Master Support & Resistance Levels (ALL YOU NEED TO KNOW)

Summary

This video script offers a guide to correctly identifying support and resistance levels in trading charts, emphasizing the importance of these levels for high win rate trades. It highlights common mistakes traders make, such as drawing too many lines, and introduces 'secret rules' for accurate identification, including multiple rejections and price movement away from swing highs or lows. The script also explains how to trade these levels effectively, using candlestick patterns and moving average crossovers as confirmation signals, and stresses the importance of focusing on the most recent key levels relevant to current price action.

Takeaways

• 📊 Support and resistance levels are crucial for traders to identify high win rate trade opportunities.
• 🔍 It's common for traders to incorrectly draw too many lines on their charts, leading to confusion rather than clarity.
• 💡 The first secret rule for identifying support and resistance is 'multiple rejections', where the price reverses at the same level multiple times.
• 📉 The second rule states that the price must move away from a swing low or high before a support or resistance level can be confirmed.
• 🔄 Support levels can become resistance and vice versa when the price breaks through them and retests the level.
• 📍 Key levels should be near the current price to be relevant and useful for trading decisions.
• 🚫 Avoid marking levels that are too far away from the current price as they are irrelevant and can clutter the chart.
• 🌟 A support or resistance area is not a single line but an entire zone where the price has shown consistent behavior.
• 📈 Use candlestick patterns, such as the Evening Star, as a confirmation signal for potential reversals at key levels.
• 📊 Moving average crossovers provide another confirmation signal, indicating a potential change in trend direction.
• 💰 When trading support and resistance levels, wait for multiple confirmations before entering a trade and set stop losses with some room for price to breathe.
• 🎯 Place take profit orders at the next key level, anticipating a potential reversal at that point.

Q & A

What is the main focus of the video?

The video focuses on teaching the correct way to draw support and resistance levels on trading charts to improve the accuracy of trading decisions.

Why are support and resistance levels important in trading?

Support and resistance levels are crucial because they can help identify high win rate trade opportunities by indicating potential reversal points in the market.

What is a common mistake traders make when drawing support and resistance levels?

A common mistake is drawing too many lines on the chart, which can lead to confusion and make it harder to analyze the market effectively.

What is the first secret rule of support and resistance mentioned in the video?

The first rule is 'multiple rejections', which means identifying levels where the price has been rejected multiple times, indicating potential support or resistance.

What does it mean when the price moves away from a swing low or swing high?

When the price moves significantly away from a swing low or swing high, it indicates a potential level where the price might reverse, forming a new support or resistance level.

Can a support level also act as a resistance level and vice versa?

Yes, a level can be both support and resistance. For example, a support level can become a resistance level when the price breaks through it and re-tests the level from the opposite side.

Why is it important to draw support and resistance levels near the current price?

Drawing levels near the current price is important because distant levels are irrelevant and do not contribute to the current analysis, making the chart less confusing and more focused on relevant information.

What is the significance of the 'Evening Star' candlestick pattern in the context of the video?

The 'Evening Star' is a reversal pattern that can signal a change from an uptrend to a downtrend, indicating a potential reversal at a key resistance level.

How does the moving average crossover provide confirmation for a trade?

A moving average crossover can confirm a potential reversal when the moving average crosses over the price candlesticks, indicating a change in the trend direction.

What should be the approach when the price reaches a support or resistance level?

Traders should wait for multiple confirmations, such as candlestick patterns or moving average crossovers, before entering a trade at a support or resistance level to increase the probability of a successful trade.

How should a trader manage their stop loss and take profit when trading support and resistance levels?

The stop loss should be placed with some breathing room above or below the resistance or support level, respectively, to avoid being stopped out prematurely. The take profit can be set at the next key level, which could be a former resistance or support level.

Outlines

00:00

📊 Correctly Drawing Support and Resistance Levels

The speaker emphasizes the importance of accurately identifying support and resistance levels in trading to increase the win rate of trades. Common mistakes, such as drawing too many lines on the chart, are pointed out as they lead to confusion rather than clarity. The first secret rule discussed is 'multiple rejections,' where the price touches a level multiple times before reversing, indicating a strong support or resistance level. The second rule is that the price must move away significantly from a swing high or low before a level can be confirmed. The video also covers the concept that levels can act as both support and resistance, and the importance of keeping levels relevant to the current price for effective trading analysis.

