How to draw major support & resistance levels
Major or primary levels of support and resistance are relative to the timeframe you are trading, personally I would say they are levels taken from the most significant timeframes. The hourly timeframe and upwards.
I personally trade the daily charts so my major support and resistance levels are taken from the weekly and monthly charts. With any levels on the daily charts considered minor support and resistance. So to make level instantly identifiable I draw support and resistance levels on my weekly charts in red solid lines, if I add any levels on the daily charts I just use dotted / broken lines to signify minor / weaker levels, here is an example of what I do below. First the weekly chart then the daily.
Weekly chart
Daily Chart below
I also use fibonacci levels and trendlines to work out the most significant levels. Watching and learning candlestick price action at these levels of support andresistance is key to trading them. You must also learn about how to identify the direction of the trend. You must trade with the trend, NEVER against it.
Stress free trading using support and resistance.
Ok, you will need to practice and practice drawing your levels but I promise you your time is better spent learning how to do this on the daily and weekly charts than trying to trade the lower timeframes like the 1, 5, 15, 30, 60 and 4hr timeframes. After you have learned to trade the daily charts, then you may want to drop to the 4 hour or hourly timeframes perhaps to tighten entries or stops.
Stress free daily chart trading? Yes for sure. Once you have drawn your major areas of support and resistance all you need to do is leave them on your charts and wait for the price to come to them, go long off them in an uptrend and short off them in a downtrend. Want a recent example? Here it is, CAD/JPY long trade.
I went long on Cad/jpy at the green dotted line 83.00 all the support and resistance lines have been on the chart for weeks / months now, the ascending trendlinefrom mid January shows the long term trend is up and as such I must only look for long trades. How stress free is that, I drew my lines ages ago all I had to do was wait for the price to drop back to support and then wait for the price action / candles to form to show bullish sentiment.
Therefore I was waiting for a significant bullish daily candle off of the ascending trendline or the support level of 82.50, as it was I got a clear hammer candle on the 2nd of October, sellers pushed the price all the way down to 81.00 before the buyers jumped in and pushed it back up to close at 82.50, the next bar was an inside bar, I traded the break of that inside bar, the break of the top of the hammer and the break of the round number / significant level 83.00. The safest place to put the stoploss would be below the 81.00 level 150 pips away but with a 300 pip first target and a 700 pip actual target the risk reward is very good.
I am hoping this will continue to 90.00 and above but I will be using price action to take profits or add to this trade. The safest trade is to take profits at the first daily resistance level which was 85.86, the red dotted line. I’m nearly 400 pips profit so far and I only spend 20 minutes a day checking 20 charts. I check them at the end of the New York session 22.00 gmt. The close of the daily candle is criticle, also you must confirm the trend and candles on the weekly chart in this case we had a series of higher highs and higher lows confirming an uptrend.
You will probably need to spend a year or so learning to trade PASR price action at support and resistance, but at least you will not have to do what I did and waste two years trying to find the holy grail of forex indicators. THERE ISN’T ONE, THEY ALL LAG AND MANY REPAINT. do not even go there. If you do succum I promise you in years to come you will do full circle and be back here trading pure price action on clean charts.
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