Swing trading base

Good health, readers of the trading blog. are one of the main topics technical analysis, and are considered in conjunction with the doctrine of trends ( what is a trend, trend line, how to spot a trend reversal). In concluding his research, Hockheimer wrote: "Empirical evidence has been obtained that convincingly proves that the movement of prices in the markets is not chaotic." We have already seen this for ourselves, studying trends that are not formed in a straight line, but through tops and bottoms. And what lies behind these peaks and troughs? What are support and resistance levels?

What lies behind the support and resistance levels?

Why do traders constantly look for support and resistance levels on the charts? Why are they so important? The fact is that they show us the fundamental law of any market - supply and demand. The increased demand that occurs in the bottoms after the price decline generates buyers, which leads to a rise in the stock and the formation of a support level.

When the price rises to a certain level, buyers begin to sell their shares to take profits, thus generating an increased supply, which leads to a decrease in the price and the formation of a resistance level.

Where is the support level on the chart, and where is the resistance level?

Regardless of the direction of the trend, the support level is always placed lower. current price(at the bottom) and the resistance level is higher (at the top). Example:

The support level is at the bottom (area of ​​low market prices) and the resistance level is at the top (area of ​​high market prices)

How to understand the expression: the levels of resistance and support change roles?

If the price has overcome the resistance level, then in the future it is likely that it will become support. This also applies to the opposite. Example:

The price overcame the resistance level and used it on a pullback as a support level.

How to draw support and resistance levels: through extrema of shadows or candle bodies?

In candlestick analysis, shadows are treated as market noise. But in swing trading, concepts are distinguished as an area of ​​support and an area of ​​resistance. That is, we say that the stock finds support in the area of ​​$19.65 - $20.0. There is no level, just like a line. Therefore, draw support and resistance levels as shown in the charts above, with shadow capture.

When is a support or resistance level considered broken?

There are several options here. I, based on candlestick analysis (find out what advantages candlestick chart ), I consider the closing of the current candle above/below the level as a breakdown. It happens that after overcoming the level, for example, on the daily chart, the price returns the next day. But, if you look at the weekly chart, you can see that only the shadow of the candle has passed the level. And this, as mentioned, is not considered a breakdown (which is why I do not like to trade them). The more timeframe support and resistance levels appear, the more significant they are..

Support and resistance levels and swing trading

We will consider all this in detail later when studying the swing trading strategy using a moving average. But what can be said in general terms? You yourself understood everything. Following the basic law of economics, buy when there is demand (from a support level) and sell when supply rises (from a resistance level). Here is an example:

Areas highlighted in green correspond to purchases from support levels.

This also works in reverse, in a down market, like this:

Areas highlighted in green correspond to sales from resistance levels.

Do not forget that gaps (price gaps) and round price values ​​can also serve as support and resistance levels.

On this chart, the gap and the $10 mark simultaneously served as a resistance level, and further support. Use them also in your trading. Just remember the basic rule: buy when there is demand and sell when supply rises.

The significance of support and resistance levels depends in direct proportion to:

1. Timeframe values
2. Number of times tested
3. Volume values ​​during testing
4. Duration

I would be glad if you found information on trading blog useful to yourself. Thank you for your attention. Leave comments on the topic support and resistance levels. Happy trading!

Hello my dear traders! Immediately I ask you to stay at the monitors of all beginners stock market and those who, in making strategic decisions, are accustomed to relying solely on technical indicators or super-complex techniques for analyzing the state of the market. I decided to devote today's article to no less effective and significant tools for analyzing price movements. So, we have resistance and support levels on the agenda. Unlike all other methods of analysis only lines know how anticipate changes in the state of the market and make appropriate adjustments to the price movement. Let's quickly find out what these lines are, how to draw levels and trade on them?

As always, I will begin my review with an acquaintance with theory. I just want to say that qualitative and accurate or foreign exchange market Forex is impossible without building clear resistance and support levels. It is these tools that we need to determine the trend and find chart patterns that will tell us about the upcoming price change. Assessing the strength of these lines will provide you with the information you need to predict the trend and find a reversal point.

