How do you select your support and resistance levels? | Forex Factory

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How do you select your support and resistance levels?

  • #1
  • First Post: Jan 25, 2010 1:34pm Jan 25, 2010 1:34pm
Ive been spending alot of time reading into support and resistance levels and plan to base my trading around entry/exit at these levels. Ive specifically been interested in WMDs Deadly Accuracy thread and Sam Seiden's videos on FX Street. Both concentrate on entering on pullbacks to s + r.

My issue at the moment is that I see alot of potential levels all over the chart. However, Im finding it difficult to pick out the approriate levels to mechanically enter trades at.

Id be interested to hear how people who take a similar approach select their levels on the chart.
  • #2
  • Jan 25, 2010 6:45pm Jan 25, 2010 6:45pm
This is perhaps one of the most basic and most difficult areas of technical analysis. It takes practice and real chart time to fully understand it. That said, here are some rough guiding points:

1. First draw areas where price trends and areas where it consolidates. As soon as you classify the two, you will be able to draw the appropriate support and resistance.

2. Look for areas where it has flipped (prior support becomes new resistance).

3. Look for areas where it has stopped multiple times at relative extremes. The appropriate "look back" period is simply to where the consolidation began and where the trend ended.

4. Look for areas where other traders will look. Support and resistance for the most part is a self-fulfilling prophesy. Look where other traders focus and you'll experience the "aha" moment.

5. Practice. This point is more important than the rest. Open a chart, go back in time for a few years and then drag one candle at a time. Spend 10 hours solid doing this and at the end of it you will understand support and resistance.
  • #3
  • Jan 25, 2010 7:02pm Jan 25, 2010 7:02pm
Quoting Lobo2010
Ive been spending alot of time reading into support and resistance levels and plan to base my trading around entry/exit at these levels. Ive specifically been interested in WMDs Deadly Accuracy thread and Sam Seiden's videos on FX Street. Both concentrate on entering on pullbacks to s + r.

My issue at the moment is that I see alot of potential levels all over the chart. However, Im finding it difficult to pick out the approriate levels to mechanically enter trades at.

Id be interested to hear how people who take a similar approach select their...
at the very top of forex factory there is a tool called search ... this will allow to search things that have been discussed 100 times already.
  • #4
  • Jan 25, 2010 10:51pm Jan 25, 2010 10:51pm
I totally agree that there are a lot of support and resistance level in a chart but the key lies in the major support and resistance and not simply any support and resistance levels.

For me, I uses 3 types of support and resistance

1. Identify swing highs and lows: there are numerous swing highs and lows in a chart but I am only interested in the major ones. The major swing highs are those that have 3 or more candlesticks on it's left and right side and the same applys to major swing lows. The major swing highs will then acts as level of resistance and the major swing lows will then act as level of support.

2. Fibonacci level: the fib usually acts as strong level of support and resistance especially the 0.382, 0.5 and the 0.618 levels. Your trading platform will definitely have the function to help you plot your fibonacci levels and you can then use them as major levels of support and resistance.

3. Pivot points: the pivot points are usually tools used by those big dogs traders and therefore it is usually very significant. Before I trade everyday, I will surely plot the pivot levels as they are good areas of entry and exit. Therefore are a lot of websites that provides free pivot point calculator that you can use. All you have to do is to enter the values and it wi automatically gives you the levels. Very useful level of support and resistance.

Hope that i am able to shed some light for you.
  • #5
  • Jan 26, 2010 3:39pm Jan 26, 2010 3:39pm
As an example, Ive looked at placing some support/resistance lines on the GBPJPY chart. Ive tried to keep the number of levels down, so have chosen some levels from the weekly (blue squares) and daily (purple line) only.

Theres a number of other potential areas, however could have ended up placing lines over the whole thing.

Would appreciate some comments.


thanks
Attached Image (click to enlarge)
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  • #6
  • Jan 27, 2010 12:08pm Jan 27, 2010 12:08pm
Hi, any opinions?
  • #7
  • Jan 27, 2010 1:54pm Jan 27, 2010 1:54pm
Well you are getting there. You missed probably the most important one which is 150. Remember round numbers and .50 are important.

I like the way you have made them a zone. The daily could do with being in a pastel shade and set as background.

Try putting some Donchian Channels on the screen. Where they go horizontal for any length of time on any given time frame, that's S/R. Then delete them because they are obtrusive.

Don't forget closer S/R on any given time frame is stronger.
Gone to a better place
  • #8
  • Jan 28, 2010 12:32pm Jan 28, 2010 12:32pm
Re. round numbers, which ones would you take into account? For example, with GBPJPY, if you took into accoutn every 0.5, then you would have SR at every 50 points.
  • #9
  • Jan 28, 2010 3:54pm Jan 28, 2010 3:54pm
Honestly you would do well to keep an eye on it. Practise makes perfect.
Gone to a better place
  • #10
  • Jan 28, 2010 3:54pm Jan 28, 2010 3:54pm
Thanks for asking, by the way.
Gone to a better place
  • #11
  • Jan 28, 2010 9:41pm Jan 28, 2010 9:41pm
I would suggest going to have a look at market footprint charts. Although the volume is generated with FX futures, it is still a very good tool to identify levels of importances and heaviest volume in terms of price.

I have heard a few who find these heavy volume areas useful. Attached a chart of one example, its from Market Delta. One thing about it thou, you have to pay extra for it, unless you use ninja trader. There is a plug in for ninja trader in FF somewhere. Use the search function.


