I recently encounter a new challenge, Draw correctly Support and resistance line, I thought I was doing great a while ago but know it started to get confuse in my head.
I know they are area, so more likely to be playing around but not exactly on a specific spot.
But do you draw them from the HIGH/LOW or from the closing/Opening prices ? or that is part of the area ?
I try to draw one line of S/R above the price and one line of S/R under the price, but I get confuse to where to i draw it now at the Low(closing opening) or at the high (closing opening).
My guess was if the current price is under I check the first S/R above the price in the past not specially the closest in time, but the closest from the current price( so if the current price is at 1.5000, the closest in time S/R resistance is at 1.5050, but the closest in price is at 1.5025, so I draw my S/R at 1.5025 and not 1.5050) and I draw my S/R at the the Low of the area and not the High. and Inversely from price under the current price, I draw my S/R line at the high of the S/R area.
Is how I am doing it, but it can be very confusing. check the screenshot
I have a few screen shot where you may be able to see why I am getting confuse
My guess was if the current price is under I check the first S/R above the price in the past not specially the closest in time, but the closest from the current price( so if the current price is at 1.5000, the closest in time S/R resistance is at 1.5050, but the closest in price is at 1.5025, so I draw my S/R at 1.5025 and not 1.5050) and I draw my S/R at the the Low of the area and not the High. and Inversely from price under the current price, I draw my S/R line at the high of the S/R area.
But I think I need to correct When looking above the price, I check a resistance where the price can’t go above (so the High of the S/R) and inversely When I check the S/R under I check for a resistance where the price can’t go lower, (so the Low of the S/R) well I guess.
Support and Resistance is very much subjective in most instances, gather a room of 10 traders and split them up, ask them to find five levels and all 10 traders will come back with different answers - all possibly correct depending on the justification.
But it’s not all bad news, there are tools available to help you identify these levels and get rid of noise. For example you may want to look into Pivots, Fibs or simply try measuring the strength of your chosen support and resistance (how many times historically has this level provided reliable - it’s suggested that the more times a level holds the stronger it happens to be - until of course it gets broken)
So you need to decide, are you going to choose these levels by either
discretionary approach
rigid rules by using indicators
Just take a moment to realise that in this instance the indicators are being used as an aiding tool, and not as a trade signal provider - this is how they should be used.
agree with Jezzode, you may draw S/R-levels similar to Fibonacci-levels, there is place for subjective reading of chart. To get a ‘coach’ to compare your personal ideas you may try an indicator like this one (take the 2nd of the 4) -I saw you’re using MT- and have a look at Stratman’svideo. Youtube shows a lot of ‘How to correct set S/R’ and other, opening the video’s website.
Use 5-day New-York close charts for best results ( NY-close: D1 candle closes when NY market closes ).
[ e.g charts from: AxiTrader, Pepperstone, HotForex, RoboForex, etc ]
