Significance of Support and Resistance levels
Before we go deeper into spotting the exact support and resistance levels on a chart, it’s important to know how much significance we can give to these levels. In other words; is the level strong and holding or weak and likely to break.
There are two things which have a major impact on this significance of the support and resistance levels we draw: Trend + Time Frame.
Support and Resistance vs Trend
In general we can determine three types of trends: uptrend, sideways (ranging) and downtrend:
The significance of the support and resistance depends on the trend we’re currently in. If the level is strong, it’s not likely to break. If it’s weak, there’s a good chance it won’t hold.
Support and Resistance vs Time Frame
The Time Frame is a very important and significant thing to keep in mind when trading Support and Resistance levels. The higher the time frame, the more significant the level. This means that drawing Support and Resistance lines on a Weekly time frame are more likely to hold than Support and Resistance levels on a 15-minute time frame:
|Time frame||Support and resistance levels|
|High (Daily, Weekly, Monthly)||Strong|
|Low (Hourly, 15-minute)||Weak|
Drawing Support and Resistance levels
At PacifyPro we developed an indicator for Tradingview which automatically draws all support and resistance levels on your chart and on every time frame if you want. However, it’s always good to understand where these levels are coming from and how you could draw these yourself.
Swing Highs and Swing Lows vs Trading Range
In order to draw the support and resistance lines, which together will form our trading range, we need to indentify the so called Swing Highs and Swing Lows on a chart:
Above you can notice that when a future candle breaks the past support or resistance a new Swing High or Swing Low will be formed. The are in between those Swing Highs and Swing Lows we can indentify as our Trading Range with Support at the bottom of the channel and Resistance at the top of our channel:
Trading the Range
Keeping in mind the significance of a particular trading range they can be very helpful to make better trading decisions. In short it comes down to: Buy Support and Sell Resistance. Is it really that simple? If you set aside all emotions and stick with your strategy, it could be!
We’ve deleoped an indicator for Tradingview which identifies all Swing Highs and Swing Lows on every chart, on every time frame. It automatically will show you all Trading Ranges. Off course this save you a lot of time identifying the current Support and Resistance levels.
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