- 5 months ago
https://tradernws.com
Category
📚
LearningTranscript
00:00okay welcome we're gonna do a quick video on support and resistance levels important thing
00:11to keep in mind all right this is a this is a basics guide to technical analysis we just pop
00:20down the music here so one of the key concepts one of the core foundational things that we need
00:25to understand when we're trading is support and resistance levels one of the most helpful
00:29things that we can have on our charts in our thought process is support and resistance it gives
00:40us an idea about where buyers and sellers are operating and so we're just going to cover off
00:46in a quick video the ways that I use in order to assess my support and resistance level so we've
00:52got a very good example of one here on BNB and something that I want to use as the the first
00:59example in this so let's dive in this is the four hour time frame now when we're looking for support
01:06and resistance levels what we're looking for is areas where the price is hold up right so it's held
01:13up from ascending further or it's supported from dropping lower and that's what we're looking for
01:19so the resistance is always from the upside pushes we see a clear line of defense where the sellers
01:25aren't letting us pass through and the buyers may not have enough energy or funds to push price through
01:32and the support is the opposite the support is where the buyers are strong and the sellers either
01:39don't want to push price through or the buyers are just too strong and they're sat comfortably in their
01:44positions now support and resistance levels are key for understanding the direction overall direction
01:51of the market certainly on higher time frames what we can see here on bch is you can see in this area
01:58here we've got three areas of resistance and you've got one here one here and then we've got this little
02:04one just in here what we can see in each of these three occasions is this is where price has been
02:10halted all right we tap into this level here at 600 and we sell off we get back to this level at 600
02:17we sell off we get back to this level at 600 we hang around and we break through
02:22so when we're looking at identifying support and resistance levels what we're looking for is number
02:28of touches we want to see at least three touches that's typically what we want to see so in this
02:37example on bmb what we can see here is one touch two touches third touch in here and then break out
02:46now what we take from this example and what we take from support and resistance levels is that the
02:51greater the number of touches usually the weaker the level becomes so the more times the level has
03:00been touched the more times it's been tapped into the weaker it becomes and the way that i use to
03:06analyze and discuss this you know or give some background to it is what you have to imagine is
03:13let's imagine that this here is an apple tree right above us here this is an apple tree
03:19and what happens is uh we go up and we pick some apples off the tree here all right but now we've got
03:31enough apples and we have to come back and empty the basket and then we go back up the apple tree and we
03:41take some more apples but our basket's full again and we have to come back down and drop off the
03:47apples in our basket and we go up again but now by the time we go up again we've already been up to
03:52the apple tree twice and we've already taken a huge number of apples off the apple tree and by the time
03:58we come back to it for this third time there's no apples left here and what we have to do is we have
04:03to go further up the tree we have to climb higher to find the apples again it's a great way to think
04:11about resistance levels and why they become weaker all right so we run out of uh supply here we run
04:18out of supply we eventually get rid of all of that supply there's no more apples left we have to find
04:24new apples and we do that by traveling higher further up the tree and we find new apples we sell off
04:31again okay so that's the way that we visualize the way that the market works around these resistance
04:36levels and the number of taps making it weaker because we're essentially taking whatever the
04:43asset is out of the market and it when we do that enough there's no sellers left there's no apples left
04:49on the tree we have to move elsewhere in order to find new sellers new apples right i hope that analogy
04:55makes sense so the resistance level very important very key through here number of touches is
05:00important to us because the number of touches that we have signifies number one the legitimacy of
05:07the level and secondly
05:08how likely a breakthrough potentially is so this example on bmb one two three touches breakthrough
05:17ideally all of our resistances have around a three touch value for breaking out we would certainly hope
05:24that our resistance levels would be near a breakout when we have three touches sometimes we can see
05:29resistance levels with five six seven touches but again each one of those touches we anticipate will
05:35eventually lead to a breakout one of the best ways that we can use to map resistance levels like this
