The secret of support and resistance levels, teaching you to find effective positions

Content source: Hui Classroom

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Support and resistance are skills that must be learned in foreign exchange trading in addition to the K line.

However, many people have not been able to find a valid support or resistance level. For example, many people will ask: "Using Fibonacci to draw multiple lines, which line can act as support or resistance?"

Today, Hui Classroom will share with you the secrets of support and resistance levels of top traders in the past 10 years, so as to improve your ability to apply support and resistance.

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01 How to draw effective support and resistance levels

You can adjust support and resistance levels by following these three steps:

Step one, zoom out on the chart, this will allow you to see more of the price chart and see where support or resistance lines touch the price;

The second step is to draw the more obvious support and resistance levels that you can see, and pass through 2 or more price highs or lows;

The second step is to adjust the support line and resistance line drawn above so that it has more contact points with the market price;

For example, in the EUR/USD trading chart below, follow the above steps to find effective support and resistance levels.

The first step is to reduce the chart by 5-10 times. The MT4 on the mobile phone can be pinched and zoomed with two fingers, and the MT4 on the computer can be zoomed in the menu bar or scrolling the mouse.

The second step is to draw the obvious support and resistance lines that you can see.

The third step is to adjust the above support and resistance lines so that they are in contact with the market price as much as possible. The first resistance line is adjusted downwards, touching more price highs; the second resistance line is adjusted downwards, touching more callback points; the third support line is adjusted upwards, touching more price lows; The 4th support line is adjusted upwards, the 5th resistance line is adjusted downwards, and the 6th support line is adjusted upwards.

The adjusted support and resistance diagram is as follows:

After learning how to find more effective support and resistance levels, can support or resistance levels work? Is there a way to judge whether the market price will reverse at the support or resistance level?

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02 Is it a reversal or a breakthrough

When the market price reverses at the support or resistance level, there are generally obvious signs:

1. There will be a strong buyer or seller entering the market;

2. This powerful force is finally rejected by the market, and the price reverses, and the rejected position is usually an obvious bearish or bullish K-line;

Usually, the larger the K-line entity is, the more certain the reversal is, and the longer the market price is away from the support or resistance level, the greater the reversal may be, because the market price has not reordered the support or resistance level for a long time, which will attract more people's attention The location where the price was rejected.

For example, in the GBP/JPY trading chart below, the market price shows a strong upward momentum in the marked part.

Finally at the resistance level, the strong bearish engulfing pattern reversed.

Under what circumstances will the market price break through at the support or resistance level?

Usually, when the market shows an ascending triangle pattern, the resistance level will be broken, and when it shows a descending triangle shape, the support level will be broken. From the perspective of price action, it means that the market price will have a process of accumulation before breaking through. The price may have just reached a key resistance or support level and is consolidating.

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As shown in the figure above, they are ascending and descending triangles respectively. In the ascending triangle, the buyer’s power is getting weaker and weaker, and in the descending triangle, the seller’s power is getting weaker and weaker. This is the process of price accumulation, and eventually the support and resistance levels will be broken.

As shown in the figure above, before the market price breaks through the resistance level, there is an accumulation process that is accumulating strength. Finally break through the resistance level.

The above is today's sharing. You need to practice a lot about support and resistance levels. Once you find the feeling, it is actually very simple.