█ Sᴜᴘᴘᴏʀᴛ ᴀɴᴅ Rᴇꜱɪꜱᴛᴀɴᴄᴇ Dᴇꜰɪɴɪᴛɪᴏɴ
terms are used by traders to refer to price levels on charts that tend to act as barriers, preventing the price of an financial instrument from getting pushed in a certain direction.
A support level is a price level where buyers are more aggressive than sellers. This means that the price is more likely to "bounce" off this level rather than break through it. However, once the price has breached this level it is likely to continue falling until meeting another .
A resistance level is the opposite of a . It is where the price tends to find resistance as it rises. Again, this means that the price is more likely to "bounce" off this level rather than break through it. However, once the price has breached this level it is likely to continue rising until meeting another .
A previous will sometimes become a when the price attempts to move back up, and conversely, a will become a as the price temporarily falls back.
█ Iᴅᴇɴᴛɪꜰʏɪɴɢ Sᴜᴘᴘᴏʀᴛ ᴀɴᴅ Rᴇꜱɪꜱᴛᴀɴᴄᴇ
can come in various forms, and the concept is more difficult to master than it first appears. Identification of key levels is an essential ingredient to successful .
If the price stalls and reverses in the same price area on minimum of two different occasions, then a horizontal line is drawn to show that the market is struggling to move past that area. Those areas are static barriers, one of the most popular forms of and are highlighted with horizontal lines.
Repeated test, the more often a level is "tested" over an extended period of time (touched and bounced off by price), the more significance is given to that specific level
High volume, the more buying and selling that has occurred at a particular price level, the stronger the support or is likely to be
Market psychology, plays a major role as traders and investors remember the past and react to changing conditions to anticipate future market movement.
Psychological levels, is a price level that significantly affects the price of an underlying financial instrument. Typically, near round numbers often serve as
The following related topics are beyond the scope of this study, so they will be mentioned roughly only as a reference for concept
Trendlines, levels in trends are dynamic. Throughout an uptrend, levels of support tend to look like a trendline, usually clustering around higher lows. As the price rises, the price where buyers consider the stock to be “too cheap” also changes, which creates new support levels on the way up. The same is also true for resistance levels. In an uptrend, a stock is continuously breaking through perceived resistance levels and making new highs
Moving Averages, is a constantly changing line that smooths out past price data while also allowing the trader to identify . In the example Notice how the price of the asset finds support at the moving average when the trend is up, and how it acts as resistance when the trend is down
The /Extension tool, is a favorite among many short-term traders because it clearly identifies levels of potential
Pivot Point Calculations, is another common technique, where is calculated based on the high, low, and closing prices of previous trading session/day and levels are projected based on the , different calculation techniques are available, as presented in this example of an indicator : PVTvX by DGT
█ Tʀᴀᴅɪɴɢ Bᴀꜱᴇᴅ ᴏɴ Sᴜᴘᴘᴏʀᴛ ᴀɴᴅ Rᴇꜱɪꜱᴛᴀɴᴄᴇ
Once an area or "zone" of support or resistance has been identified, those price levels can serve as potential entry or exit points because, as a price reaches a point of support or resistance, it will do one of two things—bounce back away from the support or (trading ranges), or violate the price level and continue in its direction (trading breakouts) —until it hits the next support or
The basic trading method for using is to buy near support in uptrends or the parts of ranges or chart patterns where prices are moving up and to sell/sell short near resistance in downtrends or the parts of ranges and chart patterns where prices are moving down. Buying near support or selling near resistance can pay off, but there is no assurance that the support or resistance will hold. Therefore, consider waiting for some confirmation that the market is still respecting that area
Trading breakouts, a breakout is a potential trading opportunity that occurs when an asset's price moves above a or moves below a on increasing . The first step in trading breakouts is to identify current price trend patterns along with levels in order to plan possible entry and exit points. Once the asset trades beyond the price barrier, tends to increase and prices usually trend in the breakout's direction. Breakouts are such an important trading strategy since these setups are the starting point for future increases, large price swings and, in many circumstances, major price trends. When trading breakouts, it is important to consider the underlying asset's levels. The more times an asset price has touched these areas, the more valid these levels are and the more important they become. At the same time, the longer these levels have been in play, the better the outcome when the asset price finally breaks out. Asset prices will often move slightly further than we expect them to. This doesn't happen all the time, but when it does it is called a false breakout. Therefore it is important to consider waiting for some confirmation while trading breakouts. It’s also popular for traders to sell 50% of their positions at the , and hold the rest in anticipation of a breakout above resistance
█ Pʀɪᴄᴇ Aᴄᴛɪᴏɴ - Sᴜᴘᴘᴏʀᴛ & Rᴇꜱɪꜱᴛᴀɴᴄᴇ ʙʏ DGT Sᴛᴜᴅʏ
This experimental study attempts to identify the levels. Assumes a simple logic to discover moments where the price is rising or falling consecutively for minimum 3 bars with the condition increases on each bar and the last bar’s should be bigger than the long term moving average. A line will be drawn at the end of the move (highest or lowest, depending on the move direction), the line will be drawn at minimum on the 3rd bar and if condition holds for other consecutive bars the line will switch to 4th, 5th etc bar.
