- How to find support and resistance when day trading.
I'm sure this is a question
many beginner traders are asking,
because every time I asked my ex for support,
all I got was resistance.
In this video, I'll show you guys how to draw out
the correct support and resistance levels step by step
when day trading,
Finding the right support and resistance levels is crucial
and should be a part of the foundation
for technical analysis, whether you are day trading stocks,
crypto, futures or even Forex.
As a full time day trader, I'll also be sharing some tips
for utilizing these technical levels
when trading short term volatility,
so if that sounds helpful to you
make sure to gently tap the like button
and you will magically get more supports from me
without the resistance and the bad jokes.
So what exactly are support and resistance?
Okay, no more jokes this time around, I promise,
I don't wanna torture you again.
Support levels are areas in the charts,
historically speaking,
when the price sold off to those same price levels,
the stock bounced off and people came in to buy the stock,
so that's why in the chart, you'll see the stock,
typically would have bounced off a similar area
like here, here and here many times in the past before,
because there's a market to support a stock
whenever it's sold off to those price levels.
Remember, a market, whether we're talking about
the stock markets, crypto market futures or Forex,
is made up of buyers and sellers, so a support area
is where more buyers came into buy than sellers.
On the other hand, resistance levels like these
are price levels where sellers came in to sell the stock,
so whenever the stock came up to these areas right here,
here and all the way up here,
sellers decided to take profits
and get out of their position
and there were more sellers than buyers.
So now that we all have a basic understanding
of what support and resistance means, let's go in
and draw the actual price levels step by step now.
Step number one when drawing support and resistance,
you are looking for the extreme highs and the extreme lows,
so on the charts over here,
where do you see the extreme highs and extreme lows
that we talked about?
The very obvious extreme highs, all the way up here,
all time high is around 159 dollars,
you have another extreme high around the same area, 155
and you have another extreme levels up here,
right here, here,
we are seeing like these upside down V-shapes
or W-shapes when you are looking on the chart.
So you can see, this is the tip of the V-shape
and that you have another tip right here,
so those are the extreme highs
and down here, you see some of the previous levels as well,
extreme highs here, highs here and all the way up here,
so these are what we call resistance areas up here.
You are looking for the most obvious levels,
the highest levels that stand out
and this will work the same way
when you are drawing support lines,
you are looking for the extreme lows.
So you can see here,
you can see like a V-shape here on the chart,
this is a support area right here,
the inside, the extreme lows of the V-shape
and another one down here because you see
and the V right here and then your V-shapes or W-shapes,
all these areas are support areas
because that's the extreme lows.
Before the stock, you can see it bounced off once, twice,
couple more times and went up to the resistance areas
that we drew out.
So up here around the 143, 145s area
you have another support area,
because you have a small V-shape down here, you can see,
this will be another extreme low,
so that's another support area for the stock.
The reason we want to use the extreme highs
and extreme lows, the V-shapes and W-shapes,
is because we wanna find the most obvious level
that the market and the majority of the people see and use.
We're not trying to find some secret,
hidden line on the daily charts, it's the opposite,
we want to use what the big funds, the big picture,
big buyers and sellers use
and use those levels when drawing support and resistance.
So now that we have the lines
based on the extreme highs and extreme lows,
the next step for us, step number two is to make sure
that these lines have touched a few Kendall's,
at least two or three times in the past before.
Generally speaking, the more times a support
or resistance line has been tested in the past before,
the more powerful it would be
and that would be the same case for resistance levels,
you can see now that we're trading the old time highs,
there's a resistance level around the 156 area
that's been tested once, twice, three times over here,
so that's a pretty strong resistance,
and we are still holding up.
Down here as well, we can see a resistance level
around this extreme high right here,
around the 122 to 123s area
that's been tested once over here,
second time again and a third time,
that's when it succeeded and broke out
above that resistance.
So while you're on step number two,
you can go in and adjust all the lines you've drawn
from step number one.
So I can come in here and move the lines around
to make sure that they have indeed touched the Kendall's
at least two or three times in the past.
The more touches or more contacts
you get from the Kendall's, that will be even better,
you remember that would mean the levels are stronger
like we talked about earlier and that's really the essence
of support and resistance levels,
these are not some magical price levels
that the Kendall's just bounced off
or sold off for no reason,
these lines, the technical levels,
they represent significant price areas
that people decide to come into buy or sell,
so that's the reason we wanna make sure to chart that out
when we are day trading.
Now, moving on to step number three
and this is more of a very important tip I have
for the beginner new traders,
when you are drawing support or resistance levels,
you wanna make sure that you're zooming out
to the daily charts or the weekly chart.
I know this may sound counter intuitive
or doesn't make sense since we are day traders,
sometimes we close all the trades in five minutes
or 30 minutes but it's actually very important
for us to see the bigger picture.
A lot of times I see many new traders
focus on just the intraday timeframes,
such as the one minute, two minutes
or even the five minute charts
but you need to take into consideration all the support
and resistance levels from the hourly charts,
daily charts and if you are swing trading,
you wanna look at the weekly chart.
So remember always to zoom out and use a big picture
when you are drawing support and resistance.
Now, let's move on to step number four
and this is another very important tip
for the beginner new traders,
is to treat the support and resistance lines
as a general zone of buying and selling.
It's important for you to understand
that the support toward resistance levels you draw out
or anyone else draw out for that matter,
it's never going to touch exact to the cent.
Generally speaking,
the higher price and the more volatile the stock,
the bigger the trading range will be
and this is especially true for low float stocks.
For example, you can see this support area for AMD,
this one's at 102 but down here it's around 100 dollars,
so for AMD, sometimes the support could be off
by one or two dollars and that will be normal for the stock.
However, if we look at a completely different stock here,
Tesla, this one is a lot more expensive than AMD,
about three times more
and the range for the support and resistance
would be very, very different as well, it's a lot higher.
So on the chart as you can see, the support area here,
I would say that's a thousand dollars,
there's a range between 1,019 and down here 987 dollars,
so that's more than 20, 30 points range
for this rough support area on the daily charts
and it's the same up here, you can see,
this is a rough area of support for a Tesla stock
and this, the low of this day was around 1,158
and down here the previous day, 1,146,
so that's a difference of 10 points
but still in the same area of support.
Same thing down here for resistance,
up here, the resistance was around 1,104
and over here, same area of resistance, this one is 1,116,
so that's where you get a range of these 10 to 20 points
for Tesla stock.
Again, always show all the support and resistance
on the higher timeframes, the daily charts,
the weekly charts or the hourly charts
and draw out the most obvious levels,
the extreme highs and the extreme lows
and don't forget that these levels should have touched
three Kendall's or more in the past before.
This method of charting out support and resistance
makes the charts very clean
and easy to read when day trading
and that's all I need to day trade every single day,
just simple support and resistance,
alongside with sometimes VWAP and volume,
so I don't need to rely on any fancy
or gazillion indicators.
If you found this video helpful,
please do remember the drop a like
at the bottom of the video,
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and feel free to check out
my day trading for beginners playlist down below.
If you're interested in learning
more of my day trading strategies
without relying on indicators or patterns,
feel free to check out The Humbled Trader Academy
on my website.
Thank you guys so much for watching as always,
I'm the Humbled Trader and I will see you guys next time.
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