05:42is turning on line so if you're struggling to identify your support and resistance levels
05:49utilize a line chart it will make it a lot clearer for you to see those levels sometimes when we've got the
05:55wicks up it can be very very difficult in order to see where the true levels are you'll also notice that
06:02from this i do a lot of my drawing of levels based on candle closes i don't take into account wicks
06:12that's important for me because i think one element of drawing support or resistance levels
06:18is acknowledging when we have a breakthrough and by drawing to candle closes it becomes obvious when
06:24we have a breakthrough or breakout of a level so for me this is very important why i draw it from
06:31the close so you can see with bmb for example if i zoom in on this region right we didn't get any
06:36closes above this 600 level we traded above it traded above it traded above it but didn't close above it
06:43all right so that's why i always tend to draw from candle closes you swap to a line i get the same
06:49picture very clear so the bmb level here very very nice all right very clean
06:56let's say on bmb this it's too clean to deviate away from so after we have a resistance level and we
07:06have a breakout the level usually acts as support i think that's the rule that's what happens we
07:13talk about this in terms of flipping levels so we flip a resistance level into a support level
07:19and the support level becomes a new marker for the market in order to potentially become buyers at that
07:25point and typically one of the reasons that that happens is because when we flip a level we know
07:31there's been a lot of selling interest at that price point so it gives us an opportunity to freeze
07:35out those sellers by not allowing us to drop any deeper and it also sets a new market of sort of fair
07:42value for us in that we know that buyers were willing to buy at this price point and therefore
07:48if it comes back down to this price point we would expect to see demand kick back in
07:52it's really important to understand from that support resistance flip
07:59example because what we know as well is if we lose a support level if bmb is to come back underneath here
08:08that would be a significant change in the market because we wouldn't expect that to happen right
08:13we've had two successful holds and we would not expect us to dip lower and if we do then something
08:18has changed
08:19your support and resistance levels can be drawn on any time frame the most important thing that you
08:27have to do with support and resistance is ensure that they are valid and what you are looking for is
08:33a horizontal level a small rectangle a line if you want to that encapsulates a range of price data
08:41and that has multiple touches against it that's what you're looking for okay multiple touches
08:48and a range of price data that's covered what you don't want to see in a support or resistance level
08:54is you don't want to see price action that you can convince yourself is resistance because it just goes
08:59like this very tightly and this is the only data you have for it if this was super lower time frame
09:06then maybe you could play a scalp on a breakthrough of a level like this aside from that what you want
09:12is clear movement away and back to the level right so bmb again is a perfect example of this taps into
09:18this moves away comes back up taps into it but look at the distance between here it's 11 days 11 days
09:26passed before we got back to this level we reject again right reject here 21st all the way to 29th
09:32another eight days passes before we get back up to this level again so that's what you want you want
09:37these big sweeping touches of a support or resistance level now when i talk about this tight structure like
09:45this now this price action here is fine if it comes at the end of one of these styles of structure
09:52so if i take this back here and if what we had at this point here on bmb is price action that went
09:59like this this would be good for us because we're keeping up the pressure at the resistance level
10:05i hope you see that we're keeping pressure here so what's happening in this situation is the buyers
10:11are saying we're not dipping you're eventually going to have to tap out right the sellers here you're
10:17eventually going to have to tap out because we are not letting this drop and we're going to force this
10:22level so when we have this tight back and forth back and forth underneath the resistance level that
10:29we have clear touches and bounces away from this is where we can often anticipate a breakout
10:35because we see this nice tight consolidation under the resistance and we're looking for the power in
10:41the break above this is something that happens quite regularly on uh on the multiple time frames
10:49so where we're looking for nice structure
10:53nice structure through nice clean bounces away and back to the level and then we can have consolidation
11:00underneath
11:01so there's some of the tips for drawing support and resistance levels all right if i can try and
11:08summarize now
11:09you want to draw horizontal lines or rectangles i like rectangles because i like to encapsulate a
11:16wider area of price and i'm not so fussed about the distance that i'm covering in that i think it's
