(VIDEO) How to Properly Draw Support and Resistance Levels

The ability to properly draw support and resistance levels is one of the most basic skills every price action trader must have. It’s also the building block for everything that comes after it, including price action trading strategies like pin bars and inside bars as well as a proper risk to reward ratio.

Get it right and trading starts to become effortless. Get it wrong and your trading experience will most likely be a frustrating one.

In this lesson we’re going to define what a support and resistance level is, as well as why they form. We’ll also dive into how to properly identify these levels, and then we’ll finish things off with a few basic rules to trade by.

In short this lesson will help you keep your charts from looking like this…

bad support and resistance forex chart

And more like this…

nice forex support and resistance levels

A quick note before we get started. This lesson will only focus on horizontal support and resistance as I believe it to be the cornerstone on the topic of key levels.

I’ll save trend lines for a later lesson as they have many different facets that deserve more attention.

What is a Support and Resistance Level?

A support and resistance level is simply a level in a market at which traders find a price to be overvalued or undervalued depending on current market dynamics. This creates a level in the market that can act as support or resistance depending on various factors surrounding each currency.

So that’s the “fancy” definition of a support and resistance level. Now for the price action trader’s definition…

A level at which we can look for price action buy or sell signals such as the pin bar. That’s really all we need to know. We aren’t concerned about why a level has formed. Instead, we’re focused on how important that level is relative to the surrounding price action. If it’s deemed to be an important (key) level that we want on our chart, we simply wait and watch for a price action buy or sell signal to develop.

Here is a great example of a support and resistance level in action.

drawing support and resistance levels forex

What Causes These Areas to Form?

To understand why these levels form we have to go back to the supply and demand curve. I won’t spend too much time on this as the real benefit to support and resistance comes once you learn how to properly identify the levels.

Notice how in the supply curve below, the number of units for sale increases as price increases. To put this in trading terms – the higher the price, the more willing traders are to sell their positions.

supply curve

The demand curve, on the other hand, is the exact opposite. As price increases the number of units desired decreases. This is because traders are less willing to buy in a more expensive market.

demand curve

We can, therefore, label a support and resistance level as a point in the market where traders are more willing to buy or sell, depending on market conditions. This creates an area of tension between buyers and sellers, which often causes the market to change direction.

Here’s how that looks when it’s applied to a market such as GBPNZD.

support and resistance forex market

Now that we have a good understanding of how and why these areas form, let’s take a look at how to properly identify them.

How to Draw Support and Resistance Levels

The first thing I want to mention about support and resistance levels is that they aren’t always exact levels. In fact, most often these “levels” are better thought of as areas on your chart.

It’s a common misconception that a key level has to line up perfectly with highs and lows. This couldn’t be further from the truth as most support and resistance levels have areas where the market failed to respect it as either support or resistance.  This is the reason we use price action strategies like the pin bar as confirmation that a level is likely to hold.

I don’t know about you, but I learn best when I can see something in action. Which is why I created a video to show you how I go about drawing support and resistance on my own charts.

 

If you’ll notice, the support and resistance levels I drew in the video didn’t always line up exactly with highs and lows, nor did the market always respect them. But that’s okay.

It’s important to understand that although properly drawn support and resistance levels can be a powerful asset, they aren’t without flaw. But as I mentioned earlier, that’s where price action signals come in to help us determine the strength of a level prior to placing a trade.

One last point about drawing your support and resistance levels. You should always aim to achieve the most touches possible on either side of the level. This usually requires you to move the level up and down a few times until you can find the place where the market touches that level the most from both sides (as support and also as resistance).

Remember that these levels represent areas in the market where traders are more willing to buy or sell, which can mean a change of direction in the market. So by moving a level to a place that achieves the most touches on either side, you stand the greatest chance of catching the move if and when it happens.

Rules to Trade By

Here are a few simple rules to follow that will vastly improve your ability to identify key areas of support or resistance.

Use swing highs and swing lows in the market to your advantage

By using the highs and lows as a guideline to start drawing your support and resistance levels, you’re more likely to capture the “key” levels. These are the levels that you should be interested in as they are the most likely to produce a valid price action buy or sell signal.

