What is Auto Support & Resistance Zones Indicator

Curiously, by default, the MT4 terminal lacks an indicator that automatically constructs support and resistance levels. These levels are pivotal in technical analysis and widely used by traders. The Auto Support & Resistance indicator addresses this gap.

Indicator Description

The Support and Resistance indicator autonomously plots key support and resistance levels on the chart.

Resistance zones are illustrated in red, while support zones are shown in blue. Support zones suggest potential buyer interest when prices near them.

Conversely, resistance zones hint at potential seller interest if prices approach these levels.

The automatic plotting of current support and resistance levels by the indicator saves time and effort in chart analysis. This is advantageous for both experienced and novice traders.

Nevertheless, beginners should practice drawing levels manually. This fosters better understanding and experience of forex market pricing. Manually drawn levels can be compared to the automatically drawn ones, serving as a learning aid.

Support and resistance levels shown by the indicator can guide order placement when closing positions (stop-loss and take-profit). They also help identify signals for opening trades.

Indicator Drawing Technique

Support and resistance levels are usually drawn using market extrema, known as fractals. The standard MT4 terminal includes the Fractals indicator, which highlights these extrema.

The Support and Resistance indicator incorporates the Fractals indicator, plotting support and resistance levels at points with the most fractals.

For instance, a resistance level might be drawn based on 11 fractals. Clicking the number at the beginning of the resistance level reveals which fractals were used.

The height of support and resistance levels depends on the distance between the fractals.

The larger the gap between the upper and lower fractals of a support/resistance level, the higher the plotted level will be.

Conversely, the closer the fractals, the lower the height of the level.

Thus, the indicator does not redraw but adjusts the height of levels as new fractals emerge.

How to Trade Using the Indicator

Trading methods based on support and resistance zones often involve signals for breakout or rebound from the levels. However, these methods vary for flat versus trending markets.

Trading from the lower to the upper limit of a flat and vice versa is typically straightforward and profitable.

However, it’s crucial to recognize that flat markets are temporary. Eventually, a flat will transition into a trend.

A combination of support and resistance zones in this context forms a minor flat.

According to technical analysis, a breakout is more likely in the direction of the preceding trend. Hence, breaking the resistance zone upwards is more plausible than a downward move.

This suggests considering buy trades from the support zone during the trading day. It also suggests considering breakout trades upwards for mid/long-term positions.

During an active trend, support and resistance zones act as levels where profitable trades can be made in the main trend direction.

Combining trend lines with support/resistance zones initially increases the likelihood of a successful trade.

Let’s use the AutoTrendLines indicator to identify the trend.

A combination of the resistance zone and the downtrend line allows consideration of sell positions.

Similar to the flat example, sell trades from the resistance zone can be considered both during the trading day and for mid/long-term positions.

Thus, the Support and Resistance indicator is a valuable tool for chart analysis. Its versatile settings and efficiency enable effective use in nearly any trader’s system.

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