In this video below, I share about how I use support and resistance in my trading strategy. This simple approach has helped me trade full-time profitably. Well, it’s simple but tough to master. It requires a combination of support and resistance, Fibonacci retracements, Fibonacci extensions, True RSI and proper trade management.
SUPPORT AND RESISTANCE SIMPLIFIED
Back to basics my friend.
Let us first properly define what Support and Resistance levels are before moving further (to avoid any confusion).
Resistance = any level that is above price.
Support = any level that is below price.
Support and resistance levels are essentially key levels a person should watch out for because previous price action between the bulls and bears have given us a key sign into the importance of those levels. See price failing to break above this resistance line for the past 3 times? That’s clearly a strong level to pay attention to.
If you see price failing to break below this horizontal support line multiple times, it is a strong level to pay attention to too. One of the most common questions we’re asked is how to determine resistance and support lines – especially which ones are the most important since based on how we draw them, almost every level can be an important level.
DIAGONAL VS HORIZONTAL
Which is more accurate?
Quite simply put, there are many ways to draw support and resistance lines, but only a few correct ways to do so.
There are ascending/descending lines such as diagonal lines (most inaccurate) because the subjective nature of taking the proper levels is too subjective. If you get one point off by 1 pip, the line goes way off tangent.
There are channels which require at least 2 points on top and 2 points below which are fairly more accurate. This is because you are essentially taking a minimum of 4 points.
Then there are horizontal support/resistance levels which are the most accurate because it leaves extremely little room for subjective interpretation. To this tune, we’ll be focusing on the key support and resistance levels from such horizontal lines/areas.
WHAT MAKES THE TFA SUPPORT AND RESISTANCE INDICATOR DIFFERENT?
Versus the other 100 indicators out there.
What makes this support vs resistance indicator different from all the hundreds others out there is that it filters out a lot of the weak levels and on top of that, it doesn’t only find support and resistance levels, but instead more importantly, find support and resistance areas. Now, this is not some “demand/supply zone” indicator which many people are familiar with, it’s way better than that.
Using areas (instead of lines) gives us a much better idea on which levels to watch out for. After years of testing, the most important support and resistance levels can be broken down into these 3 :
1. Swing highs / Swing Lows
These are levels where price just reacts and bounces off multiple times. The more times price reacts off these levels, the stronger they are. Here’s a picture of how swing highs look like :
2. Pullback Resistance / Pullback Support
Pullbacks occur when a swing high/low has been broken – then price makes a “pullback” to the level. In the picture below, you can see that once our swing high resistance is broken, it turns into an “overlap support”.
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