Support and resistance can be either fixed or dynamic, and is a vital part of the majority of trading systems. People often try to make it pip perfect, but it’s better to look at these areas as more of a zone and use multiple time frames to fine tune levels and look for signals in those areas.

You can download the market structure reversal indicator mentioned here: https://www.mql5.com/en/market/product/46295

Video Transcript

Right so support and resistance that there are, and what to look for at support and resistance. So when we’re looking to take entries, the thing that people struggle with a lot of the time is taking entries and knowing when to get in to trades. So with any system or any indicator that you use, so for example, with market reversal alerts indicator, you will get loads of alerts and it will trigger lots of different entries for you, but they’re not all going to be good entries to take. So support and resistance entries are always going to be the best type of entry you can take with any system or any indicator. So things like the RSI, for example.

But you do want to take it when the RSI gets extended at a level which is a previous support or resistance. So it’s a reason to get into a trade. So to be able to use support and resistance, you need to know how to draw it in correctly and which timeframes you should be using. And obviously the different types of support and resistance as well. So there’s lots of different types. I use dynamic support and resistance with moving averages and I used fixed support and resistance at highs and lows of previous sessions and days and weeks and just points where price has turned multiple times. So those are the bits I’m going to cover in this session, how to draw them in and the best ways to basically draw them in. The other types of support and resistance you’ve got are things like pivot points. I have tried pivot points in the past, I couldn’t get on with them because I didn’t find them particularly reliable and quite often when you find a pivot point that turns and you actually look at, oh that pivot point works really well, if you scale out and look to the left you’ll probably find that it’s a previous support and resistance level that you would have drawn in anyway. And the same goes for supply and demand. Supply and demand is very, very popular. A lot of people use supply and demand and basically supply and demand gets drawn like that at previous highs and lows, which is support and resistance. It’s all the same stuff. It’s basically an area that price gets to and turns at or has a chance of turning out. Okay so let me just get a fresh chart up, a blank one and we’ll basically start from the top. So the best way to draw support and resistance is to work down from time frames and start off with depending on which time frame you’re looking to take your entries.

So a lot of the times we’re taking entries on M5 and M15. So I like to start using daily for support and assistance. Let’s find something that’s a little bit more. Actually, we’ve got COVID. Let’s zoom in a little bit. I like to use basically the daily as a starting point. So the obvious thing to do, and you can use weekly and monthly as well if you want to, but basically all you do to start off with is just draw a line at the obvious highs and lows that you can see on your chart.

So the very highest and the very lowest points, yeah? So that one there and that one there is obviously the very highest we’ve got in this particular time period we’re looking at and that is the very lowest we’ve got. If we scale out again we can then see that there’s one there as well and that is another low okay and that one corresponded with that wick there yeah so that one’s been tested a couple of times yeah. So these are levels where we would expect price over a long period of time to potentially reach for and react at. You’ve then got sort of intermediate support and resistance, which is more recent support and resistance always just look for extremes. So this is an extreme where price has got to and then it’s turned away from. So the top of that wick yeah. So another extreme you could use maybe is this one here and there’s no right or wrong when you’re drawing support and resistance. It is a very subjective thing is ideally price having rejected or attempted to break through a level at least twice.

So for something to become a solid, good, strong support and resistance, it has to have worked at least twice. If it’s just worked once, like this one down here, we’ve only hit this once, we’ve never hit it again. So this is what I would call a weak support and resistance or a potential support and resistance because we’ve only been to it once. This one here has acted as support and resistance multiple times. We can see that to the pip it hit there, it tried to break through there and rejected, it closed, it stopped to the pip there, tried to get through, tried to get through, tried to get through, tried to get through, hit to the pip. So this is an incredibly strong level of resistance on the way up and support on the way down. So we would expect this at some point in the future to become reactive. So this is something I would definitely leave on my charts.

