Support and

Resistance zones

Ultimate 4-Step Support

And Resistance Trading
Strategy

Trading Strategy Guides

 Ultimate 4-Step Support And Resistance Trading Strategy

This Support and Resistance Trading Strategy will enable you to take trades at the exact area
where price action reverses. Trading support and resistance lines are critical for every trader to
implement into their system.

In this article, you will learn how to identify support and resistance and, support and resistance
trading zones.

Before we begin, feel free to visiting Trading Strategy Guides, for more trading strategies like this.
We would love to be your go-to trading strategy education source.

If you are new to trading, please check out What is Trading. It’s a comprehensive guide to help new
traders understand nancial markets, and get a jump-start to understand what trading is all about.

Moving forward, let’s continue with the best support and resistance trading strategy.

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Ultimate 4-Step Support And Resistance Trading Strategy

 Ultimate 4-Step Support And Resistance Trading Strategy

Table of Contents
Intro — Support and Resistance Trading Strategy
Support and Resistance Defined
What is Support?
What is Resistance?
Support and Resistance Zone Strategy
Steps for Trading Support and Resistance Zones Strategy
Step 1 – Drawing Zones
Step 2 — Wait on Price Action
Step 3 — Wait For Candle Close
Step 4 — Identify Entries
Entry Criteria
Exit Criteria
Conclusion — Support and Resistance Trading Strategy
Further Reading
Support and Resistance Trading Strategy Frequently Asked
Questions
What is support and resistance trading?
How do you identify support and resistance levels?
What are the benefits of using support and resistance
levels in trading?
Can support and resistance levels be used in any market?
Are there any drawbacks to using support and resistance
levels in trading?
Support and Resistance Trading Strategy Video
Support and Resistance Trading Strategy PDF

Ultimate 4-Step Support And Resistance Trading Strategy

 Ultimate 4-Step Support And Resistance Trading Strategy

This is a simple, easy to learn and easy to understand trading strategy. After you read this strategy,
you will be able to identify these sweet spots where marvelous price action happens. Keep reading
and you won’t regret it. Also, read trading discipline, which is an important skill for successful
trading.

Support and Resistance De ned

Support and Resistance are areas on your chart where you can draw invisible barriers to price
movement. See below for some examples:

What is Support?
Support is the level where price nds it dif cult to fall below until eventually it fails to do so and
bounces back up. It’s simply many traders making trading decisions at that level.

Support acts as a oor that limits any further downward movement. Like this:

What is Resistance?

Ultimate 4-Step Support And Resistance Trading Strategy

 Ultimate 4-Step Support And Resistance Trading Strategy

Resistance is the level where price nds it hard to break through to the upside, and is pushed back
down. It acts as a ceiling, limiting further upward price movement.

Like this:

You should frequently suspect a reversal at support and resistance, as there is a high probability
that price action will reverse at those key levels. It already did that before in the past and is likely
to continue to do so in the future as traders tend to take caution on these levels.

Traders who had open trades will exit at those price levels, and others will initiate new trades at
these levels. That’s why it is crucial to learn to draw zones using technical analysis.

Support in the past can mean resistance in the future. The same thing goes for resistance. The
Resistance in the past could mean support in the future.

Both are formed through the actions of the traders in the current market.

So the million-dollar question is, What causes the price to “hit” these certain levels and bounce off
if it?

And what causes the old areas of support to become the new areas of the resistance?

Ultimate 4-Step Support And Resistance Trading Strategy

 Ultimate 4-Step Support And Resistance Trading Strategy

The answer…

It’s simply traders making trading decisions.

The decisions to buy or to sell are made by analyzing the current prices against previous areas.
This triggers an emotional response to traders.

They fear missing out of an opportunity so they either buy or sell at these areas of support or
resistance.

Ultimate 4-Step Support and Resistance Trading Strategy – "[Traders] fear missing out on an
opportunity so they either buy or sell at these areas of support or resistance." Click To Tweet

The support area is basically de ned when the demand overcomes the supply. This limits the price
from going down any further.

The resistance area is de ned when the supply has been overcome with demand, which limits
upward price movement.

That is where you see a “Barrier” form.

You will sometimes notice that a support/resistance area isn’t exactly a straight line, which is why
it is called an area. What happens is traders will make different decisions at different prices in this
area.

Never assume these areas will hold. However, they should always be areas of interest and you
should take note of it when you see them.

See an example below of resistance in the past acting as support in the future:

Ultimate 4-Step Support And Resistance Trading Strategy

 Ultimate 4-Step Support And Resistance Trading Strategy

This was taken from our Price Action Pin Bar Strategy, where we talk a lot about this very topic.

Finding these “areas” will help you make better trading decisions when the price action goes to
these levels.

Be the smart trader and wait for con rmation before you trade a breakout of support or resistance.
Also read about Scaling in and Scaling out in Forex.

