Things To Remember
Before we end I just want to give a list of some things which you need to remember when drawing and identifying support and resistance lines.
- When you’re marking the round numbers nearest the reversals don’t worry if you can’t get the price tag to sit exactly on the round number itself. If it’s within 3 pips of the round number then it’s fine to mark as a support or resistance level. i.e if you could only manage to get the tag to sit at 1.11801 instead of 1.11800 that’s still fine for marking the level.
- Prices which end with 500 (i.e 1.11500) or 000, (i.e 1.11000), are the ones which are most likely to cause big reversals to take place in the market. Usually you will see the market reverse after it has penetrated between 100 or 200 pips past these prices, so make sure you always have the 500 and 000 prices marked as support and resistance lines on your charts.
- When marking the reversals to see where potential support and resistance lines are located, make sure you only mark the reversals which have occurred recently. Don’t go all the way back and mark every single reversal which has occurred from a similar price to one another, just mark the ones you can see in the segment of price action you’re viewing at that time.
- If you have a situation where not enough reversals have occurred for you to mark any reversal lines, go back to the last time some price action formed above or below the current market price and mark the reversals from there.
Although I think some of the more experienced price action traders reading this will look at today’s method of drawing support and resistance lines as being quite long winded, I can promise you it becomes a much quicker process once you’ve gown accustomed to carrying it out a few times. After a while you’ll be able to see where the reversals and round numbers are found without actually marking them on your charts, which will allow you to identify where the support and resistance lines are located a lot quicker than if you were to follow all the steps I’ve given you today.
If you have any questions about drawing or identifying support and resistance lines using the method in this article, please leave them in the comment section below.