How do you draw your S/R zones?


ever since I started trading I tried to build everything around S/R zones. And ever since I am looking for a method to draw them somewhat objectively. I struggled when common forex knowledge told me to draw them “where price turned”. That is so immensely subjective that it led me nowhere because I could draw lines wherever I wanted because you can always find an instant when price turned right there. I then tried to use swing points (aka a high surrounded by two lower highs on either side, a low surrounded by two higher lows on either side) but these do not seem to be respected very well.

So I wonder: how do you go ahead? Gut feeling or do you have some rules?


Really no rules. That’s the issues with S/R lines - they are purely subjective and drawn at any place they will always have reasonable explanation. The second point is that if you find this “golden rule” sharing it with public will imminently break your edge because other traders will place their bets considering your advantage.
Constant winning rate with considerable gains may be ensured only with information asymmetry or speed advantage, any other tricks with excellent MM will hold you at breakeven or maybe small gains.

To develop in this way you may use volume data available in futures trading to understand what is the current positioning although many of the big trades made by big banks are invisible in this information, so still you have not complete picture and relying on it won’t provide accurate signals

Frankly speaking, I am sure about it which is why I am using indicator for this. I think there are various types of indicators available developed in different way but all very useful and effective, so we should always use that to help our self. But, I definitely believe it is awesome if we can work out these things as it’s fairly enjoyable, but still it is not something you would put into necessary thing.

I love profitbaby’s answer - S/R really are subjective, there is no scientific way to identify them such that all traders will agree and more importantly such that the market will agree.

They are a personal guide to places not where price turns but where your acceptable probability of acceptable profit within your own preferred time period turns.

Well S/R is more about areas, not lines. Start from 1H timeframe and while scaling out the zone of S/R gets wider. Place your trade at the subjective support and resistance while set your SL according to the width of this zone. Easy as that!

Hi Codaky… I’m with PB… there is no set method… basically its a line you draw through a “zone” with as many touches of the candles as possible… below the price is the support and above the price it is resistance.

On some pairs it works like magic and others that don’t respect support and resistance at all…

I also use an indicator that is adjustable with set price, touches, periods, daily, extreme and zones.

If you use cTrader the link is below (it’s FREE)

Keep posting. Nice thread

Yes, I also use swing points of market (on daily and H4 only) for measuring reliable support/resistant levels! In addition, I have noticed when market breaks an important level then market makes this level as a reversal pattern! This type of entry points are too much accurate, I actually use maximum trading lot size when get this kind of authentic setup! Besides, I prefer high time frames for measuring support and resistant levels!

Contrary to whats been stated, there actually is an optimal way to identify levels for entry. OP whats up with your profile though no PMs?

I am not aware of any restrictions on my account, but you may as well share what you know with us all :wink:

I’d be curious to hear this answer too - even though I don’t perhaps use S/R in the traditional way myself.

I’ve never read about an optimal way that suits all :o

Statistical data regarding the size/duration of retracements on the timeframe in focus. Use that info to predict where and when the retracement will end. You’ve essential narrowed your options to a handful of levels. Thats as far as I’m willing to go publicly.

Stop reading and start developing a strategy that caters to the market, not you the trader. Do this and you will wind up with something very similar if not identical to what I’ve developed. Its the same puzzle and we have the same objective.

Statistical data regarding the size/duration of retracements on the timeframe in focus

Quite a lot of blabble their, artwilder, did you have a trading thesaurus to hand, perhaps?

Its the same puzzle and we have the same objective.

This, I totally agree with, yet on the same merit we take part in such a secretive industry where apparent successful traders try to hide what they [I]think[/I] is the golden key to financial wealth :wink:

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.

How do you find the accuracy of Fib Levels?

Personally, I can’t use them as they are at best guess work, typically used to project future levels of interest. Should enough of the [I]crowed[/I] also believe in these fib levels then you may well see a reaction within price movement.

Although I understand the mathematics behind Fibonacci and it’s applications, it’s fair to say that these projected levels provided by drawing Fibonacci are ‘hopes’ that a formula will somehow produce profitable results. They are very much subjective, nothing [in my opinion] beats drawing real S&R levels that price has historically produced - this is after all the real deal, and not subjective like that of Fib levels.

To apply extensions of 38.2% and/or 61.8% to a chart in the hope that this is a turning point in price seems a little unrealistic, or unrealistic when considering long term success.

I admit that there have been times that I myself have seen price follow Fib levels to the rule, and it’s an interesting observation. However, it can’t be forgotten that Fibonacci is ONLY a self-fulfilling prophecy: [I]“a prediction that directly or indirectly causes itself to become true, by the very terms of the prophecy itself, due to positive feedback between belief and behavior.”[/I] Which translates to; “if enough traders believe in a certain fib level applied to a price chart, price will react as expected”

Frankly, I don’t use any technical tool for identifying valid support and resistant points of Forex market, I use manual strategy by using horizontal lines; even sometimes I use trend line for dynamic support and resistant levels! I have seen, higher times are more powerful and valid on this identifying issue; D1 is my favorite time frame for all kind technical analysis!

I am also like with simple way, look on daily timeframe as trigger to draw line to predicted on support and resistance area, and then going to H1 to analyze current trend, will open trades following current trend with short term trading plan or sometime as swing trading plan

I agree with you. I use them as general support and resistance levels [I]combined with other analysis[/I], but I add prominence when the fib levels are at or very near other support and resistance levels such as previous highs or lows. I don’t act on them alone. For example; I might use and ADX and Bollinger bands to find that the market is in a range. Then I might decide to use a stochastic, if the stochastic is overbought and the price is just above or moving down towards a 50% fib support level that also happens to be close to a previous low I would consider I have more odds in my favour and would be inclined to place a buy limit at that price. However, if the ADX and bolligner bands indicated a trending situation and the price was moving down, I would likely completely ignore the fibs entirely. I would rather wait till I got some sort of confirmation of the trend ending or even short the market, expecting the price to continue to crash through support levels. Again I always use stop losses. I’d like to add that I do frequently lose on these trades but I have my money management principles I also use and has kept me in good stead.

Again I agree with the good old drawn S&R levels based on history and use them extensively. I just find sometimes using a system to help draw historical supports stops me from seeing too many supports and resistance. I try to find ways of finding the important ones. The same applies to drawn support and resistance and fibs. If enough people are using them it produces a self fulfilling prophecy. If 30% of the market draw support from previous lows and another 30% draw supports from fibs, then when a fib and previous low are aligned it means that 60% of the market may be looking at the same support and resistance level, increasing the likelihood of respect of that line. Again, why I look for more than one indication.

I’m done…

According to your contribution of providing a defenition; you never really started? So it’s ironic to now say that you’re done :wink: