How to Draw Support and Resistance

How to Draw Support and Resistance Levels

4 min read
Knowing how to draw support and resistance levels is fundamental to any trader’s success. Without having this skill set, how do you know where to buy low and sell high? You don’t if you can’t identify the highs and lows. The concept behind trading stocks is to buy low and sell high in technical terms, which means buying at support levels and selling at resistance levels.

For starters, 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, and higher lows. These connections are referred as trend lines. In particular, peak levels are called resistance levels, and valleys are support levels.

Drawing support and resistance levels is key to becoming a successful trader. Unfortunately, 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 several months.

Trading takes hard work, and there is no easy path to success. Just get better each day, and soon it will become instinctual and automatic.

AAPL Support and Resistance

1. Angular Momentum

Drawing resistance and support lines is like those “Magic Eye” pictures.  Adjust your eyes to see the picture.

2. "The Magic Eye Reveals"

At first, charting a stock and learning how to draw support and resistance levels seems foreign but over time 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 like they were there all along. Some popular trading strategies to check out are our learning to buy the dip and gap and go posts.

How Do You Determine Support and Resistance?

  1. Find as many previous highs and lows as possible on a chart. The more, the stronger the floors and ceilings.
  2. Watch for buying and selling pressure at these levels
  3. 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 to use. One of our favorite free ones is ThinkorSwim. Sign up for an account with them, but you can open a virtual account without having to fund it.

ThinkorSwim charting is incredible. Learning at first is a bit cumbersome, but it’s well worth the effort.

Stockcharts is another really good charting service to use. They have both a paid and free version. The free version is a bit basic but can be sufficient for swing trading or long-term options trading. We recommend using TOS to chart for day trading.

How Do You Identify a Trend?

First, connect at least two to three higher and lower highs in an uptrend. Connect at least two to three lower highs and two to three lower lows in a downtrend. The main point is that you need to connect as many peaks and valleys as possible.

Add Indicators For Precision

Learning how to invest in the stock market is very important. Technical analysis indicators such as simple moving average (sma), Exponential moving average (ema), vwap, macd indicator, level 2, and time and sales can help you see the big picture. Add the indicators to your chart so it will be quicker to 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, sell at resistance levels and buy back at support.
  • Where To Go From Here?

    The stock market takes time to learn how to draw support, and resistance levels are the key to your success. So we always drill this into our traders’ minds in our trade rooms. We want people to understand the big picture of support and resistance, be patient, and use their tools to find a good entry.

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