Drawing Support & Resistance Lines

Hi everyone,

After getting some really useful advice on another thread I started I had a look at my charts and it dawned on me I have never really learned how to draw support and resistance lines to find points that price might bounce off/Break through.

Of course I can always find them in hindsight.

Say we are looking at the Daily chart, How far back to you go to find s&r and do you ever delete them off your charts?

I should of also asked can pivot points be used instead of finding S&R zones?

Hi,

We can make mistake to find support and resistance zones. As you are a new trader, you can use of Fibonacci retracement technique to find support and resistance zones. For Fibonacci you have to find recent Swing High and Swing Low. Mostly Traders looked into recent prices which have been traded. So in Fibonacci retracement in certain prices can be seen. For your better understanding, there are levels you can see in Fibonacci as 61.8%, 50%, 38.2%, 23.6%. Mostly traders concentrate on 61.8% and then 50% level.

Pivot point is good for finding support and resistance zones. In my opinion, Fib is better than pivot point. It’s differ according to the user.

  • Jim

Actually, you can [I][B]only[/B][/I] find them in hindsight.

[I]Past price action[/I] is precisely what they represent – those levels in the recent past where price has reacted, by pausing or by retracing.

When you open your Daily chart, you are probably presented with about 100 candles (100 days of price action). That’s normally enough range for finding valid S/R levels – [I]unless[/I] the pair you are looking at has been nearly dead flat (i.e., no significant price action) for those 100 days, in which case you would scroll back another 100 days or so to find those levels where there was significant action.

Start at the right edge of your chart, and look to the left to identify swing highs and swing lows. Pay special attention to levels that have been touched and have held 2 or more times. Not all S/R levels are equally important. Learn to distinguish between strong and weak levels. You can even use horizontal lines of different widths on your charts to alert your eye to the relative importance of the various levels you have identified.

Don’t overload your chart with too many S/R levels. Concentrate on the important ones.

As for deleting them, it’s perfectly fine to wipe them off every day, and start over with fresh eyes.

Old levels can get [I]really[/I] old.

No, absolutely not. [I]Pivot levels are totally arbitrary[/I], and are no substitute for real S/R levels.

The whole idea of pivot levels is that markets respect certain magic percentages of the previous day’s range. That’s [I]sometimes[/I] true, to the extent that a system like pivot points can be a self-fulfilling prophesy. That is, if enough players expect a market reaction at a pivot level, their own actions will contribute to making that reaction happen. But, this is a pretty weak basis for determining your S/R levels.

[I]Real S/R levels,[/I] on the other hand, display the actual, recent price action of the specific pair you are looking at. They show you something about the real-world, rather than magic percentages.

All that having been said, [I]pivot levels which happen to be in confluence with real S/R levels[/I] can offer you a degree of confirmation regarding those real S/R levels. To the extent that the true-believers in pivots take action based on those pivots, they will reinforce the real S/R levels where confluences occur. But, don’t base your trading decisions primarily on pivot levels.

I disagree completely.

Fibonacci [I]-- even more so than pivot points --[/I] is a system of magic numbers (23.6%, 38.2%, etc.).

Fibonacci retracement levels can serve to reinforce real S/R levels (as pivots can, as I described above), but they are no substitute for real S/R levels.

[I][B]In other words, you have to start by finding real S/R levels.[/B][/I]

If you can do that without “making mistakes”, then you can do without Fibonacci, altogether.

Maybe. But, don’t base your trading decisions [I]primarily[/I] on either one.

.

Thank you both for your reply’s, I will look into both over the next few days.

Fibonacci is [B][U]definitely not[/U][/B] a way to find Support and/or Resistance. Fibonacci is simply a maths equation, it is not even a derivative of price its self.

You look for past support/resistance by using price and price only. It is price that reacts at these levels in the first place. The fact that Fibonacci can sometimes agree with support/resistance levels is caused by absolute mass market belief. Fibonacci is a self-fulfilling prophecy. It is a prediction that directly or indirectly causes itself to become true, due to positive feedback between belief and behavior.

Support and Resistance comes first - testing to see if it agrees with Fibonacci comes second. Fibonacci does not cause support and resistance.

I am not mentioning that the Fibonacci retracement provides support and resistance. It helps to find the support and resistance zones. We have to look at the retracement in these levels.

I think I may have it, I am trying to upload a pic but whenever I try it doesn’t give an option to load from my laptop and if I select from a website it crashes. Its a little frustrating as I would like to get some opinions if I have done it right.:46:

How did you get on with this, MissPipa?

One thing as well is to use the ‘double zeros’ or whole-number levels… I am trialling a system based on that, and there is some statistical evidence that whole-number levels are strong S/R levels…

I find it helpful when using lower timeframes to identify s/r levels on higher time frames. When the levels on lower time frames are also significant levels on the higher timeframes, thats a good indication of a strong s/r level.

If market retest from a specific level more than two times, then please count this level as a S/R level! In a range, the upper and lower level is also known as resistant and support! Yes, pivot point is another important level for counting market trend status! You can use Google and YouTube, there you’ll get so many useful contents on S/R!

I agree that too many supports and resistances will confuse you and you will not have a clear view of the chart. Use only the most significant ones and also you can have a look which levels are overlapping with the Fibonacci retracement levels.

I think I have it, Just need to wait and see. Only looking at daily charts from now on so takes a little time to confirm it.
I’ve looked in at whole numbers in the past as I was trying to find a lazy way to find S&R and I found although price does react around the double zeros there to far apart to use on there own.
I think what I need most is the practice but patience is not one of my virtues lol

Hey Miss!

I’ll be more than happy to provide input on this and give you the lazy way of finding S/R + Live trades taken this week off of it so you can see the example then see it in action.

(Please note, I am a swing trader that scalps on the H4 timeframe, so I find S/R on the H4-D1 and W1)

Anyways, Let’s stop by the EURUSD H4 chart


Now, here we have a beautiful clean chart. (We are going to focus on this week’s trading/trades to make this info nice and relevant.)

On this higher timeframe, we can see with clarity, obvious tops and bottoms that have acted as S/R levels and that would be very good zones for future S/R levels.

I have the 1 EMA over the chart so I can get the exact closing price peaks and valleys to place my levels like so,


The levels you see drawn were drawn off of the obvious peaks and valleys (Pyramids and Vs or S/R or Supply/demand zones however you want to call them haha)

The same concept would be applied to the D1 or W1 to find a relevant level to place your buy or sell limits off of. In this case, I based all my trading off just the H4.

Here is the Live example of Sunday start to Wednesday profit taking (To put things into live perspective)


Here is the Profit taking as it happened live (You can open your H4 EURUSD chart right now and confirm


(I’ll continue this on the next reply since I can only add 5 pictures per post)


Continuing from the last picture, Here is how this played out on the second batch of sell limits as seen above,


All sell limits for this trade were placed on the D1 using the same concept of S/R I explained in the beginning.

All T/P levels were placed on recent highs or lows on the H4 (I always choose the one nearest to my entry points.)

I’m an H4 scalper, so I never hold trades that long or target S/R levels that are too far, but I hope that my reply was able to be of help!

-Sam

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