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How to spot the best Support and Resistance levels

Traders often make a big fuss and mess out of Forex trading as they make things complicated. Such over-complicated activity often covers using way too many indicators that you often would fail to see the chart itself, which you need to see in order to define the price levels.

In “How to find strong support and resistance levels” training two professional Forex traders look into one of the most common trading tools, support and resistance levels from supply and demand perspective.

Support and Resistance are some of the most common TA tools that most traders ignore because it seems too simple to work. Well, then they end up blowing up their entire accounts! In short, you can not trade if you don’t understand the logic behind support and resistance!

Support and Resistance definition?

Support and resistance levels are price levels or zones where, most of the times, the market sentiment shifts from bullish to bearish or vice-versa

  • Price action gives strong S/R levels
  • They are based on fundamentals that take into account the repetitive nature of human nature
  • They are used to optimize the price and timing for a trade
  • Most of the times it is recommended to establish an area of ​​Support and Resistance due to volatility and the large number of market participants
  • A support level/area may become a resistance level/area and vice versa

Finding support and resistance is indeed easy. The secret is in your charting style, you should keep your charts clean and trade based on healthy market principles.

Finding the Support level

The support is a level/area below the current that will create a price reversal to the upside or at least it will make it harder for the price to drop below it.

  • it is opposing to the current down-move of the price
  • it can be horizontal or dynamic (trend-line or curved)
Different types of Support levels

Different types of Support levels

Finding the Resistance level

The resistance is a level or an area above the current market price. Because of the traders’ behavior around these levels, the price will often reverse to the downside or at least it will surpass it with difficulty.

  • it can be horizontal or dynamic (trend-line or curved)
  • It is simply the opposite of Support
Different types of Resistance levels

Different types of Resistance levels

How to spot the best Support and Resistance levels

If you are asking how to spot the best support and resistance levels, you need to follow the below given methods:

CLUSTERS

Probably you are wondering what are clusters? Clusters can be described as the following:

  • Is given by two or more levels of horizontal S/R found in a narrow price range (usually not more than 0.2% of the market value)
  • The different S/R levels often come from different AT tools (previous highs/lows, round levels, Fibonacci levels, etc.)
Clusters example

Clusters example

 

CONFLUENCES

So what are confluences?

Confluences are:

  • The intersection of two or more different types of S/R (trend-liens, horizontal, indicator or time) which offers an area of ​​S/R both in price and in time
  • Projections play an important role in time, given by cycles, fractals or Gann, Fibonacci extensions.
Confluences example

Confluences example

Price Action

You probably have heard about price action before. So how can price action be a part of Support and Resistance levels?

  • The way the price breaches through certain levels will tell a lot about the future S/R of that market
  • Reading the candles on a chart can give you an edge on where the strongest S/R are – especially in markets where the volume is not reliable
  • The logic – the levels/areas where strong players will enter in the market will be heavily defended and therefore, will act as S/R

 

More details can be found in the how to spot the best Support and Resistance levels video recording.

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How to spot the best Support and Resistance levels session was delivered by Adrian Flip, AtoZForex and one of the AtoZ Forex Approved Forex brokers, FidelisCM

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