05:01

📈 Trading Support and Resistance Levels with Confirmation

This paragraph explains how to trade using support and resistance levels by waiting for confirmation signals before entering a trade. The speaker illustrates the use of candlestick patterns, such as the Evening Star, as a sign of reversal at resistance levels. Additionally, moving average crossovers are highlighted as a second confirmation of a potential price reversal. The speaker advises on placing stop losses with 'breathing room' and setting take profit levels at the next key level. The importance of waiting for multiple confirmations, such as a bullish engulfing pattern and a moving average crossover, is stressed to ensure a high probability of a successful trade.

10:02

🚀 Enhancing Trading Strategy with Candlesticks

The final paragraph focuses on enhancing the trading strategy by combining support and resistance levels with candlestick patterns. The speaker demonstrates how to enter a buy position with three confirmations: the presence of a support level, a bullish engulfing candlestick indicating strong buying pressure, and a moving average crossover signaling a change in trend. The paragraph concludes with an example of a successful trade that hits the take profit level, emphasizing the simplicity and effectiveness of the strategy when applied correctly. The speaker encourages viewers to subscribe for more content and suggests further learning by combining this strategy with candlestick analysis.

Keywords

💡Support and Resistance Levels

Support and resistance levels are critical concepts in technical analysis for traders. A support level is a price at which a downtrend may pause due to buying interest, while a resistance level is where an uptrend may pause due to selling pressure. In the video, the speaker emphasizes the importance of correctly identifying these levels to increase the win rate of trade opportunities, using examples to illustrate how prices reverse at these levels.

💡Multiple Rejections

Multiple rejections refer to instances where the price approaches a certain level multiple times but fails to break through, resulting in a reversal. The video script uses this term to highlight how identifying areas with multiple rejections can help in drawing accurate support and resistance levels, as seen in the example where the price reverses three times at a particular level.

💡Swing Low/High

Swing low and swing high are terms used to describe the lowest and highest price points in a stock's recent price movement, respectively. The video explains that these points are significant when drawing support and resistance levels because they indicate where the price has reversed significantly, which can be used to establish potential future reversal points.

💡Consolidation

Consolidation in the context of trading refers to a period where the price of a security moves within a certain range, showing no clear upward or downward trend. The script mentions consolidation when advising against drawing key levels that are far from the current price, as they may not be relevant in the current trading scenario.

💡Candlestick Patterns

Candlestick patterns are graphical representations of price movements within a specific time frame and are used to predict future price movements. The video script mentions the 'Evening Star' as a reversal pattern that signals a potential change from an uptrend to a downtrend, which is an important confirmation for trading decisions.

💡Moving Average Crossover

A moving average crossover occurs when a shorter-term moving average crosses over a longer-term moving average, indicating a potential change in the trend. In the video, the speaker uses the moving average crossover as a confirmation signal for a trade entry, especially when combined with other indicators like the Evening Star pattern.

💡Stop Loss

A stop loss is an order placed with a broker to sell a security when it reaches a certain price. It is designed to limit an investor's loss on a position. The video emphasizes the importance of placing a stop loss with 'breathing room,' meaning not too tight to avoid being triggered by minor price fluctuations before a significant move.

💡Take Profit

Take profit is the price at which a trader decides to sell a security to lock in a profit. The video script illustrates setting a take profit at the next key level, which used to be a resistance level that is expected to act as support, providing a target for the trade's exit.

💡Bullish Engulfing Candlestick

A bullish engulfing candlestick pattern occurs when a small real body is followed by a large real body that 'engulfs' the previous real body, indicating a strong buying pressure. In the script, this pattern is mentioned as a second confirmation signal at a support level, suggesting that the price is likely to reverse upwards.

💡Key Levels

Key levels in trading refer to significant price points that have historically shown to act as support or resistance. The video script repeatedly emphasizes the importance of identifying and focusing on the most recent key levels that are relevant to current trading conditions, rather than outdated levels.

💡Confluence

Confluence in trading refers to the alignment of multiple technical analysis signals that point to the same market direction. The video script advises waiting for multiple confluences, such as candlestick patterns and moving average crossovers, to confirm a trade before entering a position.

Highlights

Importance of correctly identifying support and resistance levels for high win rate trade opportunities.

Common mistake of drawing too many lines on charts leading to confusion.

The first secret rule: Identifying support and resistance through multiple rejections.

Second rule: Price must move away from the swing low or high to establish a level.

Levels can act as both support and resistance, changing roles based on price movement.

Levels must be near the current price to be relevant for trading decisions.

Avoid marking levels that are too far away from the current price as they are irrelevant.

How to apply the four secret rules of support and resistance to trading charts.

Using the evening star candlestick pattern as a reversal signal at resistance levels.