Many will get sucked into trading these areas too early because of fear of missing out on a trade.
There are a few support and resistance indicators out there so do a quick search them and you will
nd one that should t your trading style.

Support and Resistance Zone Strategy

Ultimate 4-Step Support And Resistance Trading Strategy

 Ultimate 4-Step Support And Resistance Trading Strategy

We don’t use any technical indicators for this strategy. Only price action and its relationship to
Support and Resistance zones.

Steps for Trading Support and Resistance Zones

Strategy
Now that we know the role of S&R Lines, which from now on we will call zones. That’s because
support and resistance are not a given line. If so, it would be easy for traders to know, and every
trader on the planet would have an entry order at that price.

They are more like zones that can be breached and pushed into. The trend may pull the price
action back out of it, or maybe price action will succeed in breaking it for good. This is why you
want to think of these points as zones.

Our main purpose in this Trading Strategy is to identify those Zones and use them for our favor
and make great trade entries and exit points.

Step 1 – Drawing Zones

Ultimate 4-Step Support And Resistance Trading Strategy

 Ultimate 4-Step Support And Resistance Trading Strategy

The rst step of this support and resistance trading strategy is to draw Zones on our charts. This
allows us to easily spot where the price could possibly reverse. After you do this, it will resemble a
support and resistance indicator, only you now have zones to take advantage of.

Drawing Zones on the chart is better done on a higher time frame so that we can examine the
main reversal levels and the more critical points on the chart, as a higher time frame shows us the
bigger picture. It’s almost like what we talked about in our article about the importance of multiple
time frame analysis.

We begin by drawing horizontal lines on recent Peaks and Bottoms like you see below in our chart
example: Examine this chart as it is critical for you to understand these zones.

When you are doing support and resistance trading, the more price touches the line the signal is. It
shows that the level stood against the price, passing the test many times and will continue to do
so. WHY?

Because History tends repeats itself and this continues to happen time and time again on every
chart that you will ever look at. (Stocks, Options, Forex)

Ultimate 4-Step Support And Resistance Trading Strategy

 Ultimate 4-Step Support And Resistance Trading Strategy

Note** Make sure to leave spaces between zones as drawing many lines will confuse you and
worsen your trading decision. This strategy could easily be compared to our Red zone strategy that
shows you how to draw zones on your chart.

When you take a look back after drawing Zones will nd that those lines withheld the price
numerous times before and will continue to do that numerous times more.

Step 2 — Wait on Price Action

The second step is waiting for the price action to touch the Zone. What you can do is set your
charts on 2 to 4 currencies and wait for your chance, as it may take some time for the price to
reach the support resistance levels. The reason we say 2 to 4 currencies is because this is a good
number of pairs to be looking at and will not overwhelm you. This allows you to have a good
judge on your trade opportunity.

Basically, the higher time frame takes less time and attention than the smaller time
frame. Alternatively, the smaller time frame has more signals, as the zones may get hit more
frequently. You have to be more focused if you’re trading small-time frames.

In this chart we see the price action approaching support and actually almost touched the support
so we wait to see the form and shape of the next candle.

If the price reverses that will be good, as it is what we are expecting. We will need a strong reversal
candle though to assure that price will reverse and that it will not collapse back again.

Ultimate 4-Step Support And Resistance Trading Strategy

 Ultimate 4-Step Support And Resistance Trading Strategy

On the other hand, if it breaks that level, it may be real breaking or a fake breaking. We also should
see a strong piercing candle that effortlessly breaks that level to assure it will continue in the same
way.

Step 3 — Wait For Candle Close

The third step of this trading strategy is to wait for the candle which hits the zone to close. This
will indicate the signal candle we are waiting for. Take a look at the candlestick pattern and ask
yourself:

Is it a bullish or bearish candle?

Is it strong or weak?
Big or small?
Does it have long wicks or small wicks or no wicks at all?

When you can identify the kind of candle then you will be able to decide whether to sell short or
buy long.

Knowing the type of candle is crucial to identify whether the entry is valid or not.

Ultimate 4-Step Support And Resistance Trading Strategy

 Ultimate 4-Step Support And Resistance Trading Strategy

In the chart example above we see how Support rejected the price and pushed back up. We also see
the candle that formed afterward to signal the end of the down movement and the beginning of
and upward movement.

So how did we know it is strong, what it’s secret?

Before we go any further, here are some important factors in determining a strong candle. Because
spotting that speci c candle on zones makes the difference between winning trades and losing
trades.

The Qualities of a strong candle are:

Long body
Formed after the previous touched the level but could not break it.
Entirely taken the two previous candles.

Ultimate 4-Step Support And Resistance Trading Strategy

 Ultimate 4-Step Support And Resistance Trading Strategy

This example shows us how a strong candle should look. As you can see, the strong candle
overpowers the one before.

