What is the best indicator for support and resistance?
Support and resistance are important concepts in technical analysis that can be used to predict the future price movements of financial instruments, such as stocks, currencies, and commodities. In general, support refers to a price level at which demand for an asset is thought to be strong enough to prevent the price from falling further. On the other hand, resistance is a price level at which selling pressure is believed to be strong enough to prevent the price from rising further. Over the years, traders have used these levels extensively in their strategy, and now, we even have indicators that automatically draw these levels when employed.
Best indicator for support and resistance
Traders and analysts use several indicators to identify support and resistance levels, including trend lines, moving averages, and pivot points. In this article, the experts at TU have discussed the various indicators that can be used to identify support and resistance levels and how to use them. Ultimately, the best indicator for support and resistance will depend on the specific needs and preferences of the trader or analyst and the characteristics of the asset being analyzed.
The best support and resistance indicator for MT4
In the MetaTrader 4 (MT4) platform, several built-in indicators can be used to identify potential support and resistance levels. The S&R indicator is a custom indicator that is designed to automatically find the closest support and resistance levels (or zones) for the loaded chart. To use the indicator, traders simply need to apply it to their chart in the MT4 platform and adjust the settings as desired.
One of the main advantages of the S&R indicator is that it works on all timeframes and markets, which means it can be used to identify potential support and resistance levels for a wide range of financial instruments. Additionally, the indicator does not redraw, which means that the support and resistance levels displayed on the chart will not change as the price moves. The indicator also has flexible settings, which allows traders to customize it to their specific needs and preferences.
However, it's important to note that the S&R indicator does not guarantee that the support and resistance levels it identifies will work the way traders expect them to. Therefore, like any technical analysis tool, it's essential to use the S&R indicator in conjunction with other forms of analysis, such as fundamental analysis and market sentiment, to get a complete picture of the market. Additionally, the S&R indicator does not issue warnings or alerts, so traders must manually monitor their charts and positions.
How to set up support & resistance indicator in MT4
The installation of the indicator is usual. Here is a step-by-step guide for the users of Windows:
Launch your Metatrader
Open the folder with the platform data using the File/Data Folder menu
In the folder, open MQL4/Indicators folder
Insert Support&Resistance.ex4 file from the downloaded archive
Restart your MT4 platform (or refresh the Navigator window).
How to Set Up Indicator
That’s it! All is set. You can now open any chart on the MetaTrader 4 platform and add S&R indicator to it through the menu Insert / Indicators / Custom / SupportResistance.
How to use support and resistance indicators
The following is a step-by-step guide on how to use indicators to identify support and resistance levels:
Step 1: Identify the trend
The first step in using support and resistance indicators is to determine the overall trend of the asset you are analyzing. This can be done by plotting a trend line on the chart and looking for the direction of the slope. If the trend line is sloping upwards, the asset is in an uptrend. If the trend line slows downward, the asset is in a downtrend.
Identifying the trend
Step 2: Identify critical support and resistance levels
Once you have identified the trend, the next step is identifying key support and resistance levels. Experts suggest that this can be done by plotting horizontal lines on the chart at key price levels, such as previous highs and lows, or by using the Fibonacci tool or oscillators to identify key support and resistance levels. We have used the Fibonacci tool, which is drawn from the high-to-low trend. All the lines from this tool result in an important level for any security, however, some are more important than others based on the uniqueness of the security.
Identify critical support and resistance levels
Step 3. Watch for price breaks
Once you have identified key support and resistance levels, the next step is to watch for price breaks. If the price of the asset breaks through a key resistance level, it may indicate a trend reversal and a potential buying opportunity. Conversely, if the price breaks through a key support level, it may indicate a trend reversal and a possible selling opportunity.
Price breaks
Step 4. Confirm the breakout
It is important to confirm any potential trend reversal or breakout by waiting for the price to close above or below the key support or resistance level. This helps to ensure that the breakout is genuine and not just a temporary fluctuation.
