Many beginner traders struggle with drawing support and resistance lines on their MT4 charts.
This article will explain the best practices and hopefully guide you through this process.
Support and resistance lines function primarily to mark the low and high price levels of an underlying asset.
Many beginner traders draw the lines incorrectly and make the whole thing more confusing and difficult that it needs to be.
Most common problems with drawing S/R levels
One of the most common problem is that traders often draw too many lines and too close to each other. They feel that support and resistance lines must be drawn on every noticeable high and low. This is a common mistake.
Drawing to many lines will result in confusing chart and some of the lines won’t actually serve their purpose, rendering them quite useless.
Another common mistake is that beginner traders draw the lines on lower time frames such as the M15 or M30. These time frames are simply too low to get a general picture of the asset’s price levels.
Another issue that traders face with drawing the lines is whether to draw them to the end of the wick or to the candle body, or through the middle of the body. The answer is that all three ways can be used to mark the levels.
Although some traders will insist that levels should be drawn on the ends of candle wicks, this is not always the case. Support and resistance levels should be thought of as ‘specific price zones’ and so they don’t have to be very precise but if you’re trading price breakouts then drawing them on wicks will help.
Drawing Support and Resistance lines on our MT4 charts
Support and resistance lines should be drawn on Daily charts but can also be drawn on Weekly and Monthly chart, both of which I useful in determining long term trends.
Here is the easiest way to draw your S/R lines in MT4:
STEP 1 – Open your MT4 chart, select single asset, choose Daily view and maximize your chart window. Zoom out so that you can see a general overview of the asset for the last 3-6 months. (Unless you’re a long term investor there is no need to see price data 2-3 years back.)
STEP 2 – Identify the major Support / Resistance zones by looking at where the price action accumulated.
STEP 3 – Draw the support and resistance lines through the zones in such a way that it connects at least three bottom levels marked by ends of wicks and/or candle bodies. Give greater weight to the most recent price levels.
Here is a close up of this chart with the key levels of support and resistance.
As you can see in this example that the lines touch extreme price levels that that were tested.
Once a support level is broken by the price action of an asset it automatically becomes a resistance level and likewise if the resistance level is broken, it becomes a support level.
The below example shows a close up of the chart below and zooms in on the key support level.
As you can see the support line was drawn where the price action tested a particular level a few times. The support line in some instances goes through the bottom wick or the candle body and/or aligns with the end of the wick.
Remember that the support and resistance lines don’t have to be drawn so precisely. In the above example I tried to draw the line in such a way that it would touch at least three low levels in the identified support zone.
You need to use your best judgment to mark the support and resistance levels.