Ultimate 4-Step Support And Resistance Trading Strategy

 Ultimate 4-Step Support And Resistance Trading Strategy

Here, you can see that those weak candles were not able to breach the Resistance line and had
long wicks and could not break that level. So, we wait to see what will happen with the next
candle. Will the price action break that level? Or will the resistance win and the price reverse?

On the rst case ( the candle on the left that we marked for you): clearly, the price fell on the next
candle which made it a valid reversal.

While in the second case ( the candle on the right that we marked): we had a very small candle
which did not mean anything except that the resistance stalled the price for a while.

Ultimate 4-Step Support And Resistance Trading Strategy

 Ultimate 4-Step Support And Resistance Trading Strategy

Step 4 — Identify Entries

The fourth step is to identify where you will enter the trade. You want this to happen at the pivot
point or turning point. Here are the entry criteria.

Entry Criteria
Your entry should be slightly above or below the signal candle, which is the strong candle. This
way, you are adding more con rmation to your trade to make sure that the price will move
towards the direction you expected it to move to.

Exit Criteria
Our stop loss should be placed on the other side of the zone and not too close to the level to give
it some space. As we said, it is a Zone. Putting the Stop loss there makes sense because this is the
end of the trade. The price is unlikely to reverse after that point.

So according to the rules of this strategy, below is an example trade:

We used a 3:1 risk to reward ratio, but you can adjust according to your rules.

Conclusion — Support and Resistance Trading Strategy

Ultimate 4-Step Support And Resistance Trading Strategy
 Ultimate 4-Step Support And Resistance Trading Strategy

Now you should have an understanding of how this Support and Resistance Trading Strategy
works. We showed you how to draw support and resistance zones and how to trade them
successfully. You should also know how to determine the direction that the price will probably
move to get an edge in your trading.

If you liked this strategy or still need more information, please leave a comment below and we will
answer your questions!

Trading support and resistance, and discovering support and resistance zones, are pivotal to your
trading success.

Our Fibonacci channel strategy, and the Red zone strategy are very similar and will help you in
understanding exactly what these so-called “zones” are as well, so you can check them out also if
you wish!

Please leave a comment below if you have any questions about Road to Successful Trading!

Thanks for reading!

Further Reading
If you like this support and resistance trading strategy, and have become consistently pro table in
your trading, then you may be ready to become a full time trader. We have the best guide on
learning What Prop Trading Is All About. Or you can sign up directly with global prop trader.

If you are here for Forex Trading, you may want to check out our Forex Beginner’s guide.

If you’re more of a stock trader, you may be interested in applying this strategy to your single stock
trading so that you can pro t over and over again with this strategy.

Derivatives traders will de nitely want to look into our Futures Trading Strategy to optimize their
strategies, or this article on options strategies.

Ultimate 4-Step Support And Resistance Trading Strategy

 Ultimate 4-Step Support And Resistance Trading Strategy

Support and Resistance Trading Strategy Frequently

Asked Questions
What is support and resistance trading?
Support and resistance trading is a strategy used in technical analysis that identi es invisible
barriers indicating the tops and bottoms of price levels on a price chart. These levels are where the
price tends to bounce off and reverse direction.

How do you identify support and resistance levels?

Support levels are identi ed by nding areas where the price has previously bounced off and held
above. Resistance levels are identi ed by nding areas where the price has previously bounced off
and held below. Traders often use trend lines, moving averages, and chart patterns to identify
support and resistance levels.

What are the bene ts of using support and resistance levels in

trading?
The bene ts of using support and resistance levels in trading include better entry and exit points,
improved risk management, and the ability to identify potential market reversals. Traders can also
use these levels to set stop-loss orders and take-pro t targets.

Can support and resistance levels be used in any market?

Yes, support and resistance levels can be used in any market that has price data, including stocks,
forex, commodities, and cryptocurrencies.

Are there any drawbacks to using support and resistance levels in

trading?

Ultimate 4-Step Support And Resistance Trading Strategy

 Ultimate 4-Step Support And Resistance Trading Strategy

One potential drawback is that support and resistance levels can be subjective and open to
interpretation. Additionally, these levels may not hold up during times of high volatility or major
news events. Traders should use multiple indicators and tools to con rm their analysis and make
trading decisions.

Support and Resistance Trading Strategy Video

Support and Resistance Trading Strategy PDF
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Ultimate 4-Step Support And Resistance Trading Strategy

Ultimate 4-Step Support And Resistance Trading Strategy

Ultimate 4-Step Support And Resistance Trading Strategy

Ultimate 4-Step Support And Resistance Trading Strategy

Support and resistance strategy guide 1

Ultimate 4-Step Support And Resistance Trading Strategy

 Put here a
summary or a recap
of the contents.

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