Perhaps one of the big reasons why many traders do not effectively trade with resistance is that traders do not really understand how to identify support and resistance.

This is the trading technique that traders should invest some time in. Because this is a huge advantage of traders in trading to get high-probability setups.

Let's first list a few ways that support and resistance levels can be identified.

1. Horizontal Support Resistance

As shown below is the horizontal support level:

Below is the horizontal resistance:

2. Support resistance is the round number area (also known as psychological resistance)

The circular price areas usually have the tails of 1.00, 1.10, 1.20, 1.25,.... as shown below:

3. Support resistance level is trendline or price channel

With 2 or more touch points, you can already draw a trendline. If it is an uptrend, it is considered support. The downtrend line is considered a resistance level. Like the two pictures below:

Or the price channel is also considered as a support resistance level:

4. Support resistance is fibonacci

Fibonacci is a great tool for identifying the end of a retracement. Levels above Fibonacci are seen as retracement stops and they function similarly to support and resistance levels. You see the picture below:

5. Dynamic Support Resistance

Moving averages are the ideal indicator to identify dynamic support resistance levels. Since in a trending market, the price has the characteristic of bouncing back after touching the moving average. As shown below:

Tips for drawing support resistance

Drawing support resistance is important. Because if we draw it wrong, it means that the price area to participate in the transaction is also wrong. Thus, the possibility of loss is very high. So be careful with this. Better to waste time than lose money.

When drawing support and resistance, keep the following in mind
  • Newly formed support and resistance levels are often more important than older support and resistance levels, as they represent recent price levels that the market has had a hard time breaking through.
  • If you are using the weekly chart then focus on the resistances of the past 12 months. If you use the D1 time frame, you should pay attention to the support resistance in the previous 1 month. Same goes for the lower timeframes.
  • The larger the support resistance above the timeframe, the more valuable it is.
  • Drawing support resistance should include candlestick tails to more accurately gauge the price reaction to that support resistance level.
  • The price testing the support-resistance level many times proves the stronger the support-resistance level.
  • Support resistance levels are interchangeable. If price breaks a resistance level it can change to support level. And conversely a broken support level can change to resistance level.
  • Support-resistance should be defined as a price zone, not a level.
  • Although the support resistance on the big time frame will be more important than on the low time frame. But if you trade on the low time frame, it is still a good idea to identify the support and resistance on the time frame you trade. At the same time, traders should identify support and resistance levels from long-term, medium-term to short-term to understand the price reaction at different support levels as a kind of practice.
  • If the price reaches support on the H1 chart but it is resistance on D1, it is more likely that the price will respect the resistance on D1 and break through the support on H1.