How do I decide which support and resistance levels are significant?


Here’s a trader question on the subject of support and resistance.

I am having trouble deciding where to draw support and resistance lines on a one day forex chart. To me it seems that you could go to extremes and draw support / resistance lines from every fractal. How do I decide which s/r levels are significant?

Support and Resistance is definitely a topic a lot of traders struggle with - and not just new ones.

Technical analysts and traders will throw out  a lot of different things they say tell you what you should be looking at. They include highs and lows. They include moving average lines. They include Fibonacci and other projection/retracement levels. While it’s definitely true that if the market is focused on something as a key level, then it becomes a key level – a self-fullfilling prophecy.

Most of that stuff is really nothing more than a line on a chart, though. I personally prefer to look at where the markets have rejected prices, and also the attraction points because they absolutely play into the whole mix.

A little while back, I recorded a video highlighting the way I look at support and resistance to describe what you should have in mind what you’re really looking for to spot those levels. Check it out. I think it could really open your eyes.


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About the Author
John Forman, author of this blog, has traded for more than 20 years, is a professional market analyst, and authored The Essentials of Trading. He is an active participant in trading forums, consults for trading related businesses, as published literally dozens of trading articles, and has been quoted in a number of books and in the media.
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  • Floyd

    The link for the video showing how to find support and resistance does not work. When I click on it I get sent to 1ShoppingCart.com.

  • http://www.theessentialsoftrading.com John

    Thanks Floyd. It’s fixed now.