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# How do you draw your support and resistance lines ?

Discussion in 'Technical Analysis' started by guruji, May 19, 2010.

1. ### guruji

The process of drawing support and resistance line is subjective. Many different traders have different ways of determining these lines. How do you draw them?

The one that I use most often is to look at the 20-day high and the 20-day low to get my support and resistance lines.

Based on my observation and experience, you can draw support and resistance lines based on moving averages.

For example, say you have a chart with 200 day moving average and 50 day moving average.

And also assuming that the trend reverses from bear to bull trend. So you can expect that the 50 day moving average line will start to go above 200 day moving average.

Because of this concept, you say that the 50 day moving average line represents resistance level while 200 day moving average will be the support.

This is a good tutorial on how to determine the support and resistance levels quantitatively using moving average technique:

<a href="http://www.stock-trading.me/2009/09/use-moving-average-to-determine-the-support-and-resistance-of-sp-500/">Use moving average to determine the support and resistance</a>.

3. ### guruji

Appreciate the link... I think this is a good idea

4. ### djmartin

Are you guys new to trading? If not it sounds like it Haha

5. ### djmartin

S/R are levels where you clearly see a turn in price, thats it. Why would a MA be S/R when you have so many of them?? Take a 60 minute chart and where you see a clear turn in price, thats your most important levels. Institutional Traders use 60 minute charts to cut out all the noise from intraday trading. Don't ever say I never taught you anything kids, now go and play haha, just playing.

6. ### mayhem28

It's easier to "see" support and resistance on larger timeframes, such as weekly charts (obviously because there is less noise..), so practice doing that first to get the hang of it. Then try it out with daily and then hourly charts.

For me understanding how to "correctly" see and draw s/r was where my trading got better. You need to know where those points of conjecture are for yourself.. rather than just see where other people draw them. Nevertheless it is somewhat subjective.. "support and resistance should be drawn with a crayon not a pencil" can't remember where I read that but it is very true.. s/r needs to be utilised with other things.. but it is the essential component of good trading. Also be careful with using moving averages as a substitute for s/r.. Good luck!

8. ### ProfLogic

If you can't learn to "SEE" support and resistance and you must calculate it . . . give up trading.

9. ### siddisoza

You need at least three touches (or points in a line) to confirm that it is a support or resistance level. Two is not enough. If the price action moves away fast from the line connected by these points itâs probably the dying gasp, but donât trade until you hit that line again.

Salaam, brothers and sisters.

I think Dr. Alexander Elder has given some wonderful and simple advice regarding S/R.

He states (I forgot which book) that the most significant support and resistance is where there is the most "traffic". Instead of drawing S/R at the lowest or highest points of a trend or channel, draw it in the area where there are the most candles. This should make the S/R more "significant" as it shows that these are the areas where traders were most active and interested.

Dr. Elder also states that the higher the volume in a S/R zone, the more "significant" it is.

Try it out and see if it helps.

#10     Sep 2, 2010
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