In this article, I will teach you how to draw support and resistance.
We will discuss support and resistance:
lines,
levels,
zones.
You will learn where and how to find it properly with simply technical analysis technique that works on forex, gold or any other financial market.
Best Time Frame
First, let me note that the most reliable time frame for support and resistance analysis is the daily. The structures that you will find there will be appropriate for day trading, scalping and swing trading.
Perspective
Once you open a daily time frame, you should choose a correct perspective. Because this t.f lets you see the price action even for the past couple of years.
You need to see the market movement for the last 2 months. It is more than enough to identify the recent key levels.
Above is AUDUSD forex pair on a daily. We see the price history for 2 months.
Highs & Lows
In order to identify significant supports and resistances, simply find the levels - the highs and lows that the market respected in the past and from where important movements started.
These are all such highs and lows that meet the criteria.
Zones
When I do the support/resistance analysis, I prefer to perceive it as clusters - the zones, taking into consideration the candle closes as well.
A support zone will be based on the level of the critical low and the lowest closest candle close.
A resistance zone will be based on the level of the high and
the highest closest candle close.
Following such a rule, here are the zones that I identified.
Why?
All the clusters that are identified will be applied as trading zones.
Within the supports, we look for buying opportunities.
While the resistances will be used for selling.
Depending on your trading style, and you choose a proper signal before you execute the trade.
My Advice
Execute support and resistance analysis with care and attention, because it is the absolute basis of any technical analysis strategy.
With incorrect key levels identification, even the best trading strategy will fail.
I hope that the method that I showed you will help you in your trading journey.
