CHAPTER 4
Identifying Support and Resistance Zones
There's an old saying about those who forget history. I don't remember it, but it's good.
—Stephen Colbert
You have to pay close attention to one thing on the chart if you trade naked: price. Price is king. Price will tell you all you need to know. The wonderful thing that all markets have is this: a history. The market will tell you where the sweet spot is on the chart. These sweet spots will be the foundation for everything you do as a naked trader.
A sweet spot on the chart is a support and resistance zone. You may be familiar with the concept of support and resistance, however, support and resistance zones are different from what many traders characterize as support and resistance. I will call these support and resistance zones by one word— zones. The eight important characteristics of zones are as follows:
1. Zones are an area, not a price point.
2. Zones are like fine wine; they get better with age.
3. Zones are spots on the chart where price reverses, repeatedly.
4. Zones may be extreme highs or lows on the chart.
5. Zones are where naked traders find trading opportunities.
6. Support and resistance zones rarely need to be modified.
7. Line charts help naked traders find zones.
8. Zones are often seen by many traders.
You may want to take a closer look at each of these eight characteristics. It is incredibly important that you understand how to draw zones, why you should draw zones on your charts, and understand when these ...
