Support/Resistance – What are they and how to identify them
What are support/resistance?
First, we define Support and resistance as those price zones where the forces of supply and demand are most likely to meet. It is at these key junctures where bulls (representing demand) and the bears (representing supply) are most likely to do battle, with the victor determining the market's next directional move. Notice, we DO NOT define support or resistance as an area where price WILL change direction.
How to identify them?
Using different timeframe’s we can easily identify major/minor support/resistance zones on our charts.
Open Weekly chart and change from candles to line chart. Now using the peaks on the line chart and a line tool draw a line at the price where 2 or more land. This is a support/resistance line however we must remember the s/r is a zone and not an exact price (However traders do tend to place orders on these prices) so its sometimes prudent to draw a rectangle around the line to better represent the zone.
(Weekly chart – s/r lines are red)
2. You can repeat the process on the lower timeframe charts to identify the levels which that
particular timeframe adheres to. You will find your entry accuracy will greatly increase with
your profits with the use of these zones in addition to the Fibonacci lines which act in the same
way.
(1 hour chart – mid s/r lines are Orange)
(15 min chart – s/r lines are blue)
