Support Line / Demand Zone = price reaches these key level, it tends to bounce back UP
Resistance Line / Supply Zone = price reaches these key level, it tends to bounce back DOWN
What makes a valid support line / resistance line?
- The key mistake is most traders look at 5M – 15M timeframe (TF). Those lines tend to be noisy and untested. The minimum you shoud look at it 1H timeframe.
- Find a level with most rejection or contact points. When you have more than 3 contact points, the more valid it is.
3. To initiate a position, you need to ensure your SL is placed appropriately. You do not want a scenario where place comes, touches your SL and bounce back up fiercely. In the second image, there is a potential of 3 – 4 RR. I tend not to stretch my RR too much.
Extras:
- There is no right or wrong on how you can draw resistance / support lines. Personally, I focus on the true bodies of the candles, this is where the battle is happening.
- You would also like to see whether price rejections quickly or continues to stay around the region. If it’s the latter, the rejection is not fierce enough and it increased the odds of your trade idea not working out.
The key is to be patient and do not overtrade or take subpar trade ideas.