Creation of SNR (Identifying fresh levels)

Summary

This video breaks down the creation and identification of Support and Resistance (SNR) in trading, explaining how levels are formed, tested, and broken. It covers key concepts like fresh versus tested levels, breaks of structure, and the SBR/RBS framework, showing how support can become resistance and vice versa. The speaker also introduces the 'Left Shoulder' formation, highlighting optimal timing for entries after structural breaks. With clear examples using candle patterns and practical tips on drawing and interpreting levels, viewers gain actionable insights into predicting price reactions and understanding the storyline behind market movements, enhancing trading strategy and decision-making.

Takeaways

• 😀 Support and resistance (SNR) levels are created using just two candles: a buy followed by a sell for resistance, and a sell followed by a buy for support.
• 😀 SNR lines should be drawn from the body close of the first candle in the pair, not the wick, using a horizontal line, ray, or trend line.
• 😀 A break occurs when a candle body closes above resistance or below support, while a rejection happens when price touches but does not close beyond the level.
• 😀 SBR (Support Break Become Resistance) and RBS (Resistance Break Become Support) are key patterns indicating structural shifts in price.
• 😀 Fresh levels are SNR levels that have never been touched before, while tested levels have already been interacted with by price.
• 😀 The timing of when a level is touched does not determine whether it is fresh or tested; immediate retests can still count as tested.
• 😀 Storylines are directional moves that begin after price tests a level; once a storyline starts, the level is no longer fresh.
• 😀 The left shoulder pattern is formed when a resistance or support breaks and price returns, signaling a potential reversal or continuation.
• 😀 Apex refers to the strong high or low point in a formation, often serving as a reference for patterns like SBR, RBS, or the left shoulder.
• 😀 Observing multiple touches and the length of time price takes to return can indicate potential strength of reactions, following the principle of cause and effect.
• 😀 Candle closures, not wicks, are the definitive reference for determining breaks, rejections, and formation of SNR levels.

Q & A

What is the main objective of the video?

The video aims to explain how Support and Resistance (SNR) levels are created and to clarify the difference between fresh and tested levels.

How is a resistance level created according to the script?

Resistance is created using two candles: a buy candle followed by a sell candle. The line is drawn from the body close of the first candle and extended outward.

How is a support level created?

Support is created using a sell candle followed by a buy candle. The level is drawn from the body close of the first candle and extended outward.

What is the definition of a break in SNR terms?

A break occurs when the body of a candle closes above a resistance or below a support level, indicating the level has been broken.

What is a rejection in trading terms?

A rejection happens when price touches a support or resistance level but does not close beyond it, indicating the level has held.

What do the acronyms SBR and RBS stand for and what do they mean?

SBR stands for Support Breaks → Resistance, meaning a former support acts as resistance after being broken. RBS stands for Resistance Breaks → Support, meaning a former resistance acts as support after being broken.

What distinguishes a fresh level from a tested level?

A fresh level is one that has not been touched by price before, while a tested level has already been touched at least once. The timing of the retest does not affect its classification.

How can traders identify a left shoulder pattern in price charts?

A left shoulder is formed when a resistance level gets broken and price revisits that level. It can occur without a full break of structure but is stronger if the structure breaks first.

What is the recommended method for drawing SNR levels?

Draw SNR levels from the body close of the first candle involved in the formation and extend the line outward, using either a trend line, horizontal line, or ray.

Does the number of times a level is tested affect whether it is fresh or tested?

No, a level is considered tested after the first touch and storyline initiation. Multiple touches are irrelevant until the storyline starts.

What is the significance of the storyline concept mentioned in the video?

The storyline concept helps traders determine when price is likely to move significantly from a level after it has been tested. It involves analyzing timeframes and synchronization of price action.

How can traders distinguish between a low-risk and high-risk left shoulder entry?

A low-risk left shoulder entry is preferable when the structure has broken first and then price revisits the level. Entering before the break is considered higher risk.