📊What is a key level? How to use it in trading? Clear tutorial!

2 มิ.ย. 2022

What is a key level? A key level is a price level on the chart that creates the support or resistance to the price when it falls or rises. A key level is also called an extremum.

📊There are 3 types of levels in total:
1. Resistance level — when price rises and rebounds down when it test the level.

2. Support level — when price falls and rebounds up when it test the level.

3. Mirror level — when the level is both support and resistance.

🚩How to identify the key level? As a rule, the key level may be either the price maximum (high, H) or minimum (low, L). Price maximums occur when the price moves in a trend (bearish or bullish). It is harder to identify the key levels during consolidation, because often the price simply blurs them, making false breakouts, as we can see on the Bitcoin chart. Especially often the key level is the global highs (ATH).

It can be found on any timeframe, but the higher it is (4 hours, 1 day, 1 week), the more clearly they work, because the level of 1 week may be identify by a scalper, a swing-trader or an investor, while the local levels of 1-30 minutes are only looked at by scalpers, i.e. a smaller total number of traders.

Usually, the key level is an even number: 1, 50, 100, 1000. For example, $ 50,000 for Bitcoin, $ 2,000 for Ethereum, $ 1.5 for Forex pairs.

💹Why do key levels work? It's all because the traders place their orders near these levels. To put it simply, key levels work and price reacts to them, because a large number of traders often use them. Every trader knows that when Bitcoin is falling, the level of $ 20,000 will be support for the price, because this is the level of the previous ATH, and most traders put buy orders, so the bounce of the price can be huge (10-20%).

✅How can you use a key level in trading? There are many different uses of the key level in trading, for example, trading a rebound from a level when a trader places a buy order below the level or a sell order above the level. As I said before, the more prominent the level on the chart, the stronger the price pullback, so some traders place their orders near key levels in advance to buy or sell at the best price.
Also, I use the key level on 30m-4h timeframses to identify price weakness or strength for false breakout trading. A false breakout of a key level shows that most traders are set up for a price move in the other direction.

🔥As many traders as there are ways to use the key level. My advice is to be craftier and use the key level with the rest of the technical analysis instruments, candle patterns, indicators. That way your win rate can increase significantly when different approaches are used together.

🏁Traders, how the key level helps you to identify the best entry point? Share your idea or a screenshot in the comments!

💻Friends, press the "like"👍 button, write comments and share with your friends - it will be the best THANK YOU.

P.S. Personally, I open an entry if the price shows it according to my strategy.
Always do your analysis before making a trade.