One component of a robust trading system is knowing how to find support and resistance levels.

Both levels are barriers.  Knowing where those barriers reside can save lots of frustration.  For example, it wouldn’t be wise to buy near strong resistance and sell near solid support.

It’s not that difficult to find support and resistance zones.  Study a weekly chart and draw in lines that corresponds to levels where price made little forward or backward progress.

This weekly chart has horizontal lines at areas of resistance.  Price touched these areas and then retreated.

Here’s a technique that helps develop a robust support/resistance trading system.  Find support and resistance zones on multiple time frames.

Here’s a daily look at the above chart.

The next task is to draw the support and resistance levels on the daily chart.  Draw them in a different color.

This is a daily chart with resistance lines drawn in pink.

The benefit of a chart like this is that it represents a multi-time frame look at areas of strong resistance.  As price approaches the long-term weekly lines it is approaching a very strong resistance area.  It may not be wise to initiate  a long trade near this area.  Conversely, if price falls back to a white line it may be a solid area of support and a great zone in which to place a trade.

If this method resonates with your trading style, don’t forget to draw support lines on both time frames.

This technique is valuable for intraday trading, too.  The rule of thumb is this — move up one level and draw the support and resistance lines.  For example, if trading from a 30 minute chart first draw the lines on an hourly chart.

There’s a complete trading system devoted to this strategy, HERE. I recommend it because I wrote it ; )

Another method to quickly find zones of support and resistance is to look at a Heikin Ashi chart.  Heikin Ashi graphs are special candlestick charts.  The candlesticks are clustered in the same color until the trend changes.

Here’s a weekly look at the Heikin Ashi chart for ILMN, the same chart as above –

And the corresponding daily chart –

Finding support and resistance is one of the oldest techniques of technical analysis.  This deceptively simple technique is still widely practiced by those traders that realize the value of interpreting price action and incorporating it into their trading system.