Friday, February 20, 2009

Support/Resistance lines

Continuing with my post yesterday....

What time frame should be used in determining support & resistance levels?

They can be determined on any time frame chart. But what i prefer to do is  look at the daily chart & understand the trend, and mark support & resistance lines or levels.

Next i open the hourly charts & mark the trendlines, support/resistance levels on the hourly charts.

Then one looks for price action near these levels. Its best it there is a level derived from the daily chart & one is able to see a particular phenomenon around it on the hourly. Say an hourly close above a resistance lines & then a retracement to the line where price finds support & then a move back above the high of the previous hour. This would be a perfect sign of strength.

See, one can also wait for a close on a higher level time frame. So one can wait for a daily close above the level to be very certain. But the advantage with the hourly close in earlier entry & thus being able to capture a greater part of the move.

So, thus you will have lower accuracy or correct calls, but earlier entries & greater profits or lower losses in case of false moves.