Trading Support/Resistance levels

Introduction

Support and Resistance levels are probably the most popular method of financial markets analysis and decision-making instrument.

If identified correctly, support and resistance levels allows trader to minimize loss and maximize profit.

There are many methods of calculating support/resistance lines.

Perhaps most popular is to consider previous high as resistance and previous low as support. Contrary method also exists - previous high as support, previous low as resistance (if market has strong trend).

Fibo levels and Gann lines are other popular methods.

While observing markets and working with various mathematical methods I discovered very different method to callculate support and resistance levels. These levels depends not only of absolute high or low (as classic method or Fibonacci), but also depends of trend slope, trend duration and trend patterns (expecially important how tops and lows are formed).

FX-Analyst

Despite there are many different methods to calculate Support/Resistance level, most of them are calculated by trader.

So these levels has some psychological shift. To overcome this problem, some months ago I programmed support/resistance indicator. I think it is very effective.

Support/Resistance indicator (further S/R indicator) has several inputs:
Support/Resistance levels are calculating not only using previous highs and lows (absolute values), but also other chart charakteristics: number of bars of previous trend, trend slope, highs/lows formations.
Calculating Timeframe: user defineable. Could be any Metatrader timeframe (from 1 minute to monthly). Working timeframe does not depend on calculating timeframe. It means your working timeframe could be 5 or 60 minutes and you can see levels, calculated on daily timeframe.
Calculating duration: single or doubled. Levels are a little different if using doubled duration but not significantly.

In this thread I will show how I use this indicator for analysis and trading.

FX-Analyst

This year's Euro history is good example how effectively works support / resistance lines.

First let's look at Euro March chart. You see orange green line around 1.3390 level. This level was calculated from February 29 - first part of March downtrend. If you check Fibo, you will not find any level exactly at March 27 and April 2nd Highs. But according to my method, highs were catch almost pip-to-pip !

Euro downtrend at first part of April generates new resistance lines around 1.3270

When rising Euro mets these lines, it was rejected from these levels. Multiply tops were formed. After 4 tops were formed, Euro was forced down, meeting dash blue line support (marked by arrow). After breaking this line, Euro met new support at dotted blue line.

After breaking dotted blue line, Euro falled more than 800 pip.

what is the indicator.?

You can find more about this indicator and more examples:

http://fx-analysis.com/euro-sr-analysis.html
http://fx-analysis.com/indicators-an...ce-levels.html

so I think this is a proprietary indicator for which we have to pay the site fee in order to have access......?

Would you agree.?

Yes, it is proprietary indicator. But I will give some information in this forum. Your feedback will encourage me to post more analysis here.

Hi guys,

It is true, trading by the levels is the most right way of making money. I am in the Forex market since 2008. I blown up 4-5 deposits when I was still praying on indicators, or looking for triangles, head and shoulder etc using a magnifying glass. The truth is that the market is moved by big and fat guys. When they set a range to put their BUY orders there you have a support and the resistance is where they decide to sell. Their decisions are made based on deep fundamental analyses, which are changed several times in a year. Thus their analyses can not be used for 1 minute timeframe, neither 5 nor even 4 Hours. I think the game starts from the daily chart then goes to weekly and monthly.

So, the first rule is that the levels can be defined on not lower than the daily chart. You like it or not, but those levels are mostly based on historical Fibo Retracement levels.

Next chart shows current situaction for Euro.
Orange dashdot line (resistance) holds Euroat 1.2350 level for all month. Then this level was broken, Euro rised quickly until next at 1.2574.
This level holds two times, pushing price down, first time pushing price down 130 pip, and next time 86 pip.
Perhaps every trader will ask: will this level hold third time ?




FX-Analyst
www.fx-analysis.com

I made a scalp trade.
As price touch daily resistance level I went shor. This trade seems very risky but as price is a little overbought I think I will get some pip from it.



FX-Analyst
www.fx-analysis.com

Last trade was a premature. However it seems that Euro breakout failed. I think price will test August 28th low (around 1.2470)



Regards,
FX-Analyst

Last trade was a premature. However it seems that Euro breakout failed. I think price will test August 28th low (around 1.2470) and maybe will drop lower.

Attachment

Regards,
FX-Analyst