Welcome to this video and support and resistance zones. This applies to Forex, stocks and futures. one of the questions that I receive a lot is how to draw support and resistance levels like a professional.
In this video you’ll learn how to find support and resistance in day trading and swing trading. I’ll also show you how to draw support and resistance lines in mt4 or any other charting platform.
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SUPPORT AND RESISTANCE ZONES
And so the market goes and goes and goes and boom well there it goes. OK so it went up and that could have been a potentially good entry let’s say. Now so here is the basically money management has two things money management and then also just the realities of the market. So let’s talk about money management first support and resistance zones are for a couple of different purposes.
Number one for entry is as we kind of illustrated here but also for exits. So if I have a let’s say for example I was short here and I was looking to take a profit at this support level then we never would have reached it. So that would not be good. And again from going long it didn’t quite get down to my support level either.
SUPPORT AND RESISTANCE ZONES INDICATOR
So I actually prefer to look for the lowest low of the real body is not of the low of the bar. Could be an open or a closed but the open body means the green section or the red section or green section here. And there is a very logical reason for that and that is that the markets are not so neat and tidy the mark is if you’re trying to make your technical analysis to picture perfect where you are looking for praise to go to the exact Penny, Pip, tick. We’re even to the little pixel on the chart. It’s just very unrealistic. That’s not how the market works. Markets are huge. Today we’re dealing with global markets of millions of people and trillions of dollars and everybody’s doing different things for different reasons.
Markets are not that pinpoint accurate. They’re a little messy, and so, therefore, are support and resistance zones. There’s a little bit of randomness in the market always a little bit of noise if you will. So you’ve got to allow for that noise. So that’s the logical reason from a market perspective just an auction place perspective if you will and then the money management part of it is that again if we are short and we’re coming into a we’re looking to take profits into a in this case a support level then I don’t want to miss it because of the market anyway.
HOW TO DRAW SUPPORT AND RESISTANCE LEVELS LIKE A PROFESSIONAL
That’s it. That’s what you got. So people do price all the time different shapes of price indicators and price bars and price patterns and these kind of horizontal support resistance levels. Those are price levels but very few people are trained to use the time access. The on the X access here and it’s very important because that’s really what we’re looking for we’re looking for the confluence of time and price. The intersection of those two things.
Today’s video is just about price levels it’s poor resistance Zola’s let’s look at one more example a little different example here now we have a moving average. This is the 50 period simple moving average. And you see it down there. So now how do we account for zones. This is the question because a moving average is really dynamic support and resistance zones. In other words it doesn’t stay the same praise as a horizontal line does across time.
HOW TO IDENTIFY SUPPORT AND RESISTANCE LEVELS IN FOREX
It changes price over time. So we’re not manually drawing it on there we can’t mainly draw a high a low. We’re at the real body. It’s just there it’s plotted mathematically. So how do we account for resume’s when it comes to a dynamic support resistance level. Well here’s how I do it. And there’s many different choices but this one’s worked very well for me for a long time.
So let’s just look at this bar here. So this part does come below the 50 SMA. Do I consider that this has broken the support for example if you look back here it held the support of the 50 SMA are pulled the support of the 50 SMA here and now it comes down. And do I consider this is still holding the support of the 50 SMA on this bar.
HOW TO FIND SUPPORT AND RESISTANCE IN DAY TRADING
I call that the flypaper phenomenon where it’s stuck. It’s like a little mouse that gets one foot stuck on the white paper the rest of his body is off its other four feet around. But that one little foot stuck in there there’s like a cat quite get off. So that’s what I consider this. It’s still touching it and that allows for the randomness. Now what about the next part the next part is a dog who got the wrong drawing tool on there.
That’s how I account for the support and resistance zones. Two different ways to account for zones as a review and if you have horizontal support resistance then I account for them by using the real bodies of the lowest bars and not to the highs and the lows. And for dynamic support resistance we have to have a bar completely clear the dynamics of where resistance such as a moving average and the real body has to be below the bar that was touching it.
RESISTANCE ZONE TRADING
We consider that we have now broken through that zone. So these things might seem minor but they actually become very important because sometimes technical analysis can be very deceiving because it’s so precise because it’s so mathematical and we’re looking at these lines and everything is very precise.
The problem is the dynamics of the market as I talked earlier because of the huge scale of them the dynamics of the market are not as accurate and therefore you need to have something like this built into your treaty methodology to account for that noise that randomness that chaos.
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BTW, if you’re interested in the indicator that I use personally for very precise entries and exits. I’m happy to share that with you. Just send me an email at firstname.lastname@example.org, and I’ll show you how to get access to that indicator.
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