What are support levels?

support lines or Support, if you turn to the English version, we will call you price indicator, within which the strongest positions are collected to purchase. It is worth noting that long positions in this case not only stop downtrend, but also unroll him in the opposite direction. In cases where the falling trend reaches the support line, it, like a diver, reaches the bottom, and then repels from it. Thus, on the chart, the level acquires a horizontal position.

You can build a level by drawing lines through the areas price consolidation. The border below the price will be support. It is in this area that sellers cannot overpower buyers. There are situations when the support and resistance lines change places. In such cases, the definition of support boundaries will be relevant for resistance boundaries as well. The strength of the levels directly depends on how the price bounces off them.

What are resistance levels?

As for resistance lines, or Resistance, - they are called price indicators, serving as the basis for the concentration of quite a large number short positions ( for sale). This quantity is sufficient not only to stop the uptrend, but also to expand his. At the moment when the price touches the resistance border, it is beaten off with a subsequent reversal in the opposite direction. Resistance can take both horizontal and almost horizontal positions.

Definition and construction of lines

In order to as much as possible efficiently and correctly to build support and resistance levels, it is better to start construction from the extreme parts of the area of ​​consolidation (Congestion Zones). But to use the maximum and minimum price indicators for this does not make much sense, since their effectiveness in solving this problem leaves much to be desired. The whole point is that locality the lows and highs are just the panic of small traders. In turn, the outskirts of the consolidation zones make it possible to understand where strong market players changed their minds.

Basic moments

Strong Resistance and Support lines are the reason for the trend reversal. If the borders do not have sufficient strength to reverse the trend, then the trend will only stop for a short time. As for trading along these lines, traders, most often, sell own assets when the price reaches the border Resistance, and buy them when the contact occurs at the border Support.

The properties of support and resistance levels are very important when developing trading systems and analyzing market conditions. Resistance and Support play the role of a kind of " mirrors”, which reflects the general mood of sellers and buyers in relation to certain assets.
Whenever the value of an asset reaches these limits, we understand that the market and its participants have changed their mood. It is generally accepted that reaching a certain limit is a kind of signal prices. We can interpret it in the following way: one part of the players in the market has lost the desire to sell assets, while the second part has no interest in buying them. So this moment we're facing a fall trading volumes and market fading.

Resistance and Support act as a kind of "mirror", reflecting the general mood of sellers and buyers in relation to certain assets

Trading by levels

To give you an idea of ​​how to trade by levels, I will give you a vivid example of the price reaching the border Support. In this case, the price parameter moves down by bearish sellers, but does not find the necessary support from them due to the reduction in bullish buyers in the market. This is due to the rapidly falling value of assets, scaring away buyers. In this case, the market is in a state of " oversold”, and the value of the asset drops to a psychological limit, beyond which, in the current conditions, trading is simply not interesting.

If the price parameter reaches the border Resistance, then we have the opposite situation. Despite the fact that it is impossible to determine how the price will behave in such a situation, statistics show that In most cases she fights off the border and goes in the opposite direction. An exception can be considered cases with a strong trend movement, when a temporary stop of the price still ends with a breakout of the border and the continuation of movement in a given direction. In this case, we are faced with the return of life to the market and either breaking through the price of an important psychological level, or repulsing from it. At such times, there is a significant jump in trading volumes.

If we consider the levels from a technical point of view, they are lines drawn through the values ​​of the price parameter, which are approximately at the same level. In case of Support line goes through minimum price values, and with Resistance- through maximum. The levels themselves are not exact values, but only occupy a certain price range. range, which has a range of tens of points both in one direction and in the other.

Building directly

The rules for drawing support and resistance lines are quite simple. All you need to do is to find in the selected time interval two price values ​​of minimum and maximum, respectively. It is them that we will use as supports in our construction. It should be noted that in many cases, Resistance also assumes the role of Support. This happens due to the fact that the value of the asset, having managed to overcome the limits of Resistance, did not change direction, but reached the next level, which was no longer possible to overcome. After fighting off the latter, she headed back to Resistance, who now acts as Support.

If you are already thinking about how you will set support and resistance levels, then I can make you happy. To do this, you do not have to resort to any indicators or templates. To draw the boundaries you will be enough standard toolkit contained in the MetaTrader5 or Transaq terminal panel. Personally, I find a simple horizontal line to be the most convenient tool. Use it to set on the chart borders, where the local highs and lows of the price parameter will be located.