There’s no right or wrong also about using wicks or candle bodies. You want to look at at support and resistance as an area or a zone. Occasionally, yes, it will hit to the pit, as we’ve seen here. So it hits to the pit there, hits to the pit there, hits to the pit there. But most of the time, it will be roughly around that area that we’ll see some kind of reaction. And obviously, depending on your time frame, the more accurate that could potentially be. But we’re starting on the daily here.

So you can see that this area here from maybe this high, or let’s take this one here. So this high to that wick there. And then, yeah, I mean, that’s pretty much it, isn’t it? So that is what I would class as that support and resistance zone. So what I’m looking for is at some point in the future if price gets back down into this area and looks like it’s starting to reject and giving me a signal that’s a trade that I would potentially take. So we’ve broken up through this resistance here now. If we look down on a M15 or on an hourly time frame and we get say a reversal alert somewhere around here that’s potentially an area that I would be interested in taking a trade at. So once you’ve got your hourly, sorry, your daily support and resistance drawn in, you can then switch down into four hourly. And you might want to draw more than this in. So you may also want to go maybe at that level. Let’s have a look to try and find a decent level.

So this is a potential level here. You’ve got, it’s whipped there, there, it’s couldn’t get through a couple of times there, but looking to the left, there’s not really an awful lot of other support. So this is quite a recent level of support, which if it broke down to here, and then I saw some kind of hammer forming off of it or something like that, then yeah, that would potentially be something I’d be interested in taking.

So you could draw that one as well. But what you can do then, once you’ve got your main levels on your daily chart or your highest timeframe chart that you want to use, you can then flick down to the four hour chart. And then you can start to refine your levels of support and resistance a little bit more. So when we’re looking at the four-hour chart, if we scale out, we can look for areas that are more accurate for support resistance.

So this one that we drew in here, for example, if you drag that one up to that low there or that high here, for example, we’ll be looking for areas where it’s more reactive. So here for example it’s projected, rejected, rejected, rejected again there. So where we had it drawn in previously somewhere around there on our daily chart, what we can do by dropping down to the four-hour chart is find a more accurate level of support and resistance. So this is an area when we get down to here, if we see something bouncing off of this, more to the pit or just wicking through it and then closing back above it, that is much more accurate than the previous level we had drawn in on the daily chart potentially.

Yeah, and you do the same process here. So we can draw in this high here as our four hour high, four hour resistance. high for our resistance and down here we’ve got more resistance at these lows down there and potentially that level there I would say somewhere around there would be another area I would draw in because we’ve had a good reaction there we’ve broken through and a good reaction there and it’s reacted to the pip so I’m always trying basically when I’m drawing support and resistance in to find an area where price has either stopped at, whipped through and then closed below or has hit to the pip. I don’t mind which it is. It’s a rough area, but it’s an area I know has been respected at least two times.

The more times it’s been respected, the more likely it is to be acting as a strong support and resistance. Would that be considered an area, the one at the bottom? Yeah, so this here, between that wick and that wick is an area of potential support. Yeah, so if you scale out, and let’s say we see price in the future doing this and it’s comes down, moves around, comes down to here, and then we see it consolidate and then break above there with a big propulsion candle, highly likely that is gonna be an area that we are gonna start moving away from because we’ve rejected it over and over and over and over again in the past.

Yeah, this time it got a bit deeper. But what is this? This move here. You just zoom into that area. So this move here is a stop pump, isn’t it? Yeah. So we’ve got these two lows, we’ve got a low there. Let’s discount that one for the minute because it’s already closed below there. But we’ve got this low here, where we pinned into it, closed with a sort of bearish, bullish engulfing, and then price started to move away.

