Here we go over what support and resistance levels are, different types of support and resistance lines, how to draw support and resistance lines and much more.

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Email: support@mytradingskills.com
Phone: +44 (0)1428 738305
How to Identify and Draw Support
and Resistance Levels on Any Chart
Published: 12/06/2018
By: Phillip Konchar
SKILLS
Support and resistance levels are a powerful concept in technical analysis. Many technical tools
have been developed to take advantage of support and resistance levels in the market. This
makes them one of the most wide-spread trading strategies when trading the financial markets.

2. If you’re a beginner in the market, understanding the concept of support and resistance levels
should be your number one priority. This is because many advanced strategies rely on the ba-
sics of support and resistance.
What is Support and Resistance?
Support lines represent prices where the market had difficulties to break below.
This signals that the same price-levels could again represent an obstacle for the price to move
lower. Usually, there is a high number of buy orders located just around important support
levels. When these are executed it can cause the price to bounce off the support level. In other
words, buyers jump into the market when the price approaches important support prices.
Resistance levels are similar to support levels, only that they represent price-levels at which
the price had difficulties to break above. This signals that the same level could again act as a
resistance, or barrier, for the price to move higher.
While buy orders are located around important support levels, sell orders are clustered around
important resistance levels. Simply put, sellers jump into the market when the price reaches
towards an important resistance level.
Many tools in technical analysis have the purpose to identify important support and resistance
levels where the price could retrace. Some of those tools include horizontal lines, trendlines,
channels, chart patterns and Fibonacci tools. There is even a complete trading style developed
around the breakout of support and resistance levels, which is popular among retail Forex trad-
ers.
Types of Support and Resistance Lines
There are many types of support and resistance lines in the market. They differ by the way how
they form. The list below shows some of the most important levels that every trader should
know about.
Horizontal S&R Levels Drawn by horizontal lines using at least one price-point
Round-Number S&R Levels Psychological S&R levels around round exchange rates (e.g. 1.00, 1.10, 1.50 etc.)
Trendline S&R Levels Drawn by upward or downward sloping trendlines using at least two price-points
Fibonacci S&R Levels S&R levels based on Fibonacci ratios, used to identify the end of a price-correction
Dynamic S&R Levels S&R levels which update with each new price-tick
1) Horizontal Support and Resistance Levels
Horizontal support and resistance levels are the most basic type of these levels. They’re simply
identified by a horizontal line. First, you need to spot a past price-level where the price had
difficulties to break above or below. Then mark it with a horizontal line which rays into the

3. future. Once the price approaches this horizontal line again, there is a high chance that the price
will retrace from that line.
The following charts show horizontal support and resistance levels in play.
Support Level:
Example of a Support Level on a Trading Chart
Resistance Level:

4. Example of a Resistance Level
Did You Know? For a support or resistance level to be important, the price should touch the
level at least three times.
2) Round-Number Support and Resistance Levels
Another type of support and resistance levels are round-number levels, they form around
round-number exchange rates. These support and resistance levels are psychological levels. As
market participants tend to put their stop levels or profit-targets around round-numbers, in-
creasing the number of market orders around those levels.
Round-number support and resistance levels are horizontal lines drawn at round-number ex-
change rates, such as 1.00, 1.10, 1.20, 1.25 etc. The following chart shows the EUR/USD pair
with each round number acting as a line of resistance and support.

5. Example of a Round Number Acting as a Line of Resistance and Support
3) Trendline Support and Resistance Levels
Trendline support and resistance levels are not drawn by horizontal lines, but by trendlines
which can be upward sloping or downward sloping. Since the Forex market likes to trend,
trendlines are often used to identify uptrends and downtrends. Each time the price approaches
towards a trendline, there is a high chance that the price will bounce off the trendline. Just like
with horizontal support and resistance levels, the trendline should have at least three price-
touches before it is considered important.
Example of Uptrend

6. Example of a Downtrend
Similar to trendlines, channels can also be used to identify support and resistance levels. A
channel provides both support and resistance for the price by its lower channel line and upper
channel line, respectively. The following chart shows a support and resistance chart based on
a rising channel.
Example of a Rising Channel

7. Example of Falling Channel
The next chart shows a falling channel acting as support and resistance for the price.
4) Fibonacci Support and Resistance Levels
The Fibonacci retracement tool is an extremely popular tool used to identify price-levels where
a price correction might end. This leads to the continuation of the underlying trend. Price cor-
rections are counter-trend price moves during uptrend and downtrends which give price-charts
their characteristic zig-zag pattern.
Leonardo Fibonacci was a famous Italian mathematician from the Middle Ages, known for the
Fibonacci sequence of numbers which goes like this: 1,1,2,3,5,8,13,21,34… If you divide any
number in the sequence with its successor, you’ll always get the same result: 0.618. This ratio,
also known as the Golden Ratio, is quite common in nature and occurs naturally even in the
human body.

