Drawing your major support and resistance lines with this 3 step process, is the simplest
way to find out whether the stock is a long or a short intraday.
How to draw support and resistance lines in day trading.
I know i’ve done a video on a similar topic before but I’m going to really slow things
down today and take you step by step through how to draw out these levels and applying
them when trading intraday.
I’ll also be going over some quick and simple way I use my indicators.
So by the end of this short video, you’ll be able to draw support and resistance levels
that actually matters on your stock charts. and analyze the overall trend of the stock
in the simplest way possible.
So if you’re a beginner or novice trader looking to learn technical analysis and drawing
price levels, this video is made for you.
I’ll also sharing the story about my trading mentor from years ago, who taught me almost
everything I know.
So if you’re interested in hearing the story.
Then keep on watching.
And don’t forget to always destroy that like button for the Youtube algorithm.
Thank you very much!
Alright guys let’s dive right into it.
When I draw out my levels for any stock, be it small cap penny stocks or mid cap large
cap stocks.
I always always start drawing on the daily chart first.
The daily price and volume levels are the most significant.
And why is the daily chart the most important tool?
To answer that question we must understand what exactly is a candlestick chart.
The chart is basically a visual representation of major transactions, both on the buying
side and the selling side.
So this chart maps out the price levels and where that big money decide to buy.
And the reason i say big money is because it’s the funds, the banks, and millions
of dollars going in and out of the stock that can actually move the price of a stock such
as $ROKU.
This company has 16 billion market cap.
So to move the stock 5% up or down you need…hold on
So basically you need about 2600 worth of lambo money of either buying or selling to
move this stock 5%.
And That's what i mean by big money.
They are the money that can cause major selling, which creates resistance levels.
And vice versa, where the big money buys up the stock, create support.
So let's draw some lines.
The first thing I i always do is mark out the price levels that show major volume break
out on the daily chart.
Daily Volume tells you is the amount of shares bought and sold on that day.
And when we see major volume break out on the daily, that means those areas are where
the big money in the past decided to buy or sell this companies shares.
Ok so now that we’ve drawn out major price levels that had volume breakout.
The second thing I look for is whether or not there are gaps on the daily chart and
mark out those levels as well.
Because if you think about it.
There had to be major selling or buying from the big money to create that overnight gap.
Usually these visual gaps on the daily are caused by fundamental catalysts like earnings
or FDA approvals or fails.
If you look at ROKU, these icons on the bottom of thinkorswim daily chart are when they had
earnings report.
And whether the company beat on earnings or fail earnings, that fundamental news drove
the big money to buy and sell, hence creating these visual daily gaps.
And many times these visual gaps match with the volume break out too.
So lets go in and mark out those levels
Missed earnings, funds decided to get out,.
Beat earnings, big money see more upside so they pour money back in.
the value of the stock is determined by the company earning potential.
So if this publicly traded company said in their conference call that they expect to
be affected by the trade war and sales will decrease in the next quarter.
That means their revenue will decrease they can’t make money for their shareholders.
So that's why almost always see big money movement after each earnings.
Ok so after marking out the lines on that daily that had major volume and cause daily
gaps, the third step to drawing key support and resistance, is to smash the like button
if you haven't done that already.
I’d really appreciate it.
Ok the third step, We want to go in and adjust each horizontal price level.
The rule of thumb is this, you want each price line to have touched these candles multiple
times in the past.
Why?
Because like I said earlier, these charts are a map of historical transactions that
happen at these price levels.
And we want to see multiple buying and selling had been done in the past around those lines.
Thats hows us, thats the level the big money is using.
So usually I want the lines to have touched at least 3 times.
So let's do some adjustments here.
Once you’re done, a very quick and easy way to double check whether your support and
resistance lines make sense, is to flip the daily chart to the weekly.
The chart should still look very clean.
And I want to double check that the lines still land on major volume breakouts.
And still have touched the candles multiple times in the past.
So you can add or move them here if you want to.
When I’m swing trading for more than 2 days, I use the levels especially on the weekly
chart.
Ok so now that we have support and resistance lines charted out.
Lets go over some indicators i use in the charts.
And if you want to see how to use daily support and resistance lines to trade intraday, check
out these two videos.
I don’t trade intraday with 200SMA, like i said this is just a general guide on the
And these Indicators only “work” if the masses know them, and use them.
Thats why i think its so funny whenever people tell me they have this secret indicator, and
they’re not going to tell anyone.
Or they are going to package the secret indicators in a $5000 dvd.
If only you and your neighbor know the indicator and use it, its not likely to work.
Like I’ve said many times in the past videos, don’t rely on indicators or chart patterns.
If you rely on them you’ll always be one or two steps behind.
I’ve read many times in the comments that the way i describe charts and price levels
are similar to how Forex traders do it.
And that is completely true.
In 2016 I was mentored by a forex trader his name is Orane.
He started first in forex trading then moved on to trading penny stocks using the same
methodology.
He was sharing many free video lessons and ideas on a well known penny stock community
site run by a well known penny stock guru.
All his insight on the stocks and psychology is what caught my eye and I started following
him.
But of course, eventually he got banned from this guru’s site, because he was sharing
free ideas and videos that were much much more useful than the guru’s $5000 alerts
and dvd’s.
So after he got banned he moved on to work as a hedge fund manager.
And the fund started an educational program.
and that's where I followed him to from 2016 to 2017.
The program was expensive, that's where my lambo money went.
But it was worth every penny.
The training program no longer exist now because he has moved on from trading forex and stocks
and on to the next new venture for himself.
But we are still in contact, and hopefully i’ll get to interview him on this channel
one day.
But the way he taught me about psychology and how to use it to analyze daily support
and resistance lines was truly transformational in my own trading.
This method of charting and set up makes things simple and very clean to read.
I don’t use anymore indicators besides those I mentioned in this video.
That way I can focus on price action, trader psychology, and how the candles are reacting
to each support and resistance levels, instead of spending the time to check whether all
the bollinger bands, RSI, MACD and the stars in the universe line up.
If you find this video helpful, please drop me a like and subscribe.
I create quality day trading videos here every single week.
Like I said before, my mentor came from a forex background.
I don’t trade forex, but I did find some basic forex videos that explain support and
resistance further.
I’ll leave them in the description below.