Enhance your trading activity with the best and most complete Support and Resistance auto-detection indicator, just like our customers have already done. A brief introduction Resistance and support lines are price levels which temporarily halt or reverse the continuous movement of the trend. Conversely, during a bullish trend, the price level where buyers are checked is called a resistance line. How are support and resistance levels created? When a dealer enters a buy order, the broker has the order filled by executing as many offers as possible until the amount the customer desires is reached. If the original order is a large market order, the broker will keep climbing on the price ladder until the order is fulfilled. Support and resistance points are created when the total orders in the market are not enough to clear the offers at a particular price level.
Since many participants expect a price level to resist or support the quote, that price level will act in the anticipated manner regardless of what the other variables suggest. In a sense, technical analysts claim that traders behave like pack animals. Why support and resistance levels work Emotionally charged events are remembered better and have a stronger impact in human behavior. The market causes joy or trauma to its participants and this is why support and resistance lines work. But there are a few more reasons.
Resistance and support are relatively easy to identify on charts. From the most seasoned analyst to the forex freshman, traders don’t have a lot of trouble identifying and drawing support and resistance lines. Support and resistance lines often receive a lot of attention from news sources like Bloomberg or CNBC. The public is led to identify a particular price as a decisive or key level, and when it acts accordingly, the significance of these levels is easily established. Multi-year, multi-month, multi-week support and resistance are often defended by large order clusters, originating enormous transaction volumes. How to trade using price levels The basic and most important usage of price levels it not to trade breakouts like most people think, but to recognize price ranges in which a trade can move favorably without being disrupted. Support and resistance levels are not fixed prices, but price ranges: this is why breakouts do not work very well by their own.
A support has been tested and rejected, meaning the price has closed above it. Hopefully, creating a reversal or continuation pattern of some sort. The distance to the next resistance is bigger than the distance to the rejected support. This simple fact increases the odds of the trade moving in your advantage without disruption and increases the expectancy of the trade. The exact opposite applies for shorts.
Some trading examples The goal of using support and resistance lines is to find price ranges in which a trade can move favorably without being disrupted and increase the expectancy of your trades. The perfect setup is a strong rejection of a price level far away from the next one. Don’t despair if you think they are too many, because parameters are grouped into self-explanatory blocks. Indicator Settings The indicator will read price from the current timeframe, but you can optionally select another one. For instance, you can display D1 support and resistance lines in H4 charts. You can also choose what amount of price levels to display on the chart, using the price level density parameter Color Settings Enter your desired colors for support and resistance lines based on importance.
Label Settings Optionally, labels that display the age of each support and resistance line can be displayed in the indicator. You can choose label font and size. Why do past support and resistance levels move? Past price levels are adapted to the current market action, in order to connect as much past price action as possible with the current rejected level.