You can’t trade support and resistance successfully if you don’t know how to draw them. You first need to learn how to draw support and resistance levels correctly before you should be thinking of trading it.
A lot of new traders find it difficult to draw these levels. They make the mistake of drawing lines on every high and low on their trading chart.
In doing so, their charts are clustered with lines which makes It very difficult to pick the market turning points they should be focusing on.
Example of such a chart can be seen in the diagram below.
These lines should be well spaced out. You should be only focusing on those market turning points where price had recently tested and changed direction.
You might be finding it difficult to pick the appropriate highs and lows. That is, these market turning points.
Below I will show you my 3 step process to overcome these challenges.
3 step processes to draw support and resistance successfully.
I will be using the same chart I used above so you can see the differences and correct your mistakes.
These steps include –
- Zoom out your chart
You want to zoom out your chart at least 5 times in order to see the bigger picture. Knowing and understanding the bigger picture gives you an edge in the market.
- Mark out only the obvious levels
Here you need to ignore those minor swing highs and lows because they are meaningless.
You can use the line tool, draw lines on these highs and lows. These obvious levels are major support and resistance levels, these levels are where support levels turned resistance levels and vice versa.
- Draw rectangles around the lines you have drawn
Pick out your rectangle tool and draw a rectangle around the lines you have drawn. After drawing these rectangle, delete the lines.
You want to make sure you are trading around a neat market environment.
The purpose of the rectangles and not the lines is that you should be treating support and resistance levels as an area and not a line.
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