Unfortunately, no trader can make a forecast with 100% accuracy. No one knows for sure how the price will behave after approaching the level: it will bounce off it and change direction, or it will break through it and continue moving along the specified route. Therefore, if you do not feel confident in your own abilities, you feel a lack of experience, it may make sense for you to think about it. Professional the intermediary not only knows which assets to invest in at the current time, but is also well acquainted with the intricacies of technical analysis, which is so important for a profitable investment. Personally, I use the services of a broker just2trade. To register, click on the button below.

just2trade broker website

How to find support and resistance levels on a chart?

To find support and resistance zones, we need to find on the chart the areas in which there was high degree of trading activity. The secret is this: trading large amounts of assets at the same price level leads to the fact that a huge number of shares are transferred from one owner to another, and the price at the same time becomes much more meaningful than the usual monetary expression of the value of this asset. Thus, the next time this level is approached, the price will definitely react to this, because there will definitely be those who want to do at this level, and those who decide to exit the auction. In other words, this zone will collect the interests of the largest players in the stock market, which, as we know, influence the price movement.

Examples

As you can see on the chart with a timeframe of 1 hour, the price did not go beyond the formed local maximum for a long time. 4.65$ (line resistance). At the beginning of the chart, the price dipped to 4.36$ (local level support). In this place, I bought 250 shares and set the value for sale 4.71$ , and on the 6th day the price reached the level I needed. I sold the position and fixed the profit 7% . The price may go further up, but in our business the main thing is turnover Money. It is better to take another position with a higher probability of making a profit.

On this chart, the levels are expressed much more conveniently for understanding. price line 3.45$ is strong support, you can see how the price bounces off this level and tries to go up. Resistance 3.62$ weaker, but still this level did not allow to go further along the uptrend for 6 (!) days. I bought shares at a price 3.5$ at the end of the first day indicated on the chart and set the blue line at the level 3.62$ which satisfied me. On the second day after the purchase, I sold the stock, and they went up even more, which is normal. No need to bite your elbows about the fact that you could earn more. Take note that a trade is successful if the trader has taken 60% of the trend move.

Do not forget that price lows (highs) can also act as the strongest support and resistance boundaries. No matter how the situation on the market develops, the price will sooner or later return to the previous level and provoke the conclusion of new transactions. It is the latter that will become a kind detonator for output volume. The higher it is, the stronger the level will be.

Trading range or trend channel

There are situations in which the simultaneous construction of Support and Resistance is required. This is due to the fact that when the levels are formed in parallel, a kind of trading range is created or, as it is also commonly called, Trading Range. Many traders know him as consolidation zone. Have you heard about? According to them, the rectangle symbol is trading range, which indicates the continuation of the trend line. That is, the probability that the price will fix in this TradingRange over a long period of time is quite high.

This is due to a greater extent with a high concentration of long and short orders at the boundaries of the trend corridor. The effectiveness of trading within this zone rises whenever the market successfully tests support and resistance lines.

If the market breaks through one of the lines, we are faced with a situation where the market enters either new levels (if it has managed to continue the existing dynamics), or a reversal of the current trend.

Flow of support into resistance and vice versa

The main rule of technical analysis says: a broken resistance level will certainly be followed by the transformation of the latter into support, and vice versa. If a price breaks resistance, a situation is formed in the market in which the quantity demanded significantly exceeds the quantity supplied. It is this state of the market that entails an increase in the price parameter. Most likely, after the price returns to its normal state, the activation of buyers will again push the chart up.

If price breaks Support, then we are faced with a situation where the amount of supply takes precedence over the amount of demand, which causes the price to fall. In this scenario, we can count on the activation of sellers only when the price parameter reaches the border of the hole. It is believed that trading by levels in this format is the most attractive due to minimal risks and rather high profits.

How to determine how strong a level is?

A trading strategy based on the use of resistance and support lines is based on the analysis the strength of these lines. According to Forex classic Murphy, the strength of a level will increase depending on how long prices fluctuate in its range. That is, the increase in strength is affected by the growth in volumes and the duration of the use of the line. Elder characterizes the line as strong or weak, based on how many times it has come into contact with the price.

