5 Best Support And Resistance Indicators
Plotting support and resistance levels is an essential skill for every good trader. Doing this allows you to identify areas on the charts where the price might turn or reverse. This, in turn, enables you to take advantage of good trading opportunities. However, manually plotting these levels can be difficult, depending on your trading skill level. This is where support and resistance indicators come in handy. They make it easier for any trader to identify these key levels quickly.
Some of these indicators focus only on support and resistance. Meanwhile, some can show other things like volatility, support, and resistance. Below is a list of the five best support and resistance indicators you can use on cTrader provider by TP Market Trades.
1. Fibonacci Indicator
One of the most popular support and resistance indicators is the Fibonacci. This indicator draws horizontal lines on the chart that show possible support and resistance levels. It is best suited for trending markets as it anticipates areas where the price might resume the prevailing trend.
Consequently, a downtrend allows you to anticipate resistance levels, while an uptrend will enable you to anticipate support levels.
How To Use Fibonacci To Anticipate Support And Resistance
You can use the Fibonacci tool and the other indicators on the TP Market Trades platform, cTrader. In the chart below, you can quickly identify support and resistance by finding significant swing highs and lows. Given that the trend is down, the indicator will help you anticipate resistance levels.
Moreover, the major Fib retracement levels are 38.20%, 50.00%, and 61.8%. These levels show areas where the price might reverse. In our sample, the price pulls back to the 38.20% Fib retracement level. Here, it finds resistance before continuing lower, creating an opportunity to sell.
Fibonacci indicator
2. Pivot Points Indicator
The pivot points indicator is a simple tool that draws clear support and resistance levels on the chart. The indicator calculates three possible resistance and support levels from the previous day’s key levels.
Moreover, the pivot point lets you tell the market's current direction. When the price trades above the pivot point, it indicates a bullish trend that will likely respect the resistance levels. On the other hand, if the price is trading below the pivot point, it shows a bearish trend that will meet the support levels.
How To Use Pivot Points For Support And Resistance
In the chart below, you can see the pivot points indicator with clear support and resistance levels. Meanwhile, since the price is trading below the pivot point, it shows a downtrend. As a result, every time the price breaks a support level, it pulls back to retest it as resistance. This creates excellent opportunities to sell.
Pivot Points indicator
3. Moving Averages Indicator
Moving averages mainly show the current trend by creating a single dynamic line showing the average price. However, they also offer good trading opportunities as they act as support and resistance every time the price pulls back while trending.
When the moving average is below the price, it shows an uptrend and acts as support. Meanwhile, when the moving average is above the price, it shows a downtrend and acts as resistance.
How To Use Moving Averages For Support And Resistance
TP Market Trades allows you to use different kinds of moving averages. However, in the sample below, we will focus on the Simple Moving Average (SMA). The SMA uses the average closing price to show the market's direction. You can see the SMA is below the price. Therefore, it is a bullish market. Every time the price pulls back, it finds support at the SMA line, offering good buy opportunities.
Moving Average indicator
4. Bolinger Bands Indicator
The Bollinger Bands indicator combines moving averages and channels to show market volatility. Moreover, the middle line, a moving average, is a great support and resistance level during trends. Therefore, you can gauge the strength of a trend and know the best places to enter a trade.
When the price trades between the middle line and the lower band, it is in a downtrend. On the other hand, when it trades between the middle line and the upper band, it is in an uptrend. When trading the Bollinger Bands, there is a strategy that takes advantage of the fact that the price always returns to the middle of the band, where it finds support or resistance.
How To Use Bollinger Bands For Support And Resistance
The chart below shows the Bollinger Bands indicator, with the price on a downtrend. Therefore, the middle line is a resistance whenever the price pulls back. This allows you to enter sell positions.
Bollinger Bands indicator
5. Keltner Channels Indicator
Kelter channels act like any other channel that shows resistance and support levels. However, the main difference is that the channel bands keep changing with the price. Therefore, it accommodates volatility. Moreover, it means that the price is in an uptrend when the channels are moving up, allowing traders to use the middle line and the channel bottom as support levels.
Meanwhile, when the channels move down, the price goes down, allowing traders to use the middle line and the channel top as resistance levels. Finally, when the Keltner Channels indicator moves sideways, it shows a ranging market where traders can use the channel top as resistance and the channel bottom as support, as shown below.
How To Use Keltner Channels For Support And Resistance
In the chart below, the Keltner channels indicator is moving sideways. Therefore, every time it reaches the channel top, there is a chance it will reverse. The same happens at the channel bottom. In this case, aggressive traders enter a buy position when the price gets to the bottom line and a sell position when it gets to the top line. More conservative traders only trade in the direction of the previous trend. Therefore, if the prior trend was up, you only wait for the price to return to the bottom line to buy.
Keltner Channels indicator
Many other indicators allow traders to identify support and resistance levels while trading forex. However, the list above gives you the top 5 picks that you can find on Dominion Market. Join TP Market Trades today and explore trading possibilities with support and resistance indicators.