Support and Resistance lines

by Eva
(from Forex-Trading-Beginner)

After an extremely busy 2010, including an overseas move, I am finally feeling ready to settle back into trading. And boy, am I rusty!

I started last week, opening charts and analyzing here and there, drawing trendlines, marking support and resistance and I was getting really frustrated because my charts weren't making any sense!

So I delved back into my notes (from 2005) and saw that while my trendlines were fine, I had forgotten how to correctly mark levels of support and resistance! Duh.

So in case you're wondering, here is my method:
1. Open chart (I prefer hourly candlestick chart)

2. Identify your trend (bullish or bearish?)

3. Draw trendlines. In this example it was the GBP, which was trending upwards (bullish) at time of writing.

4. Starting from the current live candle (last candle on the right), and working backwards towards the left, mark out the troughs in the market that are progressively falling, from right to left.

Note: A trough on a candlestick chart can be identified as a candle that is preceded by at least two higher candles and followed by at least two candles.

5. Mark only the troughs that are progressively falling, right to left, with a horizontal line. This is a support level.

I hope the above makes sense. Please feel free to add any comments or ask questions using the comments link below.