Knowing how to draw support and resistance levels is fundamental to any traders success. Without having this skillset, how do you know where to buy low and sell high? You don’t if you can’t identify the highs and lows. The whole concept behind trading stocks is to buy low and sell high. In technical terms that means to buy at support levels and sell at resistance levels. So how do you draw support and resistance levels properly? Keep reading and we’ll show you how!
How to Draw Support and Resistance Levels
For starters, you want to find as many horizontal peaks and valleys on a chart and connect them with a line. The diagonal peaks and valleys can be higher highs, lower lows, lower highs, higher lows. We refer to these connections as trend lines. In particular, peak levels are called resistance levels and valleys are support levels.
Where it all starts!
Learning how to draw support and resistance levels is key to becoming a successful trader. There is a small learning curve with learning a new skill like how to draw S&R. We wish that there was an easier way. However, this takes a lot of practice which entails studying hundreds, of charts over the course of several months.
Trading takes hard work and there’s no easy path to success. However, with each day you’ll get better and soon it will become instinctual and automatic. I can say after 2 years of intense trading I can draw support and resistance on the fly in about 20 seconds, even while day trading.
1. Angular Momentum: How to Draw Support and Resistance Levels
Drawing resistance and support lines is like those “Magic Eye” pictures. Remember…those pictures that drove you nuts trying to see the picture inside of the picture?!?! You had to adjust your eyes to see the picture clearly.
Well…it’s kinda like that. In fact, Dan has a magic eye and loves to draw S&R trend lines to find entries and exits into trades. As a result, we highly recommend you watch Dan’s new video on how to draw support and resistance levels here.
Dan is big on finding “angular momentum” and horizontal resistance to place his trades.
Check out our trading service to learn more about our community.
2. “The Magic Eye Reveals”
At first the process of charting a stock and learning how to draw support and resistance levels seems foreign but over time. However, it becomes more familiar. Candlesticks form patterns and those patterns show key support and resistance levels.
The process seems tedious at first and that’s why it’s so important to persist and push through. As a result, over time, just like those “Magic Eye” pictures, the patterns and lines pop right out at you like they were there all along. Learning how to buy the dip and gap and go are some very popular trading strategies to check out.
How Do You Determine Powerful Support and Resistance?
Here’s how you determine powerful support and resistance:
- Find as many previous highs and lows as possible on a chart. The more you find the stronger the floors and ceilings
- Watch for buying and selling pressure at these levels
- The more buying and selling volume the more powerful the support and resistance
What Is The Best Charting Software?
There are many different charting software services that you can use. In fact, one of our favorite free ones is ThinkorSwim. You need to sign up for an account with them but you could open a virtual account without having to fund it.
ThinkorSwim charting is incredible. It’s a bit cumbersome to learn at first but it’s well worth the effort. Feel free to take our ThinkorSwim Course if you need help getting started.
Stockcharts is another really good charting service to use. They have a both a paid and free version. The free version is a bit basic but can be sufficient if you’re doing swing trading or long term options trading. If you’re looking to do day trading then we highly recommend using TOS to chart.
How Do You Identify a Trend?
Connect The Peaks And Valleys
How do you identify a trend? In an uptrend connect at least two to three higher highs and higher lows. In a downtrend look to connect at least two to three lower highs and two to three lower lows. The main point here is that you need to connect as many peaks and valleys as possible.
Add Indicators For Precision
If you’re looking for how to invest in the stock market very important to learn other technical analysis indicators such as sma, ema, vwap, macd indicator, and level 2 and time and sales. Add your indicators to your tool bag so you can find more precise levels to enter a stock and get the best entry possible.
Key Nuggets Of Wisdom
- When going long, make sure to buy at support and sell at resistance levels
- When going short, make sure to sell at resistance levels and buy back at support.
Where To Go From Here?
The stock market takes time to learning how to draw support and resistance levels are the key to your success. We are always drilling this into our traders minds in our trade room. We want people to understand the big picture of support and resistance but also be patient and use your tools to find a good entry.
Practice making your entries in a paper trading account and make sure you read our how to get started in the stock market post which gives you a step by step tutorial on getting started in the stock market.
Sign Up For A Free Trial
Again, it’s takes a lot of time and effort to learn how to draw support and resistance levels like a professional. Plotting support and resistance levels isn’t an exact science. Sometimes you’ll have to eyeball it to get a decent gauge. If you want access to our members only videos where we expertly show you how to draw support and resistance videos OR you want to view us do it in real time. Subscribe today and click here for your free trial!