Ok, I’ve been using my own methods in placing Support and resistance lines. Importantly, I only use them as part of my analysis. So for example. If I expect some very important news at 3pm later in the day and I believe that it will push a pair up, I might then use a support line just below the price as an entry point. There are times it never touches the point, times it passes right through (and takes a stop loss) and even times it has just touched the entry point with 1 or 2 pips move past then rallied up 120 pips! The important thing is that I only used as an extra part of my total analysis, combined with my other analysis, which includes trends (MAs, Ichimoku Kinko Hyo, etc) and ranging analysis.
For example, I look mostly at the 4 hour and 1 day charts (I also look at weekly and monthly). Taking the daily chart of the EURUSD, I often open the Stochastics indicator and use it’s highs and lows as important places to place the tops and bottoms of the support and resistance. This can also be done in the 4 hourly charts too. My method is shown in the chart below:
Here you can see where I have placed the orange support and resistance lines (S&R). I have drawn perpendicular lines to show where the S&R lines have originated from the stochastics. I also use Fibonacci to draw support and resistance and I will lend extra weight to S&R where they overstack each other. For example, recently there was major resistance around the 1.07 mark from the 31 March to around 7 April. Prices where trapped in the range between 1.07 and 1.063. Both these where between price highs and Fib levels, showing where there was strong support and resistance, with a breakout just after US jobs report. I find news often the trigger for range breakouts. In this instance I studied the news, the trends (it was in a daily range with weakly positive trend starting - in my analysis). I expected the price to rise with a -ve news outcome. Even though I was correct with the news expectations, the market still turned against me. I believe the buyers just ran out and sellers took the steam. So this is
part of how I use S&R, but I use other tools to aid my analysis that I have not shown here.
Another place I put S&R is where there have been repeated lows or highs created one after the other. An example is the one above and between 16 February and 16 March. This should turn out to be a very important resistance line again should the price drop to this level, as even big banks will use this resistance line at around 1.05.
One last thing I do, I draw small areas or rectangles instead of lines, as the price often touches in mirco ranges instead of definite lines.
Like others have said, it is down to individuals how they come up with support and resistance. I use stochastics and fibs to help create mathematical or concrete lines, but I still use discretion, as my chart also shows where I have not placed lines even though the stochastics have turned.