Reaction

Drawing support and resistance lines aren’t the holy grail.

There will be times when the market will “smell” your support level and then reverses away from it which is called an undershoot:

And times where the market will break your support level and then suddenly reverses back which is called an overshoot:

So, what’s the solution to this?

It’s simple my friend:

Wait for the price to make its move around the area of support & resistance.

This means that when the price has touched your support or resistance level.

Don’t place a trade immediately.

No.

Wait for the price to “play its hand” around the key area of support or resistance first, then make your move to enter the trade.

Because remember…

Your lines on the chart don’t get to dictate where the markets go, it’s the price itself.

So, see if the price “recognizes” that level first before you do anything!

Now, assuming you’re not in the trade yet and you see an undershoot:

Ignore the trade.

You’d rather enter close to the resistance area:

Then enter late in the middle of the range and have a crappy risk-to-reward ratio: