Support and resistance levels are of great help to traders. Once they are drawn on the chart, of course. And drawing them is not always as easy a task as you might think. Support and resistance, to be reliable, must be marked correctly.
In this article, you will learn some good methods to identify support and resistance levels on the Quotex platform.
The methods I will present are as follows:
- Local lows and highs
- Various deadlines
- moving averages
- Fibonacci Levels
- trend lines
Local lows and highs
To identify support and resistance levels through local lows and highs, you need to first prepare your chart. Choose the asset, select the time period and look at the chart. Mark the highest peak and lowest bottom. ATH will be the first – the all-time high. ATL will be the second extreme – the All Time Low.
The next step is to mark all peaks and all troughs on the chart. In an uptrend, they will be called higher lows (HL) and higher highs (HH). During a downtrend, there will be lower highs (LH) and lower lows (LL).
Each horizontal line that marks lows and highs also serves as support or resistance.
Let's look at the graph. During an uptrend, HLs represent support levels and HHs represent resistance. During the downtrend, LHs are resistance and LLs are support.
Various deadlines
This method requires you to enter the support and resistance levels of the higher timeframes. When you are trading on a 15 minute time frame, check the support/resistance in the 1 hour time frame. Tick the levels. Then go to the 4 hour time frame and place the levels there on your 15 minute chart.
Levels are much stronger when the support/resistance of the higher timeframes matches that of the lower timeframes.
moving averages
Moving averages are the next way to identify support and resistance levels. It can be the simple moving average or the exponential moving average. You can adjust the periods to see what best suits your specific purpose. You can try the 20-day or 55-day moving average and see how it works.
Moving averages simply act as dynamic support/resistance, which means that the level is changing along with the moving average's movements.
During the downtrend, you will notice that the moving average creates a dynamic resistance level. The price hits and then continues to fall.
During the uptrend, the moving average will act as a dynamic support level. Again, prices approach, maybe touch or even cross and then go up even higher.
Fibonacci Levels
Popular Fibonacci levels are also a good method to recognize support and resistance levels. The most used in the foreign exchange market are 0.382 and 0.618.
A big price move up or down is often followed by a big pullback from the initial move. And often this retracement continues to Fibonacci levels.
Let's see the example below. After the long down move, the price retraces up to 0.618 which can be considered as the resistance here. From that point, the price is falling again.
trend lines
When you plan to draw a trendline, you need to identify at least two peaks or two troughs. However, the more the better. With multiple tops or bottoms, the trendline will be better confirmed and therefore more valuable.
A trendline will act as a support during an uptrend and as a resistance during a downtrend. Prices don't seem to overcome these lines.
In a sideways trend, the trendline creates very strong support and resistance as they are testing these levels multiple times.
Summary
Support and resistance levels are very important in trading. They can be identified in several ways. Today, I explained how to use local lows and highs, various timeframes, moving averages, Fibonacci levels and trend lines for this purpose.
You can use a different method to confirm the result obtained with the first one. Levels are considered stronger when they remain the same, using different ways to find them.
Go to your Quotex account now and start practicing finding support and resistance levels on the price chart. Share with us any comments you have on this topic. There is the comments section below.
