Forex Candlestick Tutorial — Part 8 — How to Draw Lines of Support and Resistance

This is part 8 of the tutorial. In this video, you will learn about support and resistance.

Lateral lines of support and resistance can be drawn using any interval of time (5-min chart, 10-min chart, hourly chart, daily, weekly and monthly). The timeframe to choose depends on whether you are a day trader, a swing trader or an investor. Generally, daily charts and at times weekly or monthly charts are most useful when looking at support and resistance.

Step 1: The first thing to do is to open up a chart, using the daily timeframe. When looking at charts, go back and look at previous history.

Step 2: Then look for areas in the chart where the price has dropped, touched several times, consolidated, and then either bounced back up or moved below it.

Step 3: Connect those areas by drawing a horizontal line across the chart. That lower line represents what we call support. Every time the price touched the support line and it bounced back up, the bulls were there to buy and push the price higher.

Step 4: Then look for areas in the chart where the price moved upwards, touched several times, consolidated, and then either bounced back down or moved above it.

Step 5: Connect those upper areas of consolidation by drawing a horizontal line across the chart. That upper line represents what we call resistance. Every time the price touched the resistance line and it bounced back down, the bears were there to sell and push the price lower.

Step 6: Expand the chart to look at the price action over the course of the past year or longer. Find other major areas of support and resistance. Come back to the 6-month or 3-month timeframe and analyze the current price action in relation to these lines of support and resistance.

© Prabhu for Forex Videos, 2016. |
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