The ONLY Support & Resistance Trading Video You'll EVER NEED!

Summary

In this video, the instructor provides a comprehensive guide on how to correctly identify support and resistance levels in trading. Emphasizing the importance of marking these key zones accurately, the video explores how traders can avoid cluttered charts and identify significant levels using higher timeframes. The concept of flipped levels—where broken resistance becomes support and vice versa—is also discussed, offering insights into strategic trade entry points. Practical tips on chart organization, including using the object tree and templates, are shared to improve chart hygiene and make trading decisions easier.

Takeaways

• 😀 Support and resistance are key concepts in technical analysis, helping traders understand price behavior and potential market reversals.
• 😀 Too many support and resistance lines on a chart can cause confusion, so it's important to only mark significant levels.
• 😀 Resistance levels form when price reverses after trending upward, as trapped buyers may create selling pressure when the price returns to this level.
• 😀 Support levels appear when price reverses after trending downward, with trapped sellers creating buying pressure when price returns to this level.
• 😀 It's essential to treat support and resistance levels as zones, not exact price points, as the market can wick through these areas slightly.
• 😀 Resistance turns into support when broken in an uptrend, and support turns into resistance when broken in a downtrend.
• 😀 The more times a support or resistance level is tested, the weaker it becomes. Each retest increases the probability of the level being broken.
• 😀 Start chart analysis on higher time frames (monthly, weekly) to avoid clutter and identify the most significant levels.
• 😀 Use the Object Tree tool in TradingView to organize and manage support and resistance levels efficiently, creating folders for different time frames.
• 😀 Create templates for your support and resistance lines to maintain consistency and avoid clutter on your charts.
• 😀 A clean chart with properly organized support and resistance levels reduces analysis paralysis, helping you make better trading decisions.

Q & A

What is the common mistake traders make when identifying support and resistance?

Traders often identify support and resistance incorrectly, leading to charts with too many horizontal lines. This can make the chart cluttered and difficult to analyze effectively.

How does resistance affect price movement?

Resistance occurs when the price stops trending upwards and reverses. It creates downside pressure as trapped buyers at that level may look to exit their positions when the price returns, potentially offering short trade opportunities.

What is the recommended method for drawing resistance levels?

Resistance levels are typically drawn from the candle body’s open or close. Using a horizontal ray or line is a common method. Additionally, selecting the magnet tool can help snap the line to the precise candle open or close for more accuracy.

How is support created on a price chart?

Support is formed when the price trends downward but finds a level where it reacts multiple times before reversing upward. This area of support indicates that sellers are trapped and, if the price returns, buying pressure may emerge, potentially creating long trade opportunities.

What happens when support or resistance levels are broken?

When resistance is broken, it signals a strong uptrend, and the previous resistance level becomes a new support level. Conversely, when support is broken, it shows strong selling pressure, turning that support level into new resistance.

Why should traders consider support and resistance as zones rather than exact levels?

Support and resistance should be viewed as zones because the market doesn't always react to an exact price point. Price may slightly wick through a level before reversing, so thinking of these levels as areas allows for more flexibility in analysis.

How do traders avoid analysis paralysis when marking support and resistance?

To avoid analysis paralysis, it's essential to start with higher time frames (monthly or weekly) to identify significant levels. Adding too many levels on smaller time frames can overwhelm the trader and make it difficult to focus on the most relevant data.

What is the 'Object Tree' in trading platforms like TradingView and how does it help?

The Object Tree is a tool in platforms like TradingView that helps organize and manage chart elements, including support and resistance levels, drawings, and Fibonacci retracements. It allows traders to group and categorize their levels, making it easier to navigate and keep the chart clean.

What is a good practice for organizing support and resistance levels on a chart?

A good practice is to create folders in the Object Tree for each time frame (monthly, weekly, daily). This helps organize the levels and makes it easy to hide or unhide them when needed, preventing chart clutter.

How can traders make their charts more efficient when using support and resistance levels?

Traders can make their charts more efficient by creating templates for different types of levels, like daily or weekly. These templates can include settings for line color, style, and labeling, which helps maintain consistency and clarity when marking new levels.