Trading support and resistance lines are critical for every trader to implement into their system. In this article, you will learn how to calculate support and resistance, identify support and resistance trading zones, stock support and resistance approach to trading, along with forex trading support and resistance. I am going to guide you every step of the way. Follow along as we cover support and resistance in forex, how to trade support and resistance in stocks, and how to trade support and resistance in options.

This is a simple, easy to learn and easy to understand trading strategy. After you read this strategy, you will be able to identify these sweet spots where marvelous price action happens. Also, read trading discipline which is an important skill for successful trading.

What indicator are we using for this strategy? Indicators Used in the Support and Resistance Zone Strategy Our indicators for this strategy will be price action and its relationship to Support and Resistance. So what exactly are these key areas? How to trade support and resistance levels? Before we explain the strategy we are going to define support and resistance. What is Support? We have a specific article on this very topic so go ahead and read that here if you do not know what support or resistance is.

Support is the level where price finds it difficult to fall below until eventually it fails to do so and bounces back up. It's simply many traders making trading decisions at that level. What is Resistance? Resistance is the level where price finds it hard to break through to rise above it until it fails to and is pushed back down. You should always suspect a reversal at Support and Resistance as there is a high probability that price action will reverse at those key levels.

That's because it already did that before in the past and it will continue to do so in the future as traders will always take caution on these levels. Some who had open trades will exit at those price levels and others will initiate new trades at these levels. If so, it would super easy for traders to know and every trader on the planet would have an entry order at that price. They are more like zones that can be breached and pushed into. The trend may pull the price action back out of it, or maybe price action will succeed in breaking it for good.

This is why you want to think of these points as zones. Our main purpose in this Trading Strategy is to identify those Zones and use them for our favor and make great trade entries and exit points. The first step of this strategy is drawing those Zones on our charts.

This allows us to easily spot where the price would probably reverse. After you do this, it will resemble a support and resistance indicator only you now have zones to take advantage of. Drawing Zones on the chart is better done on a higher time frame so that we can examine the main reversal levels and the more critical points on the chart as a higher time frame shows us the bigger picture.

It's almost like what we talked about in our article about the importance of multiple time frame analysis. We begin by drawing horizontal lines on recent Peaks and Bottoms like you see below in our chart example: Examine this chart as it is critical for you to understand these zones.

When you are doing support and resistance trading, a line with multiple touches is far better off as it is clear that it stood against the price and passed the test many times and it will continue to do so. Because History always repeats itself and this continues to happen time and time again on every chart that you will ever look at. This strategy could easily be compared to our Red zone strategy that shows you how to draw zones on your chart.

When you take a look back after drawing Zones will find that those lines withheld the price numerous times before and will continue to do that numerous times more. What you can do is set your charts on 2 to 4 currencies and wait for your chance, as it may take some time for the price to reach the support resistance levels. The reason we say 2 to 4 currencies is because this is a good number of pairs to be looking at and will not overwhelm you.

This allows you to have a good judge on your trade opportunity. Basically, the higher time frame takes less time and attention than the smaller time frame. Alternatively, the smaller time frame has more signals as the zones may get hit more frequently. In this chart we see the price action approaching support and actually almost touched the support so we wait to see the form and shape of the next candle.

If the price reverses that will be good, as it is what we are expecting. A trader could look to place a stop-loss order just below the support level in case of a long position. What is a Resistance Level? Resistance levels are similar to support levels, with the only difference that they signal a price level at which an asset could face increased selling pressure, i. Resistance levels form at previous swing highs, but can also form at other technical tools just like in the case of support levels.

Resistance levels are price-levels at which the price had difficulties to break above in previous attempts, and which could, therefore, host a large number of sell orders that, when executed, could send the price lower. The following chart shows a simple horizontal resistance level. As you can see, the 1.

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