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How to Find and Draw Support and Resistance Levels: A Complete Guide

Updated: May 11

Understanding support and resistance levels is fundamental for traders across all financial markets. These levels are crucial indicators used to identify potential reversal points on price charts, where an asset’s price might change direction. In this comprehensive guide, we’ll dive into how to effectively identify and draw these levels, providing you with practical insights and visual examples to enhance your trading strategy.


A drawing of Support and Resistance in a sideways market.

What are Support and Resistance Levels?


Support and resistance levels are key concepts in technical analysis, referring to specific price points on a chart that tend to act as barriers, preventing the price of an asset from getting pushed in a certain direction.

  • Support Level: This is a level where the price tends to find support as it falls. This means the price is more likely to bounce off this level rather than break through it. Essentially, a support level is where the buying interest is strong enough to overcome the selling pressure.

  • Resistance Level: Conversely, a resistance level is where the price tends to find resistance as it rises. Here, the selling pressure overcomes the buying pressure, making it difficult for the price to break through this level.

These levels are not always exact numbers. They often represent a zone or range where the price can stall or reverse.



Identifying Support and Resistance Levels


1. Historical Price Levels

The simplest way to identify these levels is by looking at the historical price data on a chart. Points where the price has repeatedly turned around or consolidated, are potential support or resistance areas.


2. Psychological Price Levels

Often, round numbers such as 1.3000 on a currency pair or 100 on a stock price serve as psychological support and resistance levels because traders and investors typically use these round figures as reference points.


How to draw Support and Resistance in Forex.


Drawing Support and Resistance Levels


Step-by-Step Guide:


Go up a Time-Frame: The higher the time-frame, the stronger and more obvious the levels become so if for example, you are trying to draw your levels on the daily chart, it's a good idea to start on the weekly.


Use the crosshair: Use the crosshair tool to quickly identify the biggest rejection areas before marking your levels.


How to draw Support and Resistance in Forex.

Use the rectangle tool: Rather than a single line, consider drawing zones around these levels to account for the price action touching these areas multiple times. This can be done by using the rectangle tool instead of a single line.


Use candlestick wickes: Use the tip of the candle wicks as much as possible to help delineate the areas. The higher the number of wickes inside the rectangle tool the better, and at the same time making the area as narrow as possible.


How to draw Support and Resistance in Forex.

Now repeat the process: Repeat the same process to add other important areas to the chart.

It should look something like this:


How to draw Support and Resistance in Forex.

Go down a time-frame: Finally, we reverse the process and drop down one time-frame to get our desired outcome, a chart with strong and reliable support and resistance areas.


How to draw Support and Resistance in Forex.
Notice how the areas we draw ended up being around big round numbers.

If you liked this tutorial, head over here to get more information about how to draw market-turning support and resistance.


Conclusion

Support and resistance levels are powerful tools in a trader’s arsenal. By effectively identifying and utilizing these levels, traders can enhance their understanding of market dynamics and improve their decision-making. Remember, the more times a support or resistance level is tested (without breaking), the more significant it becomes. Use this guide as a foundation to develop a nuanced approach to these fundamental concepts in trading.


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