Confirm the breakout
Step 5. Monitor the trend
Once you have identified a potential trend reversal or breakout, it is essential to monitor the trend to see if it continues or if it reverses. This can be done by using additional indicators to help confirm the trend's strength.
Overall, using support and resistance indicators is a key part of technical analysis and can help traders identify potential buying and selling opportunities in the market.
The best support and resistance indicator for intraday
Experts suggest considering the following factors when choosing a support and resistance indicator for intraday trading:
The type of security being traded
Different indicators may be more suitable for different types of securities, such as stocks, Forex pairs, or commodities.
The time frame of the trade
Some indicators are better suited for longer-term trades, while others may be more appropriate for shorter-term trades.
The trader's level of experience
Some indicators may be more complex and require more experience to use effectively, while others may be more suitable for beginners.
The trader's trading style
Different indicators may be more suitable for different trading styles, such as trend-following or range-bound strategies.
The type of analysis being performed
Some indicators may be more suitable for fundamental analysis, while others may be more geared toward technical analysis.
The level of accuracy desired
Some indicators may be more reliable at identifying key levels of support and resistance. In contrast, others may be less reliable but offer a more comprehensive range of potential levels to consider.
The level of complexity
Some indicators may be more complex to use and interpret, while others may be more straightforward.
The level of customization
Some indicators may offer more customization options, such as the ability to change the period or weighting used in the calculation, while others may be more fixed in their approach.
The level of integration with other tools
Some indicators may be more easily integrated with other tools, such as charting software or trading platforms, while others may be more standalone.
The cost level
Some indicators may be free to use, while others may require a subscription or license fee.
Finally, it is also essential to remember that different indicators may be more suitable for other traders and trading strategies, and it may be helpful to test out different options to see which works best for you.
FAQ
Which timeframe is best for support and resistance?
In general, traders that prefer the 15-minute time frame have a good understanding of support and resistance and how to read candlesticks.
Which EMA is best for support and resistance?
The 20 EMA is the best method to find support and resistance in timeframes.
What are the most popular indicators used to identify support and resistance?
Traders use popular indicators to identify potential support and resistance levels, including horizontal lines, trend lines, the Fibonacci retracement tool, and moving averages. According to traders, horizontal lines are drawn at specific price levels, trend lines are drawn by connecting price highs and lows, and moving averages smooth out price fluctuations to help identify trends.
What factors should traders consider when choosing an indicator for support and resistance?
When choosing an indicator for support and resistance, traders should consider the time frame they are trading in, their trading style, and the asset they are trading. In addition, different indicators may be more effective in different market conditions, so it is vital for traders to test and evaluate various indicators to find the one that works best for their needs.
Are there any drawbacks to using indicators for support and resistance?
One potential drawback to using indicators for support and resistance is that they are based on past price data, which means they may only sometimes accurately predict future price movements. Additionally, different indicators may produce different results, leading to conflicting signals and making it easier for traders to make informed decisions.
Can traders use multiple indicators to identify support and resistance?
Traders can use multiple indicators to identify support and resistance levels, which can help confirm trends and provide a more comprehensive view of market conditions.
Team that worked on the article
Chinmay Soni is a financial analyst with more than 5 years of experience in working with stocks, Forex, derivatives, and other assets. As a founder of a boutique research firm and an active researcher, he covers various industries and fields, providing insights backed by statistical data. He is also an educator in the field of finance and technology.
As an author for Traders Union, he contributes his deep analytical insights on various topics, taking into account various aspects.
Dr. BJ Johnson is a PhD in English Language and an editor with over 15 years of experience. He earned his degree in English Language in the U.S and the UK. In 2020, Dr. Johnson joined the Traders Union team. Since then, he has created over 100 exclusive articles and edited over 300 articles of other authors.
The topics he covers include trading signals, cryptocurrencies, Forex brokers, stock brokers, expert advisors, binary options. He has also worked on the ratings of brokers and many other materials.
Dr. BJ Johnson’s motto: It always seems impossible until it’s done. You can do it.