How to Draw Support and Resistance Correctly
Knowing what Support and Resistance are is essential but drawing it more accurately is more crucial for a trader. If a person has all the knowledge but doesn’t know how to use it, then it is of no use. Different people have a different understanding of Support and Resistance, and they all draw it differently. Support and resistance zones are significant for your analysis work and should be drawn with accuracy.
In this article, I will guide you through the entire process of drawing Support and Resistance correctly.
Before we jump into the steps of drawing Support and Resistance, I want you to know some facts about Support and Resistance.
1) Support and Resistance is not a price level, and it is a zone.
2) Support and Resistance is a zone from where price reverse.
3) Support and Resistance may be extreme highs or extreme lows.
4) Support and Resistance may show an oversold and overbought region respectively.
5) Support and Resistance get better with time, but it doesn’t mean that it can’t be broken.
Now, let us begin and understand how to draw these zones.
Always remember whenever you draw support and resistance zones, start from a Higher timeframe. Not only for Support and Resistance but any of your analysis should always begin with a higher time frame. The higher time frame has the most influence over the market.
Steps for drawing support and resistance zones
Step 1– Choose a chart of your choice and go to the monthly, weekly or any timeframe of your choice.
Step 2– Try to look for the area’s to which the price has reacted or to be more precise, search for regions from where the reversal happened (swing highs or swing lows).
Now, mark as many of those swing highs or swing lows you see.
Step 3– Use the rectangle tool from the toolbox and cover as many as swing highs or swing lows you have marked.
This rectangle region will be your Support or Resistance, so only cover swings which are in a straight line or nearby a line.
Step 4– For taking entries and if the zone is too big then try to connect more than two points with the horizontal line.
And remember, always look for 2 or more swings in a zone for the zone to be valid — the more swing points it has, the better.
Now when you are done with the higher timeframe, you can move to the lower timeframe and repeat the same steps.
Let us try to draw it on a chart.
Step 1 – Choose a chart of your choice, and go to the time frame on which you want to find Support and Resistance Zones
I have chosen XAU-USD and 4H timeframe.
Step 2 – Look for Swing highs or Swing lows.
Mark all the swing lows and swing highs and move on to the next step.
Step 3 – Draw a rectangle which covers all the swing lows and a rectangle which includes all the swing highs.
The rectangle with all the swing lows will be your support zone, and the rectangle with all the swing highs will be the resistance zone.
Step 4 – To mark the exact resistance level for taking entries, draw a horizontal line and try to connect at least 2 or more points.
The reason why I use this method to find my support resistance is that I believe support and resistance cannot be a single level. There are many traders in the market and not everyone reacts to the exact price, So how can it be a level? It cannot always react to one individual level. Also, you must have seen that you cannot connect points using a horizontal line every time and that’s why when you try to see it as a zone it becomes much easier to draw and trade support and Resistance. And you can draw a horizontal level whenever you can connect two points so that you can get your entries on point.