Don’t worry if the highs and lows don’t line up perfectly

Remember that most levels are not going to line up perfectly with highs and lows. Instead of worrying about a level lining up perfectly with highs and lows, you should spend some time making sure the level is at a place in the market that achieves the most touches on either side of the level.

Focus on the major (key) levels in the market

These are the most obvious support and resistance levels and should be immediately visible. If you have to search long and hard for a level, it probably isn’t worth placing on your chart. By only focusing on key levels you’ll be in a much better place to actually trade a price action signal when one shows up.

Stay within a six-month window

You don’t need to go back five years to find support and resistance levels. Most of the levels that you will need are going to come from highs and lows that have occurred within the last six months. Feel free to travel back in time once you have the level drawn, but don’t think it necessary to look back more than six months to find great levels to trade.

That wraps up this lesson on how to draw support and resistance levels. I hope you now have a better understanding of how to approach these levels and also which levels are most important.

Just remember to not over-complicate things. Drawing support and resistance levels should be one of the easier and stress-free things you do as a price action trader. In fact, I’ll go so far as to say that if you find yourself expending a lot of energy to find these levels, you’re probably drawing more levels than you actually need.

Keep it simple and most importantly, have confidence in your abilities! One of the bigger mistakes you can make is to second guess whether or not you’ve drawn a level correctly. It’s okay to double check your work, but just remember that your first instinct is usually the right one.

Your Turn

How do you go about identifying support and resistance levels? Share your thoughts or methods in the comments section below.

I always make it a point to respond to comments, so leave your mark below and I’ll talk to you soon.

  • HI JUSTIN ENJOYED READING YOUR SUPPORT/RESISTANCE MATERIAL WHEN I DRAW S/R I SWITCH TO A LINE CHART IS THIS A SOUND WAY OF DOING IT REGARDS MAL.PS I WOULD LIKE TO LEARN MORE ABOUT YOUR TEACHINGS.

  • sam says:

    Thanks for this educative and very enlightening post. However I wish to ask that if we are trading with the daily timeframe are we going to use the swing lows and swing highs of the higher timeframe to draw the support and resistance lines? Or is it the daily timeframe that we will use?

    • You’re welcome, Sam. That depends on what you feel more comfortable with. It will also vary depending on how far back the level goes. For example, if it spans several years, you’ll probably want to use the weekly chart.

  • philasande says:

    Hy bennet i just want to know more about dynamic resistance and how to use it in the market

  • Codey says:

    Really enjoyed the video and description! Hopefully one day I can be profitable trading!

  • Ellison Tino says:

    Hi Justin, i have always had it the other way around to draw my key levels: supoort and resistance. i would go to my weekly time frame and use the beautiful pin bars i find there to draw my levels. the high and low of the pin bar would then become my key level. these levels i use on daily time frame to trade with price action. how valid is this method, in your opinion?

    • If it works for you, then I’d say it’s valid. There’s no single right way to go about drawing support and resistance.

  • Dan says:

    Hi Justin,

    Enjoyed watching your video, just wondering what charting software do you use?

    Thanks

    • Pleased to hear that, Dan. The charts I show on this site come from MetaTrader.

      • kapuku says:

        how do you draw it then?need to learn how to draw

  • Albert Sim says:

    Sir, I had just read your “How to properly draw S & R Level”. It is really enlightening.
    However, Sir, does the S&R levels that we drawn in a Daily Chart applicable to a 4-hour’s too ? Or, different set of S&R levels should be used ?
    Rgds.

    • Pleased to hear that, Albert. You have to study the chart to determine whether the market is respecting a given level on the 4-hour AND daily or perhaps just the daily. Not all levels are created equal in that regard.

  • Les says:

    Hi Justin,
    Enjoyed your article! Thanks for sharing it.
    One question though, Do you agree that one of the trates of a good Trader is “Consistency” or “Discipline”? Which makes me think, Are there any Indicators, or Softwares (That you know of), which can draw these Lines, with consistency, and reasonable accuracy?
    I be glad to hearing from you.
    Many thanks again for the article, Loved it!
    Cheers.
    Les.