Good trading!http://farm3.static.flickr.com/2500/...864f77a5_o.png
Life is a school for the soul
  • #12
  • Jan 28, 2010 10:00pm Jan 28, 2010 10:00pm
There's a lot of good advice on this page about identifying S&R levels, but my favorite method these days is by using Renko charts. The turning points on the higher brick (30+ pips) settings give strong indication of where the market barriers lie.

I don't have a picture handy but if you see the charts you'll know what I mean.
  • #13
  • May 24, 2010 8:36pm May 24, 2010 8:36pm
Quoting domino
at the very top of forex factory there is a tool called search ... this will allow to search things that have been discussed 100 times already.
I love people that are such dicks. I believe the whole point of starting threads is either to help, or get help. Yet people that don't have a intelligent answer say do a search cause they cant find the answer either. I would say your on the right track by using weekly charts for S/R. IMO I would suggest looking at the areas where its clear to YOU. There should be those spots that just stick out at ya. If they don't I would bump up to monthly.

I would rather trade a S/R that I know then trade one I'm not sure and get burned.

Check out Clockwork's thread he has great information on trading support and resistance.
http://www.forexfactory.com/showthread.php?t=155431
  • #14
  • May 25, 2010 12:10am May 25, 2010 12:10am
Quoting naddix
I love people that are such dicks.
I love the newbie that keep bringing up the same thing over and over and over again because they dont know how to search. It really is much faster to try and search on basic topics and you can usually find an answer much quicker than waiting for someone to come along and answer your inane questions... again and again. They dont put a "similar threads" section at the bottom of posts for the fun of it.

If you even spend more than a few weeks around here you will start to notice the trend, and if you dont you may want to re-evaluate your new profession as it is all about spotting the trends...

good luck to you... something tells me you will need a lot of it!
  • #15
  • May 25, 2010 12:37am May 25, 2010 12:37am
Quoting traderjai_inhi
I love the newbie that keep bringing up the same thing over and over and over again because they dont know how to search. It really is much faster to try and search on basic topics and you can usually find an answer much quicker than waiting for someone to come along and answer your inane questions... again and again. They dont put a "similar threads" section at the bottom of posts for the fun of it.

If you even spend more than a few weeks around here you will start to notice the trend, and if you dont you may want to re-evaluate your new profession...
Maybe he wanted to have a discussion about with people instead of just reading about it. Maybe there are new members here that have a different take on it that isn't in previous threads. Does it affect you at all that he started a new thread? Does it change your life adversely? Does it make you feel like a big man to criticize newbies and judge their actions because it's not what you would do? You should turn that critical eye of yours on yourself.
  • #16
  • May 25, 2010 12:40am May 25, 2010 12:40am
Quoting traderjai_inhi
If you even spend more than a few weeks around here you will start to notice the trend, and if you dont you may want to re-evaluate your new profession as it is all about spotting the trends...
lol oh snap!
Congratulations ScalaFX for coming out of the closet!
  • #17
  • May 25, 2010 10:53pm May 25, 2010 10:53pm
Quoting traderjai_inhi
I love the newbie that keep bringing up the same thing over and over and over again because they dont know how to search.
dude ... you've been a member for almost 4 years ... what do you care what happens in the rookie section ... and actually, searching a term as basic as "support and resistance" returns 3,470 results ... that can be a little intimidating or overwhelming in trying to find a place to start ... give a noob a break
  • #18
  • May 26, 2010 2:57am May 26, 2010 2:57am
Quoting Lonestar
Maybe he wanted to have a discussion about with people instead of just reading about it. Maybe there are new members here that have a different take on it that isn't in previous threads. Does it affect you at all that he started a new thread? Does it change your life adversely? Does it make you feel like a big man to criticize newbies and judge their actions because it's not what you would do? You should turn that critical eye of yours on yourself.
Quoting tbardolph
dude ... you've been a member for almost 4 years ... what do you care what happens in the rookie section ... and actually, searching a term as basic as "support and resistance" returns 3,470 results ... that can be a little intimidating or overwhelming in trying to find a place to start ... give a noob a break
I can see the thread has really helped them out a lot. Wow, 9 whole responses related to the topic at hand. Just imagine if they had found one of the bigger S&R threads and asked their questions there. Bet theyd get more responses than 9. But then again, why would anyone want to go to the source when they can just keep spinning their wheels asking the same thing a 1000 different ways.

I also like the fact that so far neither of you have had any meaningful contributions to the thread. At least I suggested using the similar threads and search function.

But then again, judging the quality of your advice:

Quoting Lonestar
Here's my guidelines for martinglale: if you think about doing it, have someone kick you in the nuts.
maybe you really dont have anything meaningful to contribute... What was that about a critical eye, oh glass house dwelling person...
  • #19
  • May 26, 2010 3:09am May 26, 2010 3:09am
I've just done a .pdf search on google --


FOREX SUPPORT RESISTANCE


-- and it yielded this article from Brian Dolan, who is one of the big
names in forex.


Make The Trend Your Friend In Forex


Try that and see if it helps.
HELL IS EMPTY, ALL THE DEVILS ARE HERE. -- Shakespeare
  • #20
  • May 26, 2010 3:43am May 26, 2010 3:43am
Scroll all the way down to the bottom of the page and you will see links to "Similar Threads". Check those out.

It takes chart time to develop an eye for the levels and each trader will see it a little different. I think most of the suggestions in this thread are good, but keep in mind you have different s/r levels on different time frames as well. The rule of thumb is the higher the time frame the more weight the S/R level has.

Also remember, support and resistance levels will either hold or they won't.


P.S. pull a fib from the swing low to the swing high on the monthly chart and look where price stopped. 50% fib level + near the 1.21 round number + an area where old resistance turned support. 'Confluence'
Don't wish it were easier, wish you were better. ~ Jim Rohn
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