Conclusions from what was written

At the end of this review, I want to say that trading along support and resistance lines without using any auxiliary tools will not give you the desired effect. Lines are simply price values ​​from which a serious move is possible. The probability that the value of an asset will go up is the same as the probability that it will go down. Ignoring auxiliary tools in such a matter will turn your trading into "Russian roulette". Don't risk your money and be reasonable. Remember that it is the support and resistance lines that have become the basis of many profitable trading strategies. Learn to use them wisely and good luck. Subscribe to blog updates. See you right here!

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Support and resistance lines are indicated on price charts as horizontal lines and are used by traders to determine the optimal moment to enter the market. Also, with their help, you can determine with a fairly high accuracy which trend prevails in the market: bearish or bullish.

Support and resistance lines are among the main indicators that are used by both beginners and professional traders.

Resistance

In the figure below, you can see that price level, rising up, rests against a kind of ceiling, after which it turns around and begins to move in the opposite direction.

At the point where the price chart turns, traders who want to sell the currency usually enter the market. They open so many orders that it is possible to stop the price increase and force the price chart to move in the opposite direction.

If the price value during the upward movement stops several times in the same place, then this line is called the resistance level.

Most traders use this line to create short-term orders or as a profit level when opening long-term trades.

Support

In the figure below, you can see the line around which most of the buyers enter the market.

During the downward movement, the price level rests on a kind of “floor”, in the area where buyers open such a number of orders that stops the price from moving down and causes it to increase.

If the price stops in the same place while moving down, and then starts moving in the opposite direction, then this line is called the support level.

Support and resistance lines, whose drawing rules depend on the type of chart used, are used in most Forex trading strategies.

Determining the level of resistance and support

To determine the levels described above, you should find the points at which the price chart reverses in the opposite direction.

In the picture above, you can see that the price movement stops at about the same level. If we connect with a straight point of the maximum price value, we will get the resistance level.

In the following figure, you can see that the price chart, when moving down at the same level, stops and starts growing.

By connecting the minimum price value with a straight point, you will get a support level.

Building resistance and support levels during a flat

A flat is characterized by fluctuations in the price chart within the same resistance and support levels until the price range breaks out.

Looking at the chart above, you can see that at point number one, the price level is testing the resistance line, and at point two, the price level is testing the support line. At point three, the price level breaks through the price range.

At the time of the flat, the resistance line appears as the upper limit of the existing price range, and the price line as the lower one. The breakout of the existing price range is carried out at the moment when sellers work together to defeat buyers.

By learning how to correctly draw such lines on the chart, you will easily understand how to trade support and resistance lines. It should be remembered that for successful trading, in addition to support and resistance lines, you need to use additional indicators.

Drawing resistance and support lines on a chart with Japanese candlesticks

There are two ways to plot support and resistance lines on a candlestick chart.

The first method involves using Japanese candlesticks to build shadow levels. You can see how this is done in the figure below.

Next, I would like to dwell on how to correctly build support and resistance lines using the second method, which involves using Japanese candlesticks to build body lines. You can see what it looks like in the picture below.

How to place support and resistance lines on a candlestick chart depends on the trader's preferences.

Now you know how to draw support and resistance lines on various charts. More detailed information you can get by watching the video support and resistance line.

Resistance and support line indicator

If you, even knowing the secret of building a resistance and support line, do not want to do this work manually, then special applications for Metatrader 4 will help you.

You can download a specialized support and resistance line indicator for free on the Internet. There are a huge number of such applications, but in more detail we will focus on only one.

The support and resistance lines indicator called PowerDynamiteAreas is great for beginner traders. Despite the rather pretentious name, this application perfectly copes with the tasks before it.

This application is installed in the same way as any other indicator. After that, you need to launch MetaTrader 4, select the timeframe that you usually use and launch PowerDynamiteAreas. Then the following picture will appear in front of you.

Immediately after the launch, the indicator draws support and resistance lines. As you can see in the picture above, the resistance level is shown with red lines and the support level with blue lines. Using the settings of this indicator, you can change various parameters, as well as the number of displayed levels. Having opened the indicator settings, the following window will appear in front of you.