The significance of moving average crossover as a confirmation of price reversal.

Entering a sell position with three confirmations: candlestick pattern, moving average crossover, and key resistance level.

Placing a stop loss with enough room to avoid being stopped out by re-tests of the resistance level.

Setting take profit at the next key level, which used to be a resistance level.

Waiting for multiple confirmations before entering a trade at a support level.

Bullish engulfing candlestick as a second confirmation of support level strength.

Entering a buy position with three confirmations: support level, bullish candlestick, and moving average crossover.

The concept of support and resistance areas rather than single lines on a chart.

Focusing on the most recent key levels for current trading rather than outdated levels.

Transcripts

in this video I want to show you how to

correctly draw your support and

resistance levels so that your charts do

not look like this oh what the hell is

even that support and resistance or key

levels are one of the most important

things that you must muster when trading

but 99 of Traders are still getting it

wrong why is it so important because if

you can find key levels correctly it can

give you a high win rate trade

opportunity look at this example right

here there is a resistance level right

here because price went up to this level

and then reverse downwards so the next

time when price hits this level again

there is a very high chance that it's

going to reverse downwards again so you

could have entered right here a very

common mistake that Traders make is that

they draw too many lines on their chart

just like this what the hell are you

doing bro stop doing this how can you

trade with like 10 000 likes on your

chart this just makes you more confused

while the whole point of drawing key

levels is so that it makes it easier for

us to analyze make it less confused the

reason why a lot of you are still making

stupid mistakes like this is because you

do not follow the secret rules of

support and resistance the first rule is

multiple rejections you can see in this

example price went down to this level

three times before reversing back up

showing us multiple rejections so we can

draw a support level right here next

every time price went up to this level

it always rejects this level and

reverses so we can draw another

resistance level right here now you

might be wondering what if the charts

looks like this when there is no

multiple rejections yet glad you asked

which brings us to the next rule price

needs to move away from the swing low or

swing high in this example you can see

that price has not formed multiple

rejections yet but you can see that yes

from a swing high and move away from it

and when it just moved away and reverse

and head back down it doesn't just move

a tiny bit it moves significantly so

what you can do is that you can draw a

resistance level right here here's

another example you can see that price

has been going down it has just been the

downtrend and then it went back down to

this area right here and then reverse

and shoot back up significantly so what

you can do in this case is that you can

draw a support level at this swing low

the next rule is that a level can be

both support and resistance support can

become resistance and resistance can

become supports you can draw like a

support level right here because price

reverse three times at this area and

whenever price come back down to this

area it always should back up so there's

a very strong support level right here

and look at what price did when price

break through this support level it came

back up to re-test this level and now

your support level is acting as your

resistance level you can see right now

price is unable to break past this

resistance level which used to be the

support level next the levels must be

near the current price when you are

marking a key level you don't want to be

marking one that is way too far away

from where price currently is right now

like these two levels right here these

two levels they are irrelevant there is

no point in drawing them because we only

want to draw the levels that matters

rights now because remember too many

lines will look too confusing for us so

in this case what I will do is that I

will just draw a support level right

here you can see whether price comes

down here it always reverse and hit back

up and then I will also draw another

resistance level right here so these two

key levels are the only key levels that

matter now that you have understood

these four secret rules let's apply

whatever you just learned through the

charts so in this example I can draw a

resistance level right here because

whenever price comes back up here it

always reverses so this shows us that

that is multiple rejections so this is a

very strong resistance level and the

reason I draw it right there is because

it is also near our current price it's

not too far away like all the way up

here right it is near our current price

so we still have to take into account

this resistance level and then you can

also see it right here this is when

price move away significantly from our

swing height and I can also draw another

support level right here because

whenever price comes back down here it

always reverses and this just show us

that this is a very strong support level

because there is multiple rejections at

this level and at this point of time

this is when prices finally broken

through our support level and look at

what price did it come back up here to

re-test this support level which now act

as your resistance level and guys I want

you to know that this entire area here

is your support area all right remember

a support and resistance they are not

just one line like this all right this

entire area is support area that's why

you can see when price comes back up to

retest this it does not come up to

retest like a level like this it came

back up to retest an aerial so you can

see price went back up and reject this

entire resistance area which was

previously supports here's another

example you can see that there is

multiple rejections right here because

whenever boys come back down here it

always end up reversing and heading back

up come back down reverse and hit back

up so and then there is also a

resistance area right here right so it's