So everybody that saw that suddenly started to get in long, they put all their stops under there. Price then came back down, touched it again, big bullish engulfing, everyone went, ah, it’s a double bottom. Everyone went in long there, put their stops under there. They took price away, everyone’s sitting there pretty, now thinking, brilliant, we’re gonna hold this for the next, we’re on the four hour chart here, so they’re probably looking at holding it for the next few weeks, month or so, they’re long-term speculative traders. They pulled the market down, took out all this money, all these stops, and then pushed away again, came back and retested it, retested it and went. So this is an area of supply and demand, if you want to call it, or support and resistance, whatever you want to call it, it’s basically an area that price has reacted at multiple times. But the important thing to understand is price is very rarely a line, support and resistance rather, is very rarely a line. Support and resistance is an area. But you have to start somewhere and you start with a line. So you’ll start off with a line up here, for example, and what we’ll see is price push up like this and close below it and then push up again and close below it and then move away.

And then basically what we’ve got here is potential to draw in another line, but it’s really close to this one. So this becomes an area of support. But we don’t know if this is an area of support until price has come back in and rejected it twice, at least twice, because what price could do is just crash straight through it and carry on going, couldn’t it? In which case this is not an area of resistance, is it?

It’s just an area. Yeah, like this one here. We’ve drawn a line in there, but did price react at it? No, just crashed through it, wasn’t interested. But if price comes back and retests this multiple times and does that, and we can draw that in three times, that suddenly becomes a good area of resistance or support in this case. So you can’t really tell if an area or a line or a level is going to become support and resistance until it’s been tested a couple of times and the more times price reacts at a level, the more resistive or supportive it tends to become. So if you see an area that has been tested many, many times, likelihood is it’s going to hold again.

And when we see that happening over and over again, it becomes a range. So support and resistance areas that get tested multiple times form the top of our ranges and the bottom of our ranges. So in this case, I would probably say this low here, this low here, this low here. It’s kind of a consolidation but that’s kind of the bottom, tops and bottoms of ranges basically. So and your ranges will increase dependent on whether your support and resistance gets pierced and penetrated or it holds. So in this case we then move down to here as the bottom of the range. You see price collapsed down into it, rejected it, pushed up, tried to get through it again, couldn’t.

So this is an area of support, but we didn’t know it until it did that. But it’s not this level, you see. You’re not gonna get it to the pip. It’s an area where price rejects from. And this is one of the reasons why people get stopped out all the time. Because what people do and what people are taught to do is put their stops under previous support and resistance. And the market doesn’t move to the pip. It doesn’t move to the five or the 10 pip.

The market moves as far as it needs to move to gather as much liquidity as it can to move away from where it wants to move to. So you will get it where it’s very, very close. Yeah, and when we see that big push, that’s a good example actually. When we see this big push up and then pull back and then push up again at a previous level of support, that’s when we start to get into our trades. Yeah, so it’s just taking trades at logical areas that make sense. If we see a reversal alert happening here, we can say, right, is there a level that looks good to me? In this case, probably would be. There’s a double top. So I probably would have taken a trade there. Would it have worked? I don’t know. It depends what my TP was, how many pips I was after. But it did fail. And you would have got stopped out if you had stopped there, but then it worked.

So they don’t always hold, but you’ve got to draw them in somewhere. And then once we’ve got our four hour drawn in and we fine tuned our lines to be as accurate as possible on the four hour chart, we can drop down to the hourly chart and then have a look again. So on the hourly, there’s a potential level here that may act as support and resistance. It’s only, it’s a high that’s been hit and then obviously pulled back from, but when it got back to there, it kind of just consolidated and crashed through it.

So it’s not particularly a good one at the minute. This low here, you can see we had a previous low there. So it moved down to there. I’m going to move my line. I’m going to move my line for some reason. Just draw a proper line on it. So we have that low there, pulled back into it, bounced off. So that’s probably a pretty good one to join isn’t it? So yeah, you basically just go down through time frames but I wouldn’t recommend going more than sort of two or three time frames above where you are currently trading because it becomes much much less relevant. So you know looking at monthly levels for example or weekly levels. If you’re trading M15 or H1 by the time it gets up to here, it’s just pointless having it drawn on the chart, isn’t it?

