How to understand if a support zone is strong enough to support a price fall?

[lucacrebbe]

Let's assume that a lot of people bought an asset at 10$. Now the asset goes to 15$ and other people buy in. Then it goes to 20$ and other people buy in.
Then it goes to 25$ and it starts to crash.. well is there a way to be able to recognize which area of suppor between 10$- 15$ and 20$ is the strongest to hold/the number of buyers who bought at that level? Is there a way?

 

[Enivid]

You can get the total volume at each price if you have access to complete tick history with real volume data (if the asset trades on several exchanges, you would need to aggregate the data from all of them). But you cannot conclude with certainty that the level or zone with the biggest volume will serve as the strongest support. Traders buy and sell for all sorts of reasons. If, for example, the sell panic starts because the asset becomes widely regarded as a sort of scam, why would the price stop at any support level above $0?

 

[lucacrebbe]

But you cannot conclude with certainty that the level or zone with the biggest volume will serve as the strongest support.

Basically what you say it is : ''even if you look at the volume at a given support, you cannot conclude that that support will hold''

My question is: can I formulate some kind f hypotesys like these (I trade Crypto and that it's Chainlink's chart I can have order book situation and watch it.. it's like with stocks or with forex )
So can I formulate hypotesis like these ones?

''the majority of people bought back in early at this point and and then they sold in this spot. Many will likely take profit at this price point X here and those who are at a loss will sell at a loss at this price pont Y'' . What do I need / what tool would I need to do this type of analysis? just using the volume?

 

[Enivid]

Basically what you say it is : ''even if you look at the volume at a given support, you cannot conclude that that support will hold''

My question is: can I formulate some kind f hypotesys like these (I trade Crypto and that it's Chainlink's chart I can have order book situation and watch it.. it's like with stocks or with forex )
So can I formulate hypotesis like these ones?

''the majority of people bought back in early at this point and and then they sold in this spot. Many will likely take profit at this price point X here and those who are at a loss will sell at a loss at this price pont Y'' . What do I need / what tool would I need to do this type of analysis? just using the volume?

You would need a mind-reading machine, though even it would fail eventually as people change their mind all the time . You could hypothesize this with an order book (knowing where the biggest concentration of TP/SL order volume is, but orders change all the time, especially if the price moves.

 

[Onanak]

You can try to lean on Relative Strenght Index. I think that it is great indicator of overbought and oversold market. Try to figure out how to apply this indicator in your trading method. You will find a pattern and you just need to follow it