Lines will not be deleted so the historical ones will remain and will emphasis the levels significance when they overlap in feature. Strong levels are more likely to hold and cause the price to move in the other direction, whereas the minor levels may only cause the price to pause and keep moving in the same direction. Determining future levels of can drastically improve the returns of a short-term investing strategy
Bar colors will be painted based on the of the specific bar to its long term moving average. This will help identifying the levels significance and emphasis the sings of breakouts
Finally, spikes will be marked on top of the price chart. A high usually indicates more interest in the security and the presence of institutional traders. However, a rapidly rising price in an uptrend accompanied by a huge may be a sign of exhaustion. Traders usually look for breaks of to enter positions. When security break critical levels without , you should consider the breakout suspect and prime for a reversal off the highs/lows. spikes are often the result of news-driven events. spike will often lead to sharp reversals since the moves are unsustainable due to the imbalance of
A good example with many concepts observed on a stock chart and detected by the study
Length of moving average, where moving average is used to detect levels, is used as reference to compare with threshold values for spikes and colors of the bars
Hint, to get more historical lines scrolling chart to left will enable visualization of them. Please note they may appear to much all 500 line limit is used 😉
Special thanks to @HEMANT Telegram user, for his observations and suggestions
Trading success is all about following your trading strategy and the indicators should fit within your trading strategy, and not to be traded upon solely
The script is for informational and educational purposes only. Use of the script does not constitute professional and/or financial advice. You alone have the sole responsibility of evaluating the script output and risks associated with the use of the script. In exchange for using the script, you agree not to hold dgtrd TradingView user liable for any possible claim for damages arising from any decision you make based on use of the script
thanks for the suggestion @JPTradingWorld
added ability to plot lines and create alerts when volume spike is detected. Special thanks to TG user Jamie Keel for his inspiring idea
Organized script inputs in sections with some brief description for the options (new Pine feature)
* major : added ability to plot lines and create alerts when high volatility is detected
* minor : line customization ability (color, width, style)
- there are slight changes with the script inputs formating
- important : to be able to use the updated version, it could be required to remove the old version from your chart, reload the browser and re-add the study, alerts must be re-created
* "Horizontal lines and boxes starting on early bars in history are now displayed on the chart, even if their starting point is not visible on the chart's bars"
had affected visual presentation of the study and instead of plotting lines in the visble range all lines are now plotted which causes clutter in the chart
hence this update is presented.
Now the users will be able to adjust plotting support and resistance levels based on their needs with the newly introduced input option "Lookback Interval (Days)"
Special thanks to @trvii for his valuable suggestion
lookback interval is replaced with bar count interval instead of time interval,
with the udate there might be no need to re-adjust every time when users navigate across different time frames
applicable with 1/5 min charts
Special thanks to @FinTechKing for his valuable suggestion
Volume Profile (also known as Price by Volume) is an charting study that displays trading activity over a specified time period at specific price levels. It is plotted as a horizontal histogram on the finacial isntrumnet's chart that highlights the trader's interest at specific price levels.
The histogram is used by traders to predict areas of support and resistance. Price levels where the traded volume is high could be assumed as support and resistance levels.
Price may experience difficulty moving above or below areas with large bars. Usually there is a great deal of activity on both the buy and sell side and the market stays at that price level for a great deal of time
It is advised to use volume profile in conjunction with other forms of technical analysis to maximize the odds of success
bull/bear volume strength histogram, emphasis the price levels in terms of buying or selling trading activity over the specified period of time
while volume profile, emphasis the price levels of common interest over the specified period of time
* added supply and demand zones, for further details please refer to Supply-Demand-and-Equilibrium-Zones
* volume profile : point of control display and color customization options
special thanks to everyone who shared their valuable suggestions/comments
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