It’s got such a long way to go to get up to this one. So you don’t need to draw in every level, but you need to draw in multiple levels around where price is at the moment. We know that 80% of the time, price moves in a range, and then it moves out of a range and it comes back into a range, yeah? So you only really need to be drawing three or four levels maybe above where prices and three or four levels maybe below where prices. Because we’re not interested in this level really at the moment. We can draw it into our charts, but this is the weekly chart. It’s going to take maybe a year or two to get up there. We don’t need to worry about if we’re trading on the hourly charts, we need to worry about above and below us at least sort of three or four levels. And that’s really all you need to do. So if price pushes up and pushes up and gets up to this level, I want to make sure I’ve got more drawn in there because I need to think to myself, right, if we break above here, where are we going? And support and resistance acts as magnets, doesn’t it?

So price moves from support and resistance zones to support and resistance zones. So if we break through one, we need to know where’s the next one. So if we crack through this one and do that, that is the next area I’m interested in. Let me see if I can get a reaction at that level. If we break that one, that is where I’m interested in next. Let me see if we get a reaction at that level.

Bang, big bearish engulfing candle. Brilliant, get in, move down. So we’re always looking for turning points. And this is basically, support and resistance is so important because it’s where price is attracted to. And if price is going to turn, and that’s what everybody’s always looking for, isn’t it? The turning price. It’s gonna happen at a level it’s previously happened at the vast majority of times.

So you’ve got to have these levels on your chart. Now, drawing it in is obviously important, but then obviously you get a messy chart. So another way you can draw support and resistance in is by basically having a clean chart. Let me just put my template on. So another thing you can do is have a clean chart and wait for price to give you an alert. And then you can basically look at that turning point of price and draw a line on it.

Yeah, so if I saw this reversal alert here that we just got, and I thought, right, there’s an entry, there’s a potential entry there. Do I want to take this trade? So what I’m going to do is I’m going to draw a line where price got to as a high and then I’m going to go out on my charts up to other time frames and have a look at where that turning point was. Is this a potential level of support and resistance? Yes. Price has pushed up here on the daily chart and rejected it, pushed up and tried to break it again, rejected it. Have we got here before? No, this is the first time we’ve got to this level for, what, since October. So many, many months. So is this a good level to be taking a trade from? Potentially, yes. Yeah. So that’s another way you can draw support and resistance. If you don’t want to go through the process of drawing it on your charts, just draw in where your entry is likely to be and where the reaction point of your entry is likely to be.

And then go up to another time scale and have a look at where that reaction point was. So down here, for example, let’s say down here, we got there’s a nice three bar reversal happening there. So let’s say that that was going to be our entry point. That would have been the low. So what we can do is we can scale out and have a look at is that a potentially a good spot to be taking a trade from. So price has got down to there before and rejected.

It’s got down to there, it’s had a couple of goes. It’s not particularly clean, is it? It’s pushed up, rejected. So possibly not the best level of support and resistance, but it’s not bad, is it? It’s an area that price has rejected twice in the past and it’s just come down and we’ve had a nice reversal signal so you can take that trade. So you can always draw it in that way as well. In your experience, the more touches the stronger as supply and demand always teach, once you get to the third touch, there is more likely to break. Yeah, support and resistance is not always going to hold. If support and resistance held all the time, price would never move.

It would never move out of a range. If every time we got to support and resistance it worked, we’d just do that forever. Yeah, so at some point it is going to break. You can back test this and look at it. So you can draw in support and resistance and then go forward in time and look at how many taps it took before it actually got a break. There’s no hard and fast rule. We’re looking for an edge. We’re looking to put the odds in our favor. And we need tools to help us do that. And we know that support and resistance acts like magnets and price is drawn towards it and we know that it reacts from it but it’s not going to work every time. So yeah I mean I’ve seen many instances, I’m just showing you on the chart, I mean loads of instances where price has reacted multiple times at the same level so I mean would you class this level here as support I would, definitely.

