Using Support & Resistance to Find Key Levels on your Charts

Updated: Mar 9


What is Support and Resistance?

Areas where price has gone and responded to in the past and can possibly respond to again in the future

  • Basically, historical prices where a large number of orders accumulate to prevent a prevailing trend from continuing

  • Look for the OBVIOUS where you see the price being Rejected or Supported

Some other key words that you may have heard:

  • Pivot Points

  • Comfort Levels

  • Supply/Demand Zones

  • ALL can be related to Support/Resistance.

Typically, these levels can be easier to spot on a longer time frame chart, (15-min, 60-min, 240-min, Daily Chart). In the examples below we use a Daily Chart. When you see these levels on multiple time frames, they become more Obvious. Then transfer the key levels to your shorter time frames for awareness when executing and plotting targets.


Drawing these levels of Support/Resistance on your charts will help give you a plan when the price hits those levels, and seeing how the price responds (levels).

Typically, it will do the one of the following:

  • Pauses/Chops

  • Reverses

  • Ignores the level and breaks through it to make HH in an uptrend and LL in a downtrend.


What do we look for when creating our Levels?

1. Swing Highs and Swing Lows


2. Multiple rejections in a range

3. Be Obvious - don’t try to find a needle in a haystack!

  • Why do we want obvious levels? More traders, especially market movers and algos, are seeing the levels, which increases the likelihood of a group of orders being placed at that level.


4. How did the price react when it got to that level in the past?

Did it move away from the level drastically?

  • How many times did it get rejected?


5. Look for levels that act as both Support and Resistance at different times.


6. How recently was the level created or respected? Note: Time frame subjective on what "recent" is.


You do not need all of this, but the more confluence you have (multiple aspects) the better.


Do you use the Wicks or the Candle Bodies? Or Both?

  • That is a personal preference. You are looking for areas or ranges, not a single price, although you may decide that a single price is very significant.

  • Using zones/ranges (use your Region Y Highlight [Ninja Drawing Tools]) you can encompass both the close of the candles and the wicks together.

Do your best to keep your chart as clean as possible. This will prove difficult at first as you will be doing a lot of drawing on your charts, experimenting with various levels that are obvious.


When you have two closes that are very close to each other, use the Region Y Highlight on your NinjaTrader Drawing Tools as a zone between the two. If you are using another charting software, locate the draw tool that uses Region Y.


Look for BIG round numbers. Typically institutional investors, algos and market movers will use large round numbers as key levels for them to buy or sell. Look back in your charts on a larger time frame and see if those big round numbers (4500, 4800, etc.) show you any confluence with Support or Resistance. A lot of the time, the Resistance becomes Support and vice versa. Does this sound Obvious?





EMAs and Support

When you can find EMAs that line up with your levels, take note! These can be very powerful when combined with your levels.

Typically, the shorter the length of the Moving Average, the weaker the Support or Resistance it creates.

  • This means, for example, price will move through a 10-period Moving Average on a 5-min chart more often than a 89-period Moving Average.

  • The 89-period Moving Average is considered to provide stronger support for price when compared to the 10-period moving average. Traders can use any Moving Average that they like. Some common EMA periods are the 10-, 21-, 50-, 89- and 200-period Moving Averages.

While Support and Resistance, or finding levels, are valuable tools in your toolbelt, they should be used in conjunction with other factors, such as trend, technical indicators, candlestick patterns or other pieces of confluence to help you make a decision.


Levels can help with a target to trade level-to-level and give confidence when the level was Resistance, and now becomes Support.


REMEMBER, while some say that support and resistance doesn't matter - which is somewhat true - It's truly the REACTIONS to your support or resistance that matter..


PLEASE NOTE: With extreme volatility, (ie ATR 7+) levels of Support and Resistance tend to get blown out a bit. Tread with caution!


Sources:

o Investopedia: https://www.investopedia.com/trading/support-and-resistance-basics/

o CME: https://www.cmegroup.com/education/courses/trading-and-analysis/support-and-resistance.html

o Wysetrade: https://www.youtube.com/watch?v=k4PIea7hTZI

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