  • ANANT says:

    is it better to trade a monthly chart to capture more then 200 pips

  • ANANT says:

    is it better to trade a monthly chart to capture more then 2000 pips

  • Juniour Mapholoba says:

    Hi Justin

    Just a quick question, Which time frame do you use to draw your support and resistance level ? Daily or Weekly.

    Thanks

  • Farai says:

    Since I have started following you l am learning a lot.thank you

  • Durgaprasad says:

    you are best justin.

  • Adekunle says:

    Nice work Justin. I never knew support and resistance are not much difficult to identify and marked on chart. I am so happy for this wealth of knowledge. Please keep up the good. God bless you more.
    Best regards

  • Muhammad yaseen says:

    Very much clearance about drawing level

  • […] a market have to be trending or can it be range-bound? Does the pin bar have to occur at a support or resistance level or will you also consider trading continuation pin […]

  • […] for the content, you should focus on the significant market movements. Did a pair break support or resistance today? Did a pin bar or inside bar form? Is a market forming a technical pattern that may lead to […]

  • MUNGE says:

    That was a great article.

  • Roy says:

    Plain and simple. So glad I became a member. My trading insight and though process have improved.

    I am now calm and relaxed when looking at a set up and placing a trade.

  • Henrietta says:

    Thanks so much, you make learning forex so simple.

  • Abdallah says:

    Just want to know how to get that charting software

  • Charlton Basson says:

    I have read the article and understand fully the concept. I am eager to add this to my practice . I really want to be a full time trader and appreciate all the help I can get. Thank you Justin

  • Antony says:

    Hi Justin,

    Antony here, Do you recommend that Support and Res works well on the daily timeframes? Here is my number I need to ask you something +27 782 8550.

  • Letlaka Ntlhoka says:

    Enter your comment…what a fantastic lesson indeed thanks alot for up lifting my passion on forex

  • herbert says:

    Helpful

  • Cathleen says:

    HI, It’s the first time to your site. Love the information. I’m trying to take it in and keep in mind that I need to keep it simple and not over complicate it. I’m a newby and hope to absorb the information so I can feel confident to start some buys and sells. Thank you for sharing your knowledge. I’ll be coming back.

  • Paul says:

    Learn how to drawn supports and resistances

  • Eseoghene says:

    Thank you for putting this up……. U simplified this mystery to me……. Am new in forex I hope follow up on u.

  • jack says:

    Thank you bro, u clear my mind with good explanation, i always have doubt to draw S&R on High/low or on Open/Close candle… i’m really clear myself on this S&R lesson..

    once again….Thank you so much bro 🙂

  • Anayo Donatus says:

    I like your write up, it is so interesting, but my question is if one observes a pin bar at the support or resistance level in the morning, is it encouraging to place trade order even when the current day trade has not stope

  • Nkosinathi mjoli says:

    Great stuff..u are a good teacher

  • Chazlon says:

    this video is useful and as lots of insight

    Thank you so much

  • Sofia says:

    do banks and big market makers use S&R as well? and if yes, in the same way? Thanks.

  • Muhammad says:

    Sir, I read you S/R Horizontal Key Level It is really nice and very helpful for my but I am often confuse about trend line. Can you share me how to draw trend line. Thanks

  • Inyama Bright says:

    I love using the weekly and monthly chart using a line chart format to get my key levels

  • Godwin Okoubi udu says:

    I have to thank you for your service to mankind I didn’t know you can trace back for just six months, I use to go three years back,thanks for this great lecture on support and resistance

  • MOHANAMURALI MADRAS SUNDARAM says:

    Ya ur right, i feel comfortable in reading & understanding the concepts, will apply in trade from now on wards & let u know my feeds back asap. Thanks & greetings.

  • Kumar says:

    Hi Justin,
    I read that Weekly TF chart major support and resistance levels have more weight as well when trading on the daily TF charts. How do you differentiate between Daily TF support and resistance levels and Weekly TF support and resistance levels? What if Daily TF swing high and lows are nearby to Weekly TF swing high and lows? Would you not mark them even if they were close?

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