8. The Golden Ratio
Market participants believe that the Golden Ratio can be used to measure the extend of price
corrections in the market. The 61.8% Fibonacci retracement is believed to provide important
support for the price. In any case, practice shows the market tends to respect the 61.8% Fib
retracement, including other variations of Fibonacci ratios. The following chart shows an ex-
ample of how Fibonacci retracement levels are used to identify support levels.
Example of Fibonacci Retracement Levels
5) Dynamic Support and Resistance Levels
As their name implies, dynamic support and resistance levels change their level with each
new price-tick. To draw dynamic support and resistance levels, traders usually use moving av-
erages which are automatically drawn by your trading platform. The 200-day exponential mov-
ing average (EMA), 100-day EMA and 50-day EMA are very popular dynamic support and
resistance levels. This is followed by a large number of traders which increases their im-
portance and self-fulfilling prophecy even more. Dynamic support and resistance levels are
shown on the following chart.

9. Example of Dynamic Support and Resistance Levels
How to Draw Support and Resistance Lines
To draw horizontal support and resistance lines, we need to have at least one price-point at
which to place our horizontal line. That price-point is usually identified as an obvious swing
high or swing low where the price previously retraced.
Trendline support and resistance lines need to have at least two price-point to be drawn. Simply
connect two swing highs or two swing lows in a price-chart with a trendline, and project the
trendline into the future. However, bear in mind that in both cases (horizontal and trendline
S&R lines), the lines become more important if the price touches them at least three times.
Daily Forex Support and Resistance Levels
Support and resistance levels on higher timeframes have greater importance than support and
resistance levels on lower timeframes. The daily timeframe is especially popular to draw S&R
levels, as many traders follow and base their trading decision on the daily timeframe. Remem-
ber that S&R levels have a high degree of self-fulfilling prophecy, which means that more
obvious levels tend to work better as a support or resistance for the price than less obvious
levels on very short timeframes.
How to Draw Support and Resistance Lines in MT4

10. MetaTrader 4 is one of the most popular trading platforms among retail Forex traders which
features advanced charting tools to identify important market turning points. Let’s take a look
at how to draw support and resistance lines in MetaTrader 4.
Drawing Horizontal Lines
To draw a horizontal line on your chart, select the horizontal line button on your Toolbar and
click anywhere on the chart where you want the line to appear.
Toolbar on Meta Trader 4
Horizontal lines are often used to mark support and resistance levels in the market, where the
price might have difficulties to break below/above. The following picture shows a horizontal
line drawn on the EUR/USD pair, where the price might find support.
Example of Drawing Horizontal Line on EUR/USD Pair
Drawing Trendlines
Another popular tool for chart analysis are trendlines. They are similar to horizontal lines, only
that they slope up or down and are not necessarily horizontal. Trendlines are used to analyze
the current market trend. To draw a trendline on your chart, select the trendline button in your
Toolbar.
Choose Trendline in Toolbar on Meta Trader 4

11. Example of Drawing Trendlines
Drawing Channels
Channels are similar to trendlines, only that they include a second trendline which is drawn
parallel to the first trendline. Again, channels are used to gauge the current trend with the upper
and lower channel lines acting as support and resistance lines.
A trend channel (blue) drawn on the EUR/USD pair is shown on the following chart.
Example of Drawing Channels
Drawing Fibonacci Retracements
And finally, to conclude this brief introduction to chart analysis on the MetaTrader 4 platform,
let’s see how to use and draw Fibonacci retracements on the chart. The Fibonacci tool is used
to find price-levels where a “higher low” may form during an uptrend, or a “lower high” during
a downtrend.

