Mastering SBR and RBS: Key Trading Levels Explained

Understanding SBR and RBS in Trading

Trading can be complex, but understanding key concepts like Support Broken Resistance (SBR) and Resistance Broken Support (RBS) can significantly improve your trading strategy. These concepts are fundamental to price action trading and can help you identify potential entry and exit points in the market.

What is SBR (Support Broken Resistance)?

SBR stands for Support Broken Resistance. This occurs when a previous support level is broken and then acts as a resistance level. Here's how it typically unfolds:

1. A price level acts as support for some time
2. The price breaks below this support level
3. The price later returns to this level
4. The former support now acts as resistance, preventing the price from rising further

What is RBS (Resistance Broken Support)?

RBS, on the other hand, stands for Resistance Broken Support. This is the opposite scenario to SBR:

1. A price level acts as resistance for some time
2. The price breaks above this resistance level
3. The price later returns to this level
4. The former resistance now acts as support, preventing the price from falling further

The Importance of Using Line Charts

When identifying SBR and RBS levels, it's crucial to use line charts rather than candlestick charts. Line charts only show closing prices, which helps eliminate noise and makes it easier to spot key levels. Here's why line charts are preferred:

• They show a cleaner view of price action
• They make it easier to identify true support and resistance levels
• They reduce the likelihood of false breakouts caused by wicks on candlestick charts

How to Identify SBR and RBS Levels

Identifying SBR and RBS levels requires practice and a keen eye for price action. Here are some steps to help you spot these levels:

1. Switch to a line chart
2. Look for clear areas where price has repeatedly bounced off (support) or failed to break through (resistance)
3. Watch for a clear break of these levels
4. Observe how price reacts when it returns to these levels

Examples of SBR and RBS in Action

Let's look at some real-world examples to better understand how SBR and RBS work in practice.

Example 1: RBS (Resistance Broken Support)

Imagine a scenario where the market has been pushing upwards and finally breaks through a significant resistance level. After the breakout, the price pulls back to this level. If it holds as support and the price bounces off it, this is a classic RBS scenario.

In this case, traders might look for buying opportunities near this new support level, with a stop loss placed below it.

Example 2: SBR (Support Broken Resistance)

Consider a situation where the market has been in a downtrend and breaks below a key support level. Later, the price rallies back up to this level. If the price struggles to break above this level and starts to fall again, this is a typical SBR scenario.

Traders might look for selling opportunities near this new resistance level, with a stop loss placed above it.

The Logic Behind SBR and RBS

Understanding the psychology behind SBR and RBS can help you better anticipate market movements:

1. Market Memory: Traders remember significant price levels and often place orders around them.
2. Role Reversal: When a level is broken, its role in the market often reverses.
3. Self-Fulfilling Prophecy: Because many traders watch these levels, their actions can cause the levels to hold, reinforcing their importance.

Common Misconceptions About SBR and RBS

It's important to clear up some common misconceptions about these trading concepts:

1. They're Not Always Perfect: SBR and RBS levels don't always hold. Markets can be unpredictable.
2. They're Not the Same as "Break and Retest": While similar, SBR and RBS focus on the role reversal of levels, not just the retest.
3. They're Not Limited to Specific Timeframes: These concepts can be applied to any timeframe, from intraday to weekly charts.

Integrating SBR and RBS into Your Trading Strategy

Now that you understand SBR and RBS, how can you use them in your trading? Here are some tips:

1. Use Them as Confirmation: Don't rely solely on SBR or RBS. Use them in conjunction with other technical analysis tools.
2. Practice Patience: Wait for clear confirmation that the level is holding before entering a trade.
3. Manage Your Risk: Always use stop losses when trading these levels.
4. Consider the Overall Trend: SBR and RBS can be more reliable when they align with the broader market trend.

Advanced Techniques: Combining SBR and RBS with Other Concepts

As you become more comfortable with SBR and RBS, you can start combining them with other trading concepts for more robust analysis:

Order Blocks

Order blocks are price levels where significant buying or selling occurred before a strong move in price. They can often coincide with SBR and RBS levels, providing additional confirmation.

Imbalances

Imbalances in the market, such as gaps or areas of quick price movement, can often lead to SBR or RBS scenarios. Watching for these imbalances can help you anticipate potential SBR or RBS levels.

Multiple Timeframe Analysis

Using SBR and RBS across multiple timeframes can provide a more comprehensive view of the market. A level that acts as SBR on a daily chart might be part of a larger RBS pattern on a weekly chart.

Common Challenges When Trading SBR and RBS

While SBR and RBS can be powerful tools, they come with their own set of challenges:

1. False Breakouts: Sometimes, price may briefly break a level but quickly reverse, leading to a false signal.
2. Overtrading: Not every SBR or RBS level will lead to a good trade. It's important to be selective.
3. Ignoring the Bigger Picture: SBR and RBS should be used in context with the overall market conditions and trend.

Tips for Successful SBR and RBS Trading

To make the most of these concepts, keep these tips in mind:

1. Practice, Practice, Practice: The more charts you analyze, the better you'll become at spotting these levels.
2. Keep It Simple: Don't overcomplicate your analysis with too many indicators or concepts.
3. Be Patient: Wait for clear confirmation before entering a trade.
4. Manage Your Risk: Always use stop losses and don't risk more than you can afford to lose.
5. Keep a Trading Journal: Record your SBR and RBS trades to learn from your successes and mistakes.

The Future of SBR and RBS Trading

As markets evolve, so too do trading strategies. However, the concepts of support and resistance, and by extension SBR and RBS, are likely to remain relevant. They are based on market psychology, which tends to persist over time.

That said, traders should always be open to adapting their strategies. As more traders become aware of these concepts, the market may adapt, potentially changing how these levels play out.

Conclusion

SBR (Support Broken Resistance) and RBS (Resistance Broken Support) are powerful concepts in price action trading. By understanding how previous support can become resistance and vice versa, traders can gain valuable insights into potential market movements.

Remember, these concepts are tools, not guarantees. They should be used as part of a comprehensive trading strategy that includes proper risk management and consideration of overall market conditions.

With practice and patience, SBR and RBS can become valuable additions to your trading toolkit, helping you identify potential trading opportunities and manage your positions more effectively.

Happy trading, and may your support always hold and your resistance always break (when you want it to)!

Article created from: https://www.youtube.com/watch?v=kZ90fteWSQw