clear to say that this is a resistance

area and this is a support area because

it fully just satisfy the rules that we

just talked about but do you want to

Mark a level that is right here no

because that is not where price

currently is so it's irrelevant it's way

too far away from us right now it's

ancient history it's dinosaurs all right

so we do not need to care about this

levers that are like 10 years ago or

even one year ago I don't know a few

months ago you don't need to care about

those levels all right I really want you

to focus on where Price is Right Now

focus on drawing the the most recent key

levels like this the only time when I

will draw this support level right here

is when price breakthrough this support

level and it's like going down then that

is when I will draw the support level

but if it's not if you still within this

consolidation within this area you

should not be drawing key levels that is

like way far away from the current price

now that you have learned how to

identify support and resistance levels

how do you actually trade them glad you

ask so in this example I have marked out

a resistance level right around this

area because whenever price gets up

there it always gets rejected and hit

back down so this is clearly a very

strong resistance area so the first

thing you want to look out for at this

key level is to see what price is doing

its price gonna break past this level or

is it going to reverse and head back

down at this resistance level so in this

case price actually gave us a Evening

Star Candlestick pattern which is

basically a reversal pattern that tell

us that there is a lot of sellers in the

market right now is no longer an uptrend

and price is going to reverse and go

back down and by the way there are

literally like hundreds of reversal

Candlestick patterns out there so you

can just choose whatever you like but

for me I just love the evening star

Candlestick button because it's so easy

to identify and I see this kind of stick

pattern at this key resistance level

that is the first sign that tells me

that price is reversing but we do not

want to enter here yet we don't want to

enter immediately when we see our

evening star we want to wait for

multiple confluences right we need other

confirmation that tell us that price is

really going to reverse and head back

down the next thing that I saw at this

resistance level is the moving average

crossover that is the next confirmation

so you can see previously right around

this area price has been above the

moving average you can see all the

candlesticks are just like above the

moving average but right now at this

point of time the moving average has

crossed over so this is what we call the

moving which crossover you can see right

now the moving average is above the

candlesticks now so that's the second

confirmation that tell us that price is

reversing so what I will do is that I

will enter for a cell position right

here when I see the moving average cross

over the evening style reversal

Candlestick pattern and price is at a

key resistance level I got a three

confirmation that I need so I will enter

for our cell right here and I'll place

my stop loss Above This resistance level

here and guys remember you do not want

to place your stop loss super duper

tight like this because there is always

a chance that price is going to go back

up to this area and re-test it before

heading back down so you want to give

your stop loss a little bit of breathing

room and if you guys know me you will

know that I placed my take profit at the

next key level so the next key level is

all the way down here the reason I

marked up this as a key level is because

if you look towards the left it used to

be a resistance level you can see right

here it used to be a resistance level

and now it's probably going to act as

your support so that that would be by

take profit and as you can see the trade

literally went down and smashed our take

profit and right now you have made a

whole lot of money don't worry if you

still do not get it here's another

example you can see that right now price

is at this major support area right here

but we do not want to enter immediately

when price is at this support level we

want to wait for our confirmation we

need three confirmation before we enter

for the trade and right now we only have

one confirmation which is prices at this

support level that's the only

confirmation that we have so we cannot

just enter based on that so right now we

still be patient and wait so you see

like right now the next Candlestick

price shown us is a bullish engulfing

Candlestick a big fat green Candlestick

at this support level what does that

mean that means that there is a lot of

buyers at this key support level pushing

the price up this show us that price is

not going to break fast this strong

support level and that's a second

confirmation the third confirmation is

this moving average cross over you can

see at this point of time the yellow

line the moving average is going to go

below the candlesticks now so now that

we have our three confirmation I will

enter for a buy right here and I'll

place my stop loss once again below this

support level and I can't really see

because my camera is in the way up so

I'll place my stop loss below this key

support level and place my take profit

all the way up at the next key level

which is this resistance level right

here and once again I marked up this

resistance level because if we look

towards the left you will see that it

used to be a support level right here

whenever I come back down here it always

reverses come back down reverses so it

used to be a support level and right now

I'm expecting it to become a resistance

level now let's look at how this trade

will play out I'm just gonna fast

forward this thing so that I don't waste

your time and you can see like price

just going up and going up going to our

take profit and we just wait be patient

and Bam we just smashed our take profit

right here boys and we have close D3

great yeah it's really just as simple as

that like this video If this video was

helpful and smash on that subscribe

button and if you want to take this

strategy to the next level you need to

combine this strategy with candlesticks

and you can check out how to do that in

this video right here welcome to the

tribe and remember you're just one trade

away

[Music]