A study in Support/Resistance levels

I'm starting this thread as a place to study and learn about Support and Resistance levels.

My trading style has been influenced by Wisdomfx and his power levels. While I don't completely understand how he comes up with his dead-on levels, I have noticed very interesting and very tradeable S/R levels.

These levels are either in conjunction with, or outside of, the obvious levels. If they match up with a previous turning point, it is a great signal that level is still strong and highly likely to be tradeable the next time price reaches it.

I invite anyone to share insights in how they find and trade S/R levels. I'd like this thread to be a place to share information. I use no indicators and would like this to be an indicator-free environment. There are tons of other great threads for that discussion.

It should be mentioned, as with Wisdomfx's method, I look to take 15-20 pips per trade.

When price make a sharp move up or down, as along the blue line down, there are often places where it hesitates before resuming its move. This is exhibited either in opposite-color candles, or long shadows on candlesticks. Later, when price retraces back to these levels, it very often bounces off.

A) There are about 10 candlesticks in the area beneath A. But if you notice just to the left, there is a long lower shadow. And to the right are a pair of matching upper shadows. All three of these shadows meet almost precisely, so it's a great place for a level.

B) PA also hesitated here. I marked the level there because it was a very close place where the end of the three candle bodies met. Matching the lower shadows also would've worked.

C) The long shadows for the two left candles met exactly here. This tells me price bounced hard off these levels before making it past on the third candle. This was really a great level. On Aug 12, resistance was very strong here (it might also have been news day). And the next day it turned into solid support.

Again, taking 15-20 pips on these trades was quite safe. This method often leaves a lot of pips on the table, but it makes up for it with a high win rate.

Thanks. Can you post some charts if you have time?

This next chart was from the same timeframe as the other. The tradeable S/R level is the white line. Two things told me this was valid:

1) Along the blue trendline up, PA spiked at A.
2) The two candles directly above "B". The bottoms were solid bodies and both matched up.

PA bounced from this level a couple times at C.

Now along the blue trendline, price first spiked up at A. But notice that 4 of the next 5 candles had solid-body bottoms that matched up. This coincided with PA to the left of the trendline. Nothing amazing about that. In fact, if you had gone back a week or more, you would have seen this was a solid S/R line anyway.

But the point is that those 4 matching candles are telling us that the S/R line is still strong and playable. It was easily tradeable for +20 pips (where the chart says "Support) and another +20 underneath at ("Resistance"). And many more lower TF scalping as well, if that's your cup of tea.

Nice one Biz! I'll study it some more. Even if I don't trade strictly off it, I can use it to confirm what I'm seeing on the naked charts.

By the way, I assume you would have traded it at the time it was happening?

I don't show it in the chart, but my actual trades would have come later around Aug 12-13.

Please post again sometime!

Here is another trade I just took for +10 pips. The risk was also 10 pips. Nice action that would have gone for a +18 max.

The chart explains reasons for taking the trade.

Waw, is that how Wisdom calculates the power level?

Nice idea Magic Trader for the lines. I jut eye balled some charts and that method seems pretty good.

Juicyt

I'll post some more soon too. I've been busy recently creating S/R levels that have been good for a week. Here is an example post:

http://www.forexfactory.com/showthre...=9848&page=128.