How to Draw Support and Resistance Levels
In two previous posts, I taught you what support and resistance levels are and how to spot them on a price chart. I enumerated the criteria for identifying support/resistance levels in both previous posts.
To refresh your memory, let’s highlight those criteria you will need to identify a support/resistance level again here:
One criterion is quite enough for a level to be considered as a support or resistance, but the more criteria met, the better.
Now, how do you draw support and resistance levels?
Before we discuss how you can draw a support/resistance level, let’s first see how you should not draw it. Here is an example of what you must never do on your price chart. See the chart below:
You can see there are too many levels on the chart, which can make it impossible to know which level to trade.
With so many horizontal lines marking the numerous support/resistance levels, there is no space for your trade to move.
The many lines are even blocking the price bars, making it difficult for you to read the price action properly let alone knowing the level to focus on. Drawing your support/resistance levels this way can only get you confused.
Now that you know how not to draw support/resistance levels, let’s look at the right way to do that.
The primary rule is this: after spotting a support/resistance level, draw a single line that touches the most number of swing points.
Example 1: EUR/AUD daily chart
See the chart below:
You can see the resistance level we identified in the chart (yellow circles). While drawing the horizontal line that marks the level, we made sure the line crossed both points. Notice that the level was later broken, as the market looked set to surge higher.
Next, we spotted another resistance level. See the chart again in the image below:
You can see the five yellow circles that market the various swing points that formed the resistance level.
When drawing the horizontal line that marked the resistance level, we made sure it crossed all the five swing points.
Notice that this level was broken strongly, as buyers were willing to push the market upwards.
Next, we found yet another level. See the chart again below:
You can see another resistance we spotted. It later became support after a breakout. When drawing the level, we tried to make it cross as many swing points as possible.
Note that while we try to make the line touch as many swing points, we ensure the line is a single straight line.
Going further down, we found other levels. See the same chart again below:
Notice the two support levels we spotted: the first one was formed by three swing lows, while the second one was the lowest swing point on the chart.
Now, removing the yellow circles that marked the swing points, you can see how clear the chart is because we drew only a single line at the relevant levels.
See the chart again below:
You can see that the chart is quite clear and not confusing. The levels can easily be seen, and you can implement your strategy with ease.
This post is about drawing the support/resistance levels. In my trading course, you will learn the strategies you can implement with support and resistance levels.
Example 2: EUR/NZD H1 chart
Look at the chart below:
Can you see the nice resistance level we spotted in the chart? It meets the following criteria:
- The level is the highest point in the upswing (the extreme of the swing high)
- The level is obvious as the price swings to it and away from it are very significant
- It is recently formed
- The price got rejected twice from that level (the highs of both candlesticks)
To draw the horizontal line that marks this resistance level, we made such it touches the upper shadow of both candlesticks.
Analyzing the chart further, we spotted another resistance level. Look at the chart again below:
Notice that this resistance level turned to support when the price broke above it, and it later turned to resistance again when the price fell below it. You can see that we drew one solid line that crosses the five swing points.
Going further down, we spotted another level. Look at the chart again below:
As you can see, the level acted as resistance and support at different times, and it has six swing points. We drew the line to touch as many swing points as possible, which is what you should always aim to do when there are many swing points involved. Notice the false breakout on the right end of the level.
Next, we identified another level further down. Look at the chart again below:
You can see that the level has four important points. Notice that it was a resistance that was broken and turned support and later turned resistance again.
Finally, we market the lowest level on the chart. See the image below:
You can see that this lowest level is obviously a support level. We drew the line across the three swing points we could see on the chart.
Now, let’s see how clear the chart appeared when we removed the yellow marks we used to identify the swing points. See the chart again below:
You can see that the chart is clear and not confusing; the key levels can be clearly seen, with the entire chart looking clean.
Example 3: EUR/NZD H1 chart
Look at the chart below:
Again, we started by spotting a clear resistance level, which corresponds with the extreme swing high.
Going down, we identified the next level. Look at the chart again below:
Notice the four swing points that formed that resistance level. We always draw in a way that touches as many swing points as possible.
Further down, we spotted another level. See the chart again below:
You can see that the level served as resistance and support at different times and has four clear swing points. As usual, we drew our line to touch as many swing points as possible.
Finally, we identified and drew the lowest two levels. Look at the chart again below:
You can see the two support levels: the first one is formed by four swing points, while the lowest level corresponds to the extreme swing low.
Now, let’s see how clear the chart appeared when we removed the yellow circles we used to mark the swing points. Look at the chart again below:
See how the chart is now clear and not confusing. It’s easy to see the most key levels and how the market reacts to them.
If you follow our style of drawing one solid line that touches many swing points that represent each key level, your support/resistance levels will always be clear and your char clean.
You can easily see how the market reacts to the key levels. To learn how smart money use support and resistance levels, join my trading course.
While learning what you need to succeed may seem like a lot of work to do, just know that I’m always here to assist you in your trading journey if you are willing to do the right thing and put in the hard work.
What I will teach you will enable you to succeed in trading, but I cannot force you to do what is required to deserve success in your trading.
It’s normal to think you deserve to succeed in trading, but ultimately, it’s your trading account that will tell you whether you’re getting it right or not.
It is up to you to do what can make you deserve that success you desire. Join this trading course now if you desire to succeed!