It broke. Yeah, but it rejected. It broke again and rejected. It tapped, spiked through and rejected. That’s been hit four times as far as I’m concerned, but that is a support and resistance level. Some people would say that that is a failed support. I would say that is a successful support. And it’s a little bit woolly, isn’t it? It’s like drawing trend lines. You know you ask people to draw, you ask 10 people to draw a trend line, you’ll get probably three or four different versions of the same trend line.

It’s a little bit subjective, supply and demand, support and resistance. It’s all a little bit woolly but you’ve got to have some way of drawing it and I tend to just go with an extreme. So I go with an extreme, wait for price to get to that extreme and then look for reactions. Which brings me on to the next point, which is what are we looking for at support and resistance? So the main thing you tend to look for when you get there is an alert from your system or price action. So price action candlestick patterns. So when we get down to these levels, we want to see price showing signs of rejection. So if we look at this one on the pound odd we’ve got right now here on the four hour chart. So this one here, we said from the daily, this is an area where price has got to and it’s rejected in the past.

It’s come up, it’s tried to get through it again and rejected. Yeah, so we’ve come up to it again. We’ve tapped into it perfectly. This rough area where price is rejected. And have we got any reason to get into this trade? So on the four hour chart, we’ve got a massive bearish engulfing. Yeah, brilliant signal, brilliant candlestick pattern, bearish engulfing’s worked very well. So we’ve pushed up, we’ve consolidated a little bit, we’ve pushed up, and then we’ve tried to hit that level and we failed and it’s collapsed dramatically. And then we’ve got a reversal alert. So yeah, absolutely brilliant price action there.

Things to look for are good candlestick patterns to look for at support and resistance. Obviously, when we’re coming down into support, we’re looking for a long wick to the bottom and either a big body or a hammer, that sort of candlestick pattern. At the top, when we get up to levels of resistance, we’re looking for some kind of rejection, like a shooting star, or a bullish or bearish engulfing candle.

So that’s a prime example of a bearish engulfing. So big push up, much bigger push down. Let’s try and find this. So there you’ve got a bullish engulfing. So we’ve got a down candle followed by a double-sized, big push up. So this level here, potentially, yeah. So we tapped into that, rejected, tried to get through it again, rejected, finally got through, came back down, rejected it, pushed up, came back down, whipped through it, closed through it.

It’s been rejected multiple times, isn’t it? It’s been rejected there, it’s been rejected there, it’s been rejected there, rejected there, tapped into perfectly there. If price gets back down to last week’s low, wicks through it and puts in any kind of hammer, I’m jumping all over that, yeah? But where you draw your support and resistance, whether you draw it at that wick, at that wick, at that wick there, or at this bottom, is entirely up to you, but look for an area that for me, it would be that way there, because it’s been rejected multiple times in the past.

And it’s also acted as support. The strongest resistance, support and resistance you’ll get is a support, a resistance rather, that has been resistive and broken through and then has been supportive. So it was resistance there, and it’s now turned into support. Yeah. So yeah, so price action is things that you want to look for when you see support and resistance.

And obviously the market reversal alert indicator is doing exactly that. It is giving you a signal when price action is starting to turn. And if you’ve got a support and resistance level where that high is formed. Perfect, entry. So M15, that was that high. I think that was the high, wasn’t it? Yeah.

That was the alert candle there, and we’ve started to push away. So yeah, so that’s basically what to look for. That’s a bearish engulfing. So yeah, so that’s basically it. Obviously the other types of support and resistance you’ve got are dynamic support and resistance. Those are fixed support and resistance. So those are horizontal lines. And basically the way we’re drawing support and resistance in is we’re looking left.

