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Help me on Support/Resistance lines

  • #1
  • First Post: Sep 17, 2012 12:39am Sep 17, 2012 12:39am
Hi forumites,
Before entering the market, what is the best way to measure the validity or strength of the support and resistant lines. ie where exactly is one supposed to draw the lines. How many pips below and above the current market price. I am still getting a little bit confused here.

How am i to be sure that the support and Resistance lines i have drawn is strong and will give me the real picture of the current market situation.
  • #2
  • Sep 17, 2012 4:28am Sep 17, 2012 4:28am
Hi! I used to calculate pivot lines here: http://www.earnforex.com/pivot-points-calculator It's a very easy and quick way. Also there are many indicators which do calculate support/resistance lines, for example, Pulse Fibonacci + Pivot
  • #3
  • Sep 17, 2012 5:31am Sep 17, 2012 5:31am
Quoting richdadeze
Hi forumites,
Before entering the market, what is the best way to measure the validity or strength of the support and resistant lines. ie where exactly is one supposed to draw the lines. How many pips below and above the current market price. I am still getting a little bit confused here.

How am i to be sure that the support and Resistance lines i have drawn is strong and will give me the real picture of the current market situation.

You are asking the Billion dollar question.
The answer is there is no way to measure any validity in any thing in forex.
Any complicated analysis if price will hold or break a specific point is worthless.. will do just the same flipping a coin.

If you want to build and an strategy around S/R ...
Assume 1 of the 2 ( hold or break) ..if you choose Break , trade it always break... set a pending order in the other direction as your desire SL ... and wait for next signal. When next signal comes, choose to open a new order, or take one of the existing order out (only if in profit). Obviously that accomplish being long or short 1 net position in the desired direction.

The Netty gritty of the line drawing is not that important... a few pips more or less in ok.

J.
  • #4
  • Sep 18, 2012 7:36pm Sep 18, 2012 7:36pm
Quoting richdadeze
Hi forumites,
Before entering the market, what is the best way to measure the validity or strength of the support and resistant lines.
I have read a lot about how to determine those lines, night I have analyzed and so on. Than somebody told me those aren't line and I shouldn't search for lines, because there are RANGEs. All my study collapsed in a second - and he had right. Than I did the same thing, I have searched the range ( I am doing not too sometimes) than somebody explained to me those ranges, lines are moving, aren't staying there, because I draw a few line on my chart. Moving averages, Bollinger Brands they show where is WAS, but not where it is NOW.

Here it shows the most precise where it was a suppor / resistance from Oanda clients side with a bit latency, which can be different at other broker, and those who are moving the price probably aren't moving from Oanda's accounts, but that Orders positions are the real support, resistance levels - for me at least. Those orders will resist -maybe- to price movement, not my lines, in my chart
I want to buy PATIENCE
  • #5
  • Sep 18, 2012 8:22pm Sep 18, 2012 8:22pm
Quoting richdadeze
Hi forumites,
Before entering the market, what is the best way to measure the validity or strength of the support and resistant lines. ie where exactly is one supposed to draw the lines. How many pips below and above the current market price. I am still getting a little bit confused here.

How am i to be sure that the support and Resistance lines i have drawn is strong and will give me the real picture of the current market situation.
Hi richdadeze,

When drawing an s/r line, first thing that comes to mind is materiality. That means two things, time frame and time spent around a price level - for a horizontal line, or times a trend hits a trendline.

A time frame of Daily bars is a really good place to start. Reason is that a longer time frame allows you to see how price has been behaving for at least the last 3 months. 3 months is a good lenght material time to find strong s/r levels.

Then you may want to start identifying highs and lows, Dow Theory style, and the longer time those trends hold, or the horizontal s/r holds, the more poweful the move will be once it either holds/breakout.

If you draw on a few charts, maybe 8 to 10 different pairs, you can find good opportunities often with good daily information. I recommend looking at weekly charts, specially end of week when markets are closed.
Also, I find weekly pivots very good indicators.

Lastly, s/r is a bit dangerous because when a trend is bullish, resistance is always being tested and eventually broken. Many traders make the mistake of fading new highs, based on a resistance level. Those counter markets trades can be painful at times. The same with longing support.
  • #6
  • Sep 19, 2012 4:39pm Sep 19, 2012 4:39pm
Quoting richdadeze
Hi forumites,
Before entering the market, what is the best way to measure the validity or strength of the support and resistant lines. ie where exactly is one supposed to draw the lines. How many pips below and above the current market price. I am still getting a little bit confused here.

How am i to be sure that the support and Resistance lines i have drawn is strong and will give me the real picture of the current market situation.
Your charts and lines are simply not enough, you need other kind of information to know where buying/selling interest is sitting at. Start reading a news service such as IFR.
  • #7
  • Sep 20, 2012 12:31am Sep 20, 2012 12:31am
Calamardo is correct. S/R areas on price charts are an aftermath of an order imbalance and can't predict anything. You'll need to figure out where the orders are which will stop price movement and cause it to reverse. Some cause price to continue, some absorb price, ect ect. It's figuring out how a market moves.

I outlined a scenario in this post a while back: http://www.forexfactory.com/showthre...62#post5814762 I took that order info and marked it on the chart and price acted accordingly when it met those levels.
  • #8
  • Sep 20, 2012 12:45am Sep 20, 2012 12:45am
Here's some free info to get you on the right path of seeing where S&R would be: http://www.forexlive.com/blog/2012/0...nce-levels-14/ Try to figure out why orders are placed at those levels though. Once you're experienced at seeing where buy/sell orders are place, you'll be able to view markets in a whole new light.

Now; will S/R hold up, what size stops you should use, ect, those are questions no one can answer. Markets are 100% discretionary. Trade a style that is comfortable to you. Study price around these levels and get a feel for what to expect. Have an exit strategy in place for when price goes against you (because it WILL!). Good luck!
  • #9
  • Sep 26, 2012 4:21am Sep 26, 2012 4:21am
This is a good start

Inserted Video
  • #10
  • Sep 26, 2012 5:19am Sep 26, 2012 5:19am
Quoting PiP-GiRl
This is a good start

http://www.youtube.com/watch?v=raqnZOskTJ8
Good video, basic but gives all the major points needed.
  • #11
  • Sep 26, 2012 5:32am Sep 26, 2012 5:32am
S/R levels behave differently depending on trend. My view is:

Trend up, resistance is there to be broken, support is useless.
Trend down, support is there to be broken, resistance is useless.

The challenge is to identify trend (and its reversal).

TP at a level that gives enough profit.
SL at a level that confirms a trend reversal.
  • #12
  • Last Post: Sep 26, 2012 6:50am Sep 26, 2012 6:50am
hi there, try this thread on this very forum! the .pdf provided by phanti in the first post, I have found to be an excellent resource in helping further my knowledge in support/ resistance and supply demand areas!

http://www.forexfactory.com/showthread.php?t=380676

Peace! x
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