*How to identify lower timeframe support and resistance zones and trade them*
The art to any business including trading the financial markets is to simply buy low and sell high. That is it. I believe the 2 easiest ways of making sure you are doing this is by either trading with the trend and buying the dips or by using support and resistance zones and buying the price floor.
However, these 2 forms of trading are not mutually exclusive and in this blog post I will show you how to identify intraday support/resistance zones when trading trends in order to boost your probability of entering winning positions.
For the benefit of you all, I am calling these support & resistance zones “intraday” because I will use them on the 1hr and 4hr (or lower) timeframe charts for clarity of viewing. The trades entered based on the analysis using these support/resistance zones can be held for a day or weeks. It all depends on the price action that follows after entering positions.
If you are unsure on what support and resistance means in regards to trading the financial markets then please read through my old blog post on the subject. Click on the link below to read it.
Let’s get right in to it and start with the USDCAD FX currency pair that I am currently trading heavily.
The chart above shows 5 weeks of price action on the 4hr timeframe chart. I have kept the chart really clean for you to put emphasis on the analysis I am trying to show you. As you can see, I have done my normal trend analysis and identified the highs and lows to see that it is bullish.
I have then added the coloured boxes. These are your intraday support and resistance zones. Notice that I call them zones because they are never single pip perfect levels and instead areas that create price reactions and this is why they are boxes and not just shown as lines on the chart.
The chart below shows how the theory of support and resistance zones works.
Spotting the intraday support and resistance zones is easy. The best way to do it is to clean up your chart, remove all your indicators if you use them and then just look for where buying and selling stops. These are the zones where enough sell orders exist to keep price from climbing further and the zones where enough buyers exist to keep price from falling further.
I have picked the chart example above because it is very clear and precise to see. It is also easy for you to spot the bullish trend perfectly working with the support and resistance zones. There are 3 perfect examples on that chart of price finding a “ceiling” (resistance), and then breaking through it to then use it as a “floor” (support).
Without any other analysis, simply selling at the resistance and buying at the new support zones would produce good trade entries. However I don’t recommend this because you will soon find yourself trading against the trend, taking small reward:risk positions and generally over trading.
Let’s look at the chart again and I will show you what positions I would have taken.
Firstly, like always… if the current timeframe prevailing trend is bullish then I will only be looking to go long. Applying the fibonacci retracement tool to the last swing high and swing low points of the trend shows where potential levels of support might appear. In this case the 0.50 level sits right on the intraday support zone.
Using the fibonacci retracement tool also has the added benefit of being able to help you with stop loss placement and profit targeting. This long trade example shown on USDCAD produced a potential gross return of over 3.5R.
Let’s look at another example but on the 1 hour timeframe.
The chart above shows 10 days of price movements on the 1hr timeframe and I have drawn a basic trendline to show the bullish intraday trend that’s present. My question to you all is, where would you identify the intraday support and resistance zones?
I have added my support/resistance zones to the chart above. As it is a lower timeframe (1hr) there will normally tend to be a lot more zones that appear as price will appear more volatile on lower timeframes.
If you are struggling to see how I have applied these zones or how you could trade them on a daily or intraday level then look at the chart below. It is the exact same time period (10 days of trading) but I have dropped the timeframe to 15 minute candlesticks.
By dropping down to a lower timeframe you can see the rejections off these zones much clearer and if you apply a trendline, fibonacci retracement levels, daily pivot levels etc. you will be able to produce some excellent intraday trading opportunities.
Remember, use support & resistance zones in conjunction with other technical analysis. You want to build a strong case for why you are going to take each new trade position.
Trade with the trend. It’s just easier and you will produce better trade entries.
I have previously written another blog post explaining these “intraday” support and resistance zones and it has even more trade examples for you to learn from. Please click on the link below to read that post.
All my technical analysis is done using the TradingView platform. You can get access via the link below.
My preferred broker of choice is IC Markets. Low spreads and trading costs really help long term profitability. A link to their site is below.
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DISCLAIMER: None of the information posted on this site is to be considered investment/financial advice. Trading is high risk and you should only trade with money you can afford to lose.