In the window that opens, you can see the following settings:

1. The line "PivotStrength" displays the degree of importance of the levels displayed on the screen. It is recommended that this line be set to a value between one and seven.
2. The line "MaxLookBackBars" is responsible for how many last bars or candles the indicator will take into account.
3. The "PivotPipDiff" line allows you to set the distance in points between the levels displayed on the screen.
4. The "ZonePipSize" line allows you to set the required line thickness.
5. The "MaxLevels" line allows you to select the required number of displayed levels.

A well-tuned PowerDynamiteAreas indicator is able to automatically build support and resistance lines that will allow you to choose the right time to enter the market.

In this article, you learned how to identify support and resistance lines on a regular chart, as well as on a candlestick chart. Experts recommend using special indicators to build resistance and support levels, which make it possible to save a huge amount of time. In addition, using indicators, you can be sure that the resistance lines will be built correctly.

I hope this article will help you learn how to use support and resistance lines and become a truly successful trader.

What are support and resistance levels

The level of support in trading is under the price and kind of support it. The resistance level in Forex is over the price and, as it were, restrains its further growth, resists it. Imagine that the graph is a room. Then the floor is the support level, and the ceiling is the resistance level. PS levels are marked most often with the help of horizontal lines.

Important feature! Forex support and resistance levels should not be taken as a thin line. The price does not necessarily work out the level point by point, often it may not touch the level directly and sometimes it can pierce it. This is in the order of things, so think of these levels not as a line, but rather as resistance support zone. The width of the zone can vary approximately in the range of 10-250 pp, sometimes more. Such a large gap depends on the timeframe on which you are trading. The higher it is, the wider the PS zone can potentially be.

Support and Resistance Strategies

Seeing that the price is approaching strong support or resistance, you can make well-defined trading decisions. As we already know, the price bounces off the level more often than breaks it. Keyword here "more often", this means that sometimes the level can be broken and there will be no rebound, but this option is less likely.

In this regard, it is quite logical to use a simple strategy, namely support for buying, and resistance for selling.

In addition, support and resistance levels can serve as filter. If yours gives a signal to buy, but you see that the price is approaching the resistance level (rests against the ceiling), then most likely it is better to miss such a signal, because there is a high probability of a rebound. It is the same for selling: it is better not to open a sell position at a strong support level.

By the same principle, PS levels serve to signal amplification your trading strategy. Thus, a buy signal from your TS is much more likely to be profitable if it occurs at a strong support level that strengthens this signal. The same goes for selling: selling at a strong resistance level increases the chances of a successful trade.

Breakout of support and resistance levels

It is quite natural that sooner or later the price breaks through any level. Breakouts are:

• false, then a rollback occurs and the price returns beyond the level boundary
• true, then the price continues to move in the direction of the breakout.

If the breakdown turned out to be true and the level was really strong, then reverse Support becomes resistance and resistance becomes support. In other words: the floor becomes the ceiling and the ceiling becomes the floor.

Reverse - transitional support and resistance levels

Such a transition from one level to another can occur many times, and the more often, the stronger the level and the more attention should be paid to it. To determine what is in front of us - a reversal or a false breakout, you need to look at the price action. If, after the breakdown, the price consolidated, that is, it began to bounce off the level from the other side, or simply continued to move in the direction of the breakdown, this is a reverse. If there was a rollback and a return beyond the previous border of the PS level, we have a false breakout.

Local support and resistance levels

In fact, the local level of PS is almost the same as the usual one. The main difference is that it is simply smaller and has an impact on the price behavior only on some small section of the chart, that is, locally. After the level is overcome and the price has gone far enough from it, they, as a rule, completely lose their significance. But do not underestimate the importance of local levels, they play a big role and many trading strategies actively and successfully use them.

Important note. What is a local level on the older TF, starting from approximately H1 and above, on the younger TF becomes quite a full-fledged PS level! Here is an argument for the importance of local levels. Local levels are also actively used in technical analysis based on figures and .

Round levels in Forex

In addition to the above, the price also reacts to round levels. For example: 1.15000, 1.16500, 1.17500, 1.18000 are all round levels. Forex traders pay attention to them and use them in the same way as regular PS levels. This is a purely psychological moment - people love round numbers and strive for them. And since crowds of traders react to these levels, they all move the price together. You can mark such levels manually, or you can use round level indicators. I recommend the second option as the most convenient. Pay attention to how the price reacts to round levels.