11:22easier to map things out with a rectangle than it is a line because the line is very fixed it's very much
11:27a case of it has to be this point okay if like i map out the 600 level on bmb it has to be 600
11:34whereas if i just box it off what i'm saying is basically it's got to be somewhere in this box
11:40region right that's where i'm looking for it to hold and support it's somewhere around this box
11:45region that i've drawn out and for me that's easier you're looking for at least three touches
11:52or two touches in a breakout right we can have multiple touches of a level and like we said we want
11:58to make sure that the more those levels are touched the weaker we assume that they become
12:04now that applies for resistance and both support so if we have a level that is producing weak bounces
12:12from support and is hitting into support multiple times we can start potentially anticipating a
12:17breakdown in price and the same analogy works from kind of the apples in the tree perspective but we
12:23just flip it around all right so we're taking away the buyers the sellers are forcing the buyers to
12:30continue to act and eventually the buyers will step out of the way and we'll lose a level
12:34so that happens on the flip side so we're looking for multiple touches at least three to confirm but
12:40we can have a lot more than three to confirm uh sorry or a lot a lot more than three to have a
12:46resistance or a support level
12:48key thing as well i know i'm summarizing but this is just came to mind key thing as well is
12:55it's always resistance until it's always support until it's not and what i mean by that is
13:04in a bull market sometimes people get nervous about trading at support or buying support
13:13because it's been tested maybe three times already now in that situation remember what i've just said
13:19it is still a support level until it's not if we break down then sure you've got a decision to make on
13:28whether or not you sell but until the point we actually get a breakdown it is still a valid support level
13:36same with resistance right when we've got a resistance level we don't necessarily always want to anticipate a breakout
13:52because it's resistance until it's not it's resistance until it's broken through
13:56so important to acknowledge that point as well support resistance levels flip that's what we look
14:05for we look for that in a bullish scenario and we look for it in a bearish scenario so in bmb we look
14:09for it in the bullish scenario of it breaks through the resistance it retests the support this is a great
14:14bullish structure if this is to lose this level and retest underneath we would have flipped the level
14:20back right from support into resistance whereas on the breakup it's resistance into support on the
14:26break down it's support into resistance and so we always look for those flips and they're one of
14:32the simplest plays that you can begin taking as newer traders are the support and resistance flips
14:38you're looking for the levels to be overcome to be reclaimed etc and then you can start basing trades
14:44with sensible invalidation points around them
14:46and what else did we cover off in this swap to line yeah if you need to if you need to double check
14:56your levels and make sure they're legitimate swap to line the way that you draw a support and
15:01resistance level should it should look identical on a line chart to the way it does on a candle chart
15:05so if you turn on a if you turn on a candle chart and you draw a level and then you swap it to swap it
15:12to the line and it looks completely messed up and like it doesn't touch anything anymore
15:16you might want to redraw your level
15:20okay
15:23support and resistance can be drawn on any time frame like i said just make sure you've got the
15:30correct number of touches in there and make sure you've got that nice sweeping motion between the
15:34resistance or the support touches any bounces on support or resistance so bounces off support or
15:42away from resistance we should hopefully see those getting uh well we should look out if they are
15:50getting smaller because they can give us an indication of which way the market's going to break
15:54i've covered that so i don't want to cover it again
15:57i think that's pretty much everything that i have to say on a an introduction to support and resistance
16:04just remember the key things especially if you're new to trading them
16:07all right number of touches is most important most support and resistance should be immediately
16:13obvious to you as you are looking at a line chart
16:16all right most supports and resistances should be immediately obvious so let's see if we can just get
16:23like maybe ethel btc in here and we can just take a look through okay
16:29let's see what we've got here so we know we've got a we've got a couple on these
16:34um so we can see here on eth and we'll just leave it online as well just for identification purposes
16:39so we can see number one we've got this area here on eth
16:42all right where we've got one two three touches big breakout retest here
16:49all right and then we've got this area here
