Price Action - Support & Resistance by DGT

Sᴜᴘᴘᴏʀᴛ ᴀɴᴅ Rᴇꜱɪꜱᴛᴀɴᴄᴇ, is undoubtedly one of the key concepts of technical analysis

█ Sᴜᴘᴘᴏʀᴛ ᴀɴᴅ Rᴇꜱɪꜱᴛᴀɴᴄᴇ Dᴇꜰɪɴɪᴛɪᴏɴ

Support and Resistance 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 support level .

A resistance level is the opposite of a support level . 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 resistance level .

A previous support level will sometimes become a resistance level when the price attempts to move back up, and conversely, a resistance level will become a support level as the price temporarily falls back.

█ Iᴅᴇɴᴛɪꜰʏɪɴɢ Sᴜᴘᴘᴏʀᴛ ᴀɴᴅ Rᴇꜱɪꜱᴛᴀɴᴄᴇ

Support and resistance can come in various forms, and the concept is more difficult to master than it first appears. Identification of key support and resistance levels is an essential ingredient to successful technical analysis .

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 support/resistance and are highlighted with horizontal lines.

Repeated test, the more often a support/resistance 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 resistance level 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 support and resistance

The following support and resistance related topics are beyond the scope of this study, so they will be mentioned roughly only as a reference for support and resistance concept

Trendlines, Support and resistance 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 support and resistance . 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 Fibonacci Retracement /Extension tool, is a favorite among many short-term traders because it clearly identifies levels of potential support and resistance

Pivot Point Calculations, is another common technical analysis technique, where pivot point is calculated based on the high, low, and closing prices of previous trading session/day and support & resistance levels are projected based on the pivot point , different calculation techniques are available, as presented in this example of an pivot point 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 resistance level (trading ranges), or violate the price level and continue in its direction (trading breakouts) —until it hits the next support or resistance level

The basic trading method for using support and resistance 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 resistance level or moves below a support level on increasing volume . The first step in trading breakouts is to identify current price trend patterns along with support and resistance levels in order to plan possible entry and exit points. Once the asset trades beyond the price barrier, volatility 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 volatility increases, large price swings and, in many circumstances, major price trends. When trading breakouts, it is important to consider the underlying asset's support and resistance 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 support and resistance 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 resistance level , 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 support and resistance levels. Assumes a simple logic to discover moments where the price is rising or falling consecutively for minimum 3 bars with the condition volume increases on each bar and the last bar’s volume should be bigger than the long term volume 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 support and resistance can drastically improve the returns of a short-term investing strategy

Bar colors will be painted based on the volume of the specific bar to its long term volume moving average. This will help identifying the support and resistance levels significance and emphasis the sings of breakouts

Finally, Volume spikes will be marked on top of the price chart. A high volume 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 volume may be a sign of exhaustion. Traders usually look for breaks of support and resistance to enter positions. When security break critical levels without volume , you should consider the breakout suspect and prime for a reversal off the highs/lows. Volume spikes are often the result of news-driven events. Volume spike will often lead to sharp reversals since the moves are unsustainable due to the imbalance of supply and demand

A good example with many support and resistance concepts observed on a stock chart and detected by the study

Length of volume moving average, where volume moving average is used to detect support and resistance levels, is used as reference to compare with threshold values for volume 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

Sürüm Notları: Price or Volume option added as as source to support and resistance calculations

thanks for the suggestion @JPTradingWorld
Sürüm Notları: updates with this release

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)
Sürüm Notları: updates with this release

* 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
Sürüm Notları: aesthetic changes : default line values are slightly changed (no functionality change)
Sürüm Notları: Update

pine's newfeature
* "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
Sürüm Notları: slight change with the latest update

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
Sürüm Notları: major update

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
Sürüm Notları: added bull/bear volume strength histogram, the latest update made to Vol Profile study
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
Sürüm Notları: major update

* 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
Sürüm Notları: extended volume profile - value area high / low levels added with alerts
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