What are dynamic support and resistance levels

All the levels that we have just analyzed are essentially static: I have marked everything, they remain in their places. Dynamic support and resistance levels are levels that change over time. The clearest example is the indicator moving average(Moving Average), which can serve as a dynamic level.

Please note that the price tends to bounce off the moving average, just like normal support and resistance levels. At the same time, MA does not stand still, but always follows the price. This is the dynamic, changing level. The higher the MA period, the stronger this level. Read more about the King of Moving Average indicators and watch the video. Other indicators can be used as a dynamic level, for example, , etc.

Confluence of support and resistance levels

Sometimes it happens that different types of levels - dynamic, ordinary strong levels and round levels merge, that is, they overlap one another. This is not necessarily accurate to a point, especially for dynamic levels. In the screenshot, the red horizontal line indicates a strong resistance level, the green dotted line indicates a round level. As you can see, they matched, plus the moving averages here act as dynamic levels. Such a merger is very favorable and is a serious trading signal. As you can see, this soon led to a sharp price move.

Video Lesson: Forex Support and Resistance Lines

PS levels are the most important element of technical analysis. Understanding them is actually not difficult, but you need the right approach. To learn how to quickly find really significant levels in Forex, and not litter the chart with minor support and resistance lines, you need practice and need our next lesson, in which I explain step by step the sequence of actions when designating . Be sure to study!

– is a good level. All reversals and rebounds occur only from levels, no indicators and trend lines can be more important than the point of purchase or sale of a major player. After all, a good level is a place where big money comes in.

The article will describe how to find levels correctly? With all explanations and pictures.

What is the support level

Often, stock speculators observe a stop point on the chart, from which a rather large rebound occurs, the price is kept and not allowed lower. This is called the support level, the price may fluctuate above it for a long time, but as soon as it approaches this zone, it sharply reverses. There is basically one reason for this given level support is considered important for a major player, he will hold it with all his might - until he fulfills his goals. The trader's task is always to find the right support and resistance levels, because only with the help of a major player does the price move, only in this way the trader has the opportunity to take a good profit. The picture below shows an example of a fairly strong support level.

What is a resistance level

The situation is identical to the one described above, only the task of the resistance level is not to let the price go above a certain area. The market is also run by major player, he regards a certain zone as important. And with each approach of the price to this zone, the groats will throw up contracts for sale. Its task is to satisfy all longists, and even more so, to provoke a price drop. From this conclusion, there is nothing more important than finding the right support and resistance levels on the chart.

How to determine the correct level

Before starting trading, the task of each trader is to determine the entry point, it will naturally be best from a strong level. When opening a chart, analyze what state the market is in, in most cases the market is flat. Designate the upper and lower borders of this sidewall. Trades are made only from the borders, we trade from the upper border to the lower one and vice versa. There is no need to get into a trade in the middle of a flat trend, where the price behaves almost 50/50 and it will be extremely difficult to guess the subsequent movement. Only on the upper and lower borders of the flat will there be correct support and resistance levels . Another clue is that when the price approaches the level or tests it, you will notice an increase in the horizontal volume, this indicator will indicate that someone is holding the level. Pay attention to the picture below, at the level and its testing, an increase in volumes is clearly noticeable.

How to trade support and resistance levels

To trade from strong levels, you must have several criteria.

1. From a strong level, the price will bounce quite strongly
2. A strong level, namely a price reversal in its area, will always be accompanied by a large volume.
3. A reversal from a strong level should always be accompanied by returns from upper savings (trading).

Having opened the chart, find the area from which a good reversal occurred. It is desirable that after the rebound, the price once again returned to the level and tested it. Now you will have every reason to consider this level strong. After that, you can safely place a limit order to enter the position. It is better to use limit orders, the entry will be more accurate and at the best price.

After sending an application, expect it, you don’t need to worry and think that the price will not return to the level anymore, in most cases the arrival is mandatory. When the price comes to your previously set limit, pay attention to the horizontal volumes. If the level is correctly chosen, they should increase. And after entering the trade, the price should almost instantly rebound. If it starts to blunt at the level, close the position - this means that the pressure to break through the level is increasing.