paychex started forming a resistance level at approximately $39.67. The change of trend was then confirmed when Paychex started forming lower highs and lower lows.

You can use the TimeToTrade rising and falling price threshold triggers to notify you when a stock or option hits a support or resistance level.

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A support level is a price point where an equity’s price pivots and changes direction. They are formed when you can draw a horizontal line between two or more price pivot points.

The support level is the lowest price that a equity trades at, over a period of time. The more frequently a support level is tested (i.e. hits a previous support level pivot point but does not fall below it), the stronger the support at that level. Some traders believe that the stronger the support at a given level, the less likely it is to break below that level in the future. It is said that if an Equity breaks prior levels of support only by a small portion, it will drop until a new level of support is reached.

A support level can become a resistance level if the price of the equity falls below the support level; similarly a resistance level can become a support level if the price of the equity rises above the support level as illustrated in the following price chart example:

If a stock price is moving between support and resistance levels, then a basic investment strategy commonly used by traders, is to buy a stock at support and sell at resistance, then short at resistance and cover the short at support as per the following example:

When judging entry and exit investment investment timing using support or resistance levels it is important to choose a chart based on a price interval period that aligns with your trading strategy time frame. Short term traders tend to use charts based on interval periods, such as 1 minute (i.e. the price of the equity is plotted on the chart every 1 minute), with longer term traders using price charts based on hourly, daily, weekly or monthly interval periods. Typically traders use shorter term interval charts when making a final decisions on when to invest, such as the following example based on 1 week of historical data with price plotted every 15 minutes. In this example the early signs that the stock was coming out of a downward trend was when it started to form support at $30.48 and then started to form higher highs and higher lows signalling a change from negative to positive trending.

You can use the TimeToTrade rising and falling price threshold triggers to notify you when an equity hits a support or resistance level.

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Originally this blog started out about timetotrade, however it ended up morphing into a blog about the Sensatus Investment Club; the club that was behind the development of timetotrade.

Last week when we upgraded timetotrade, we decided to separate the content into two blogs and keep this timetotrade blog focused on developments within timetotrade and investment education. We are going to create a new blog for the Sensatus Investment Club and as soon as that is finished I will post a link to it.

The upgrade to the new version of timetotrade, with the ability to create free private investor and investment club accounts, is now complete. It is so rewarding to see so many of you signing up and it has put a big smile on everyone’s face. The recent upgrade from initial version of timetotrade was a big step, as we introduced a platform that can support private investors and investment clubs. From here on in, it is simply a matter of plugging in the new features that are currently under development.

So why are we going to focus this blog on education? I’ve been investing since my student days at the start of the 90’s and learnt a lot of lessons along the way, some the hard way, some through books and on-line research, others through paid investment education courses. When ever someone new to investing asks for advice about how to begin trading, my answer is always the same, ‘the first investment you should make is in yourself’. ‘Educate yourself on how the markets work and the techniques used by professional successful traders’.

So on a regular basis going forward I’m going to use this blog to educate people who are new to investing or maybe simply want to learn more. Hope you enjoy it.

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The initial alpha version of timetotrade is now in the process of being upgraded to the new beta version. The main changes include:

* You can now create a FREE ‘Private Investor’ or FREE‘Investment Club’ account

* The introduction of an Investment Club package that can be used to manage member subscriptions, unit valuation and generate performance and UK Form 185(new) tax returns

* New navigation layout

* Ability to increase or decrease the size of charts

* Ability to increase the text size

* Re-designed Notes tab

* Unit fund valuation for Private Investors

* New Help Wiki and Education section

* Click here for an extensive list of the changes

Please note that not all of the Accounts features are fully developed and may contain some bugs. The Accounts feature is being made available at this interim stage, in order to get your feed back on the functionality you would like to see implemented. If there are any features, changes or bugs that you would like to see addressed please click here.

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