WEBVTT 0 00:09.270 --> 00:15.630 Here we have pound-dollar on a daily chart and I have received a question from a student. How to draw 1 00:15.630 --> 00:18.690 support and resistance? In this video, 2 00:18.690 --> 00:24.270 I'm going to show you how to draw support and resistance in order to be sure that you will not miss 3 00:24.330 --> 00:26.570 any key level in the future. 4 00:26.820 --> 00:32.980 The technique that I'm going to show you is based on turning points or you can call them swing points. 5 00:33.240 --> 00:40.120 What is a swing point? It is just a point where you can see that the price deviates from its direction. 6 00:40.140 --> 00:43.910 So simply a point where the price changes direction. 7 00:43.950 --> 00:50.820 Let's try to identify all the swing points and also draw a line that may work as a support or a resistance. 8 00:51.300 --> 00:57.270 Starting from here, you can see that the price was going a bit up and then suddenly changes direction 9 00:57.300 --> 00:59.140 and starts to go down. 10 00:59.160 --> 01:04.620 This can be identified as a turning point, so I can draw my first key lever here. 11 01:05.040 --> 01:09.280 Then the price goes down until here and it changes direction again. 12 01:09.300 --> 01:14.330 So another swing point is here and I draw my second horizontal line. 13 01:14.370 --> 01:19.920 You don't need to be extremely accurate with the lines, because support and resistance are areas 14 01:19.920 --> 01:23.180 of price, they are not exact prices. 15 01:23.520 --> 01:29.490 Then the price goes up and here and I can draw another line because this is another turning point. 16 01:29.520 --> 01:32.460 Let me try to fix this... ok. 17 01:33.710 --> 01:39.540 As you can see, after this level the price starts to go down until it reaches this point and it changes 18 01:39.540 --> 01:40.890 direction again. 19 01:40.890 --> 01:47.850 So we have another swing point here and we draw another line. Then it goes up and down, it is between 20 01:47.850 --> 01:50.940 two key levels, in a sideways trend I would say. 21 01:50.940 --> 01:56.120 Then it goes up till here and we can draw another line to identify this level. 22 01:56.130 --> 02:00.580 It's not like a major swing point but it is better to consider it. 23 02:00.960 --> 02:07.470 The price goes back to this support, it goes up again and stays for a while on this level before going up 24 02:07.470 --> 02:12.270 until it reaches a new high here and we can draw another line. 25 02:12.720 --> 02:17.570 The price goes back. We can identify here another swing point and so a key level. 26 02:17.940 --> 02:22.890 I'm going to draw a line. Then it goes back, but it is pretty much on this line, 27 02:22.890 --> 02:25.230 so I'm not going to draw another one. 28 02:25.320 --> 02:27.530 The price goes down until here 29 02:27.540 --> 02:34.860 then, so I will draw another line to identify this key level. The price goes up again until here and we 30 02:34.860 --> 02:42.780 have another level. Then it goes a bit up and down between these lines. Down again on this level and up again 31 02:42.780 --> 02:43.980 on this other level. 32 02:43.990 --> 02:50.970 It reaches then another important lever here, goes back on this support, goes back on this resistance 33 02:51.000 --> 02:55.900 and it goes all the way down until here, where we have another support. 34 02:56.100 --> 03:02.220 You can see that this support was working for a while and was stopping the downtrend, but then the price 35 03:02.220 --> 03:06.580 went down anyway and now it is on another good support. 36 03:06.600 --> 03:09.680 Now you have many lines. I would keep all of them, 37 03:09.690 --> 03:14.660 but if you want, you can change the color for the ones that seem to be more important. 38 03:14.880 --> 03:21.760 Remember that the more the price has been rejected by a support or resistance, the stronger the level. 39 03:21.810 --> 03:27.870 So you can identify the levels that have worked in the past and change the color for them to give more 40 03:27.870 --> 03:30.300 importance to those levels. 41 03:30.390 --> 03:34.840 For example, I can see that this line worked quite well as a resistance here 42 03:35.010 --> 03:39.630 and then it worked very well as a support, at least a couple of times here. 43 03:39.660 --> 03:46.830 So this is a very important level. Probably, this one is not so important at the moment, because we didn't 44 03:46.830 --> 03:51.650 have any other chance to verify if this is a good level, because the price 45 03:51.660 --> 03:59.850 only went there once. So this is how you draw support and resistance. At the moment the price is close 46 03:59.850 --> 04:01.440 to an important support 47 04:01.440 --> 04:07.660 and if we zoom in, we can also see that there is an important bullish signal. There is a bullish 48 04:07.680 --> 04:08.730 engulfing pattern. 49 04:08.730 --> 04:13.160 So this represents a great opportunity to enter a long trade.