*Identifying multi timeframe intraday support & resistance zones and how to trade them!*
Welcome back to the blog, I hope you had a fantastic weekend. In this blog post I am going to be revisiting a previous blog topic and talk to you about intraday support and resistance zones. These are lower timeframe zones where price reacts and either bounces or breaks to then provide good trade position entries for traders. I will explain what you need to look for when trying to identify these zones, what timeframes are best and how you can trade these intraday support and resistance zones to make profit from them.
Before I start, it is very important that you know what support and resistance zones are and why/how they work. I have covered this topic in great detail in a previous blog post which you can find by clicking here.
I will begin by explaining what I mean by “intraday zones“. These are support and resistance zones that are more prominent and cause price reactions on the lower timeframes such as the 4hr and 1hr. I call them zones because they tend to not always be single pip perfect price levels and it is conservative and safe to allow for slippage and volatility at these zones. This is because these support and resistance zones tend to contain a lot of liquidity in the market so sell or buy orders will be waiting here and the increased buying and selling can cause price to spike.
I previously used the image below when explaining how to identify support and resistance zones and I will use it again in this post because the same theory applies. As you can see, the red lines are resistance zones were price is kept from going higher. The blue lines are support zones were price is held up (supported) from going lower.
Spotting these zones is fairly simple and gets easier the more you practice and use them in your trading. The most important thing is to use them with confidence and execute trades according to your strategy. Confidence is only gained by testing, practicing and trading so time in the markets is very important.
Let’s look at some examples of intraday support and resistance zones appearing in the FX currency markets recently. I will show you why I chose these specific zones and how I place my trade positions accordingly.
Example 1: GBPCHF FX currency pair
I have marked on the intraday support and resistance zones using the blue boxes. They are zones, which are around 60 pips wide either side of the key level which is marked on using the line at 1.25800. This price zone is a very good example of what a support and resistance zone looks like with price clearly being supported up by it before it is broken where it then becomes a resistance level and resists price going higher.
In my previous blog post that I recommended at the beginning of this post, you will see I use the floor and ceiling analogy. When a price support zone is broken (floor), there is then a good chance it will act as a resistance zone (ceiling) in the future.
In this example trade, you can see that price has now rejected the new resistance level multiple times with 3 clear 1hr wick rejection candlesticks forming. This is a good sign the resistance zone is holding and price will drop from here.
I am a fan of using multiple confluences when looking for potential trade set ups so along side the clear resistance zone, I applied the fibonacci retracement tool to the last prominent swing high and swing low points to look for potential reversal levels. These are marked on the chart below.
When trading intraday zones like this, it is important to not be too aggressive with your stop losses. As I explained, there is potential for multiple spikes to occur at these zones before price moves in its intended direction because of the liquidity and mass buying/selling that might occur. I tend to place my stop loss orders at least 15 pips above the wick highs of the rejection candlesticks.
In regards to profit targets, you need to look at the bigger picture. If you are trading a range bound market then there is a strong chance that price will go to meet the next support or resistance zone and bounce. So if the markets are moving sideways and you are selling the highs, I would take profit at the next support zone. Price might break out but you don’t know and I try to avoid being greedy. If the market is trending, like this example, then you can assume that a new lower low might be made (or higher high if entering a long trade) and therefore you can look for a profit target lower than the previous. This is another benefit of using the fibonacci retracement tool because you can use the -0.27 and -0.618 extension levels for profit targets.
The chart above shows how this 1hr intraday support and resistance trade played out. Price rejected the 1.25800 price zone and bearish momentum came in to the market with a nice 4hr bearish momentum candle formed. From theorem the 4hr 50ema was broken and price snapped down to make the new lower low and continue the bearish trend that I believe was apparent.
I will revisit this FX currency pair later in this post and show you how to use the theory of intraday support & resistance to further increase your profits.
Example 2: EURAUD FX currency pair
This second example of an intraday zone trade is for a long position bounce off of a clear resistance zone that was broken and therefore became a support zone to be retested by price. If you look at the chart above, you can see that the 1.58200 zone was acting as a string resistance with price rejecting it 5 times from below before it was eventually broken. Following the basic rules of support & resistance, this level now had the potential to act as a floor for price if it came back down to retest it.
Also in this area is the 4hr 50ema which was broken to the upside just before price broke through the 1.58200 resistance. I tend to use the 50ema as a dynamic support/resistance for price so having it as an extra support is a nice confluence for taking a long position.
This was a trend based trade because price made new higher highs after breaking the resistance zone. I therefore added the fibonacci retracement tool to the last swing high and swing low points to see where potential reversal areas may appear. Like the first trade example, the fibonacci 0.50 retracement level aligned with my existing analysis of the potential support zone and 4hr 50ema. This added to the probability of a long position being successful.
I targeted a new higher high for profit taking. This is because of the nature of the trade being trend based and a previous higher high being made. I use the fibonacci extension levels (-0.27 & -0.618) for this.
This trade played out as planned but it does show you that you the importance of treating support and resistance as zones and not just single pip levels. Price did chop slightly when it reached 1.58200 to retest it as a new support and therefore an aggressively tight stop loss would have potentially caught you out.
Now let’s go back to GBPCHF, the FX currency pair I showed you in the first trade example. I will now show you how to use these principles of intraday zones to scale in to a positions and exponentially increase your profits on the same move within the markets.
Example 3: GBPCHF Scale In Position
The chart above shows the GBPCHF original position running in profit with price having made a clear new lower low showing the previous intraday support at 1.24900 had been broken. With such bearish momentum in the market, I tend to look for scale in opportunities at the fibonacci 0.382 retracement level and short again ready for the next phase of selling.
I applied the fibonacci retracement tool to the most recent swing high and swing low and as you can see, the 0.382 retracement level aligned with the the new potential resistance zone I marked on in blue. This zone should contain some nice liquidity and sell orders ready to push price down further after this small retracement.
My scale in position didn’t need as big of a stop loss as my original position but I still kept it 10 pips above the 1.24900 resistance level and 20 pips above the 1hr wick of the current spinning top candlestick. I kept my profit target the same as the existing short position that was running from 1.25800 which gave this new positions a reward:risk ratio of over 2.5R.
Let’s look at how the 2 positions finally played out.
Again, this new position showed the need to keep your stop loss outside of the resistance zone because price did come back to sharply retest it before dropping to the intended profit target. Any aggressive traders could have been stopped out at this point and missed the bigger move.
This extra scale in position utilised the same principles as the other examples. A price support zone is broken to the downside so the floor for price now becomes the ceiling and therefore a potential resistance. This new resistance zone is where you should look for opportunities to trade and make profit. By scaling in to an existing trade you exponentially increase the total reward:risk ratio for price moving where you predicted anyway. On this GBPCHF example, it turned a 6.2R trade in to a 9.85R trade.
So there we have it, intraday support and resistance zones and how I trade them on live price charts. The examples I showed you were all on the FX currency markets but these rules can be applies to commodities, indices and stocks. Just practice and apply the theory to the charts and see how you get on.
If you haven’t already done so, please do read my previous blog post on “the power of support and resistance zones“. It will help you out when look for these intraday zones for trading opportunities.
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