16:51all right through here on eth so we've got one touch two touch three touch breakout retest here and push
16:58higher so we swap that back to candle we'll see the impact of this
17:01all right so we can see the impact of this and this is why the rectangles for me are so clean
17:06because what we have in this region is we say okay here's the resistance point
17:10here's the breakout here's the retest no closes back below this level this is great perfect retest
17:16bounce back up we've got a new resistance here and here breakout retest here retest again here
17:22and then carry on higher so you can see just just very simply on a line chart
17:28these support resistance levels should be immediately obvious to you
17:31let's see if we've got anything else if we can just go to another chart and take a look
17:36got one on ltc so we've got one through this region as well here
17:40and this is going to be an interesting one so we'll map this one out and then we'll take a look
17:43we've got anything else that's clean yeah we can probably take down here as well
17:53because this is an important one across the bottom
17:58so another like super easy way of doing this is um make sure you've got the crosshair on your on
18:03your cursor on trading view and take it down right so you can see this crosshair that i'm working with
18:08at the moment so as you can see as i'm rolling down price i can see on the left and right where
18:15potentially my support and resistance is just by scrolling down
18:19so i can see as i get to this point here on ltc i can see on this side i've got the touch
18:24for support i can see on this side i've got the touch as resistance so you see the way i can just
18:29use the crosshair to try and identify where some of these levels will be without even having to draw
18:34anything and then when i see them then i can map it like this okay and come down again nothing here
18:41nothing here and then potentially this level that we've got here
18:45so we've got some important ones in this now let's turn candle back on and see how
18:51how relevant these are so this is important part of checking the processes we've identified online
18:56where we think they are now we're going to check on candle to make sure everything lines up
19:00and what we can see is we can see with this top one here we've got a great area of support underneath
19:05here nice retest as resistance on the way down after the sell-off starts and then we've got resistance
19:10resistance big breakout perfect right good good level for us we can keep this on our chart 90
19:16we've got down at the lows support here at 65 resistance here on the retest big sell-off again
19:23resistance here breakout inability to hold bearish retest big sell-off retest retest retest retest
19:32breakout and it's a very significant level down at 65 for ltc huge level for it
19:43okay and then we've got this one up here which i said was going to be the interesting one
19:49okay so what we've got an ltc through here around this 240 region is a clear resistance point and we
19:55know it's a resistance point because we've got one touch here two touch here and breakout here
19:59now we also had an attempt to try and get a touch here which failed now what's interesting about
20:03this one is we dip down below here which is awkward because what you would typically want to do is you
20:09would want to place a buy on this position you want to place a buy here with a stop loss underneath here
20:14and then you want to start shooting for the next high up right and unfortunately this is one of those
20:19sell-offs that was very very strong when we have setups like this right like this here we can't do
20:26anything about being stopped out right we have to still take our stop loss in the place that we
20:31would which is underneath here unfortunately we get stopped out of this trade here but we have to take
20:37the stop because at the time we don't know if it's going to do this right it's only afterwards we can
20:42look and say oh damn that was a shame that i got stopped out but we have no idea in the moment
20:46this could have done this and in that case we'd be saying well thank fuck i had a stop loss set
20:57how we get back on board with this is we say okay this was the important level
21:01this was the important resistance now this daily here has closed straight above that level again
21:07so actually what i'm going to do is i'm going to take an entry now on this daily close
21:11i'm going to have my stop loss underneath this candle and now i'm going to ride this into a fresh
21:18high all right so once the level is reclaimed again we can still take the position we can move
21:24back into the original position that we had but we can do that from a position of strength we still
21:32have to have the invalidation remember trading is all about essentially being stopped out when you're
21:35still potentially wrong and making sure you're protecting your capital in those moments
21:44all right so this turned into quite a long video but i hope that it was helpful in terms
21:47of my thought process on thinking about support and resistance mapping support and resistance out
21:52and some tips and tricks that i use when i'm thinking about support and resistance
21:57any questions please just let me know