12. To draw the Fibonacci retracements on your chart, click the Fibonacci tool on your Toolbar
and select the swing lows and highs on your chart, which represent the initial move of the
trend.
The Fibonacci tool will draw percentage levels between the selected swing low and high, with
the 23.6, 38.2 and 61.8 levels usually being the most important levels where the price might
retrace.
Example of Drawing Fibonacci Retracement Levels
Now that you’ve broadened your understanding of the MetaTrader 4 platform and learned how
to perform basic chart analysis using the built-in charting tools in your trading platform, let’s
move on to a few important tips on drawing support and resistance levels.
Tips on Drawing Support and Resistance Levels
 How Far Back to Draw Support and Resistance Lines?
 There is no hard rule on how far back support and resistance levels should be
drawn. Younger support and resistance levels are usually more important than
older ones, as they represent a fresh price-level where the market had difficul-
ties to break above or below. As a rule of thumb, if you’re using higher time-
frames such as the weekly one, focus on the past 12 months of price-data to
identify potential swing-highs and swing-lows which could act as support and
resistance for the price.
 How to Draw Support and Resistance Lines in 15-Minutes Chart in Forex?

13.  When drawing support and resistance lines, the same principles apply to all
available timeframes. However, bear in mind that S&R levels on higher
timeframes tend to be more important than S&R levels on lower timeframes,
such as the 15-minutes one.
 How to Draw Support and Resistance Lines on a Candlestick Chart?
 Candlestick charts do a great job not only in creating graphically appealing price-
charts, but also in identifying support and resistance levels. A candlestick con-
sists of the candlestick’s body, which represents the opening and closing
prices, and the upper and lower wicks, which represent the high and low prices
reached during a trading session.
You can use both the body and the wicks to draw support and resistance lines
on candlestick charts.
Did You Know? If you’re drawing S&R lines on daily candlestick charts, try to focus on the
body of the candlestick instead of the wicks. The closing prices of a candlestick’s body tend to
have a higher importance than the high and low prices represented by the wicks, since they
show the prices at which market participants “closed their trading positions, took profits and
went home by the end of the trading day.”
Pro Tip 1: Support and Resistance Levels Change Their Roles
An important characteristic of support and resistance levels is that they can change their roles
once broken. A broken support level becomes resistance in the future, while a broken resistance
level becomes support in the future. This is very important to understand early in your trading
career, as a popular trading strategy called pullback trading is built around this characteristic
of S&R levels.
Did You Know? Once broken, support and resistance levels change their roles. A previous
support level becomes resistance, and a previous resistance level becomes support.
Pro Tip 2: Know the Difference Between Support and Resistance Lev-
els and Zones
There is an important difference between support and resistance levels and zones. As the names
imply, a level is a specific price-level where the price might find support or resistance. A zone,
on the other hand, refers to a zone of prices in which the price can retrace anywhere in between.
Most of the time, the price doesn’t hit a S&R level right at the pip before it retraces. The closer
the price reaches towards a S&R level, the higher the chance of a reversal.

14. Did You Know? Support and resistance levels drawn using the Fibonacci retracement tool
don’t have to be exact price-levels. The price often finds support at so-called support zones,
which can span through different price-levels. Usually, prices which lay in between the 38.2%
and 61.8% Fibonacci retracement lines can act as a support zone for the price, i.e. the price
can retrace anywhere between those two levels.
Pro Tip 3: Use Multi-Timeframe Analysis to Identify Weekly, Daily
and Shorter-Term S&R Levels
In practical trading, it’s a wise decision to perform multi-timeframe analysis (MTFA) on
weekly, daily and shorter-term timeframes to identify long-term and short-term support and
resistance levels. In essence, support and resistance levels on the higher timeframes tend to be
more important than S&R levels on shorter timeframes.
For example: If the price reaches a support level at the 1-hour chart, but the daily chart shows
that the exact same price-level could act as a resistance, there is a much higher chance that the
price will respect the daily resistance and break through the 1-hour support.
Furthermore, different timeframes can show different trends on the same currency pair. A
healthy uptrend on the 4-hour chart may look like a downtrend on the 15-minutes chart, while
the downtrend may only be a counter-trend price-correction of the uptrend.
Final Words
The concept of support and resistance levels acts as a foundation for many advanced trading
strategies, which is why you need to understand these concepts as early in your trading career
as possible. A support level refers to a price-level at which the price had difficulties to break
below, while a resistance level refers to a price-level at which the price had difficulties to break
above. As a result, traders anticipate that those levels could again form an obstacle for the price
in the future. Support and resistance charts work great in all financial markets.
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Website: https://www.mytradingskills.com/
Email: support@mytradingskills.com
Phone: +44 (0)1428 738305