Because that’s all we’ve got to look at. What’s happening in the left? Yeah, we can only see what’s happening in the left. We’ve got no way of knowing what’s happening in the future at all. But we can see where prices got to multiple times in the past and has formed areas of rejection. Dynamic support and resistance is typically in the form of your moving averages. So price will tend to respect moving averages and they act as dynamic support and resistance. So support and resistance that moves and price will often push up and then pull back into support and resistance moving averages. So let’s find an example. So this is the 24 moving average of the daily.

Let me just find a good example. Here we go. So this is the daily pound yen, as you can see. And on the four hour chart, we’ve got the daily moving averages drawn in on the four hour chart. And as you can see, price pushes up and then it pulls back into the moving average, pushes up again, pulls back into the moving average, then pushes up and stays away from the moving average for ages, taps back into it, rejects it, taps back into it, consolidates for a bit, rejects it, pulls back, pulls back and basically acts as a kind of trampoline. It bounces off of support resistance or in this case your dynamic support which is your moving average. So you can use any moving averages.

Play around with moving averages. They’re really easy to put onto your charts. If you just want to stick a moving average on your chart. Don’t know, let’s pick the 200. The 200’s always a very good moving average. Why did that not go on? 200 ma. I’ve already got one on there, haven’t I? It’s just not showing, that’s why. Let me just.

That’s my 200 ma. Okay, so there’s 200 MA. So you can see this is the dynamic support in this case. So price has pushed up, pull back into the 200, rejection, pull back into 200, rejection. It’s exactly the same process. When we pull back into the 200, we are looking for any kind of price action that says we need to be taking along. It’s gonna hold, yeah?

Consolidate, push, pull back, push, yeah? You can use any MAs you want. And the lower timeframes, obviously, you can use different MAs. You can use, a lot of people use the 20s. Scalpers use fives and nines. Longer term traders tend to use longer moving averages, but they are doing exactly the same thing. They are an average of price and price moves in waves and will tend to find areas of balance it likes to trade at and those will be back at those moving averages.

Once price gets back to those moving averages, it will tend to reject them and bounce away from them. Higher timeframes obviously are always going to work much, much better. But, yes, so those are the two types that you can use. Obviously, your fixed support and resistance is horizontal lines, and your moving or dynamic support and resistance will tend to be your moving averages. So that’s it for basically moving averages. Any of, sorry, moving averages, support and resistance moving averages.

Anybody got any questions on those? Silence. So my preferred way of using support and resistance is obviously for levels to enter trades when we’re basket trading. So here is an obvious level of previous resistance. resistance, we smashed through it and it acted as support. It’s still acting as support at the moment. But the trouble with it is that you can draw it in so much and you get to a point where you’re like your chart is just full of lines and you can’t see the wood for the trees. So my preferred way of doing it is to when I see an area that looks like it’s reacting is there a reason it should react there and like I said I will put it at that low and then look left always look left.

That’s the reason that bullish engulfing exists. Let’s take a trade you know they’re not always going to work this could now collapse down hopefully it won’t because I’m not on the pound. But yeah, so it’s easier to draw in when you get an alert or a level. As we know, we’re using the 24 and the 72s as our dynamic. And obviously we’re using fixed at obvious levels. And last week’s highs and last week’s lows, yesterday’s highs, yesterday’s lows, session highs, session lows, they all work the same. So you know session highs and lows are very often previous Asian low, yesterday’s low or previous London low in that case. And previous days highs and lows as well will obviously act as supports and resistance. So you know whenever you see something, you see a reversal alert, is there a reason why that should have turned there?

Potentially yes. Yeah, so that’s all you’ve got to do. But it is the most important thing in trading as far as I’m concerned, because we know it’s the only thing we can see. It’s the only thing we have to go on. We have nothing to tell us what’s gonna happen at the hard right edge, apart from what’s happened at the left. So it’s the only thing we’ve got to go on and we can see things happening over and over again.

This is not a coincidence that the daily moving average acts as support and resistance. It happens on chart after chart after chart.