Drawing Horizontal Support and Resistance Lines

Filed under: Learn Forex Trading |

Much of my own personal trading, and indeed the live trade signals that I have been giving out, revolve around trading price action signals at significant areas of support and resistance. But how exactly do you draw in these horizontal lines on your charts?

 

To begin with, I just need to clarify the technical terms. A support level is when price is moving up and then retraces and is held up by a level that supports it and stops it moving back down further. Or conversely, in the forex markets, price could be moving down, and then it retraces and is stopped from moving up further by a level that supports the downward move. A resistance level, on the other hand, is a level which price has trouble breaking through. If price is moving up, it may continuous get stuck at a certain price and be unable to break through. This is a resistance level. Or conversely, price could be moving down and could continuously get stuck at a certain level. This is also a resistance level. However, I often refer to all of these levels as ‘support/resistance’ levels, as very often, old resistance becomes new support, and vice versa.

 

Now, drawing horizontal lines on your charts to mark in these significant areas of support/resistance is not an easy task, and more importantly, you should know that it is not, and cannot be, an exact science. The reason it cannot be an exact science is because it is open to human interpretation. What I do it look at all the swing points on the chart, and where price is reacting to the same level over and over, I draw in a horizontal line and then put a transparent green band through it to create a support/resistance ‘zone’ (see any of my “Daily Trades” or my “Live Trades Analysis” to see examples of this). I tend to look for levels that have been reacted to at least a couple of times, but the more the better.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>