Exact Swing Points -Support & Resistance

Learn a Swing Trading strategy that’s so easy even a beginner trader could be trading it in no time! In this article, you will learn how to determine where exactly the support and resistance points and the swing points are on a chart. This is a particularly important lesson! Just about every system or method of trading at least takes note of where the key support and resistance levels are. I’ll discuss a double use for this method of identifying these points.

Now, how do you know where support and resistance really are?

🔗 More: » Technical Analysis Guide

The problem with Support and Resistance (S&R) is that it is not a definite number. It is not an exact point on the chart at which price will, without any hesitation, stop.

In fact, S&R is actually an area – it is not an exact number as we would all like to think.

The dilemma, of course, is that in order to do our calculations, we need an exact point. You can’t enter $50.10/20 area when using Fibonacci or working out your stops and limits. You need an exact number, even though S&R is not an exact number.

Try telling your broker that you want a stop loss at somewhere between 50 and 55, and watch him burst a blood vessel. This is what I want to concentrate on in this lesson. This is a technique I have found to be particularly good at not only identifying strong S&R points but also swing points. In order to find S&R, we must first identify market swing points. There are various ways of doing this, but I am going to use the one I have used for years.

■ Swing Up

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〽️ Elliott Wave Principle and the Stock-Market Cycles

Elliott Wave Theory states that market prices move in predictable wave Patterns due to investors psychology.

ℹ️ About Ralph Nelson Elliott

An American accountant named Ralph Nelson Elliott studied stock market volatility during the 1930s and concluded that certain price movements (patterns) tend to repeat over different time frames. Before Elliott's work, investors largely viewed market fluctuations as random events. He proposed that the stock market moves in a recognizable structure, which became known as the "Elliott Wave Principle."

🕸️ Introduction to Elliott Waves

The key step in applying the Elliott Wave Principle is to identify the pattern the market is currently following. Wave patterns have two phases: an impulsive phase and a corrective phase. The impulse phase consists of five sub-waves (labeled 1, 2, 3, 4, 5) that move in the direction of the main trend. The corrective phase consists of three sub-waves (labeled a, b, c) that move against the main trend. The diagram below shows the basic Elliott Wave Pattern.

• Wave count: 5️⃣ impulsive waves followed by 3️⃣ corrective waves

• Full cycle: 8 waves (5 + 3)

• Trend Direction: 🔼 Uptrend = 1–2–3–4–5, and then Downtrend 🔽 A–B–C 

Graph: Elliott Waves

Read more: Elliott Wave Principle

〽️ MAJOR TYPES OF TECHNICAL ANALYSIS CHARTS

Technical analysts rely on charts to identify price action and spot strong trends, patterns. The four main types of charts they use include: (1) Line, (2) Bar, (3) Candlestick, and (4) Point & Figure.

• There are also less common charts such as the Renko Chart (ignores time) and Heikin-Ashi Chart (Smoothed candlesticks filtering market noise)

 Introduction to the Four Major Types of Charts

Technical analysis charts provide a visual representation of an asset’s price movements to help identify trends and patterns. The four main types are:

1. Line Charts: Connecting closing prices over time with a continuous line, offering a straightforward view of overall trends.

2. Bar Charts (OHLC): Each bar shows the Open, High, Low, and Close prices for a period, with vertical bars and horizontal ticks that reveal price volatility.

3. Candlestick Charts: Using color-coded bodies—typically green or white for upward closes and red or black for downward—along with wicks that mark price highs and lows, these charts highlight market sentiment and pattern formations.

4. Point & Figure Charts: These focus solely on significant price changes, plotting columns of Xs for rising prices and Os for falling ones, ignoring time intervals to emphasize major trends by filtering out minor fluctuations.

The table below compares the four major types of charts.

Read more: Major Types of Charts

📈 Essential Forex Technical Analysis

Trading the Foreign Exchange market by using technical analysis is a common but complex task for every Forex trader. Here are some major technical indicators related to the Forex market. 🔗 More: » Technical Analysis Guide

Relative Strength Index (RSI)

The RSI measures the ratio of upward and downward price movements on a scale from 0 to 100. An RSI of 70 or higher signals that the market is overbought, meaning prices have risen more than expected. An RSI of 30 or below signals the market is oversold, meaning prices have fallen more than expected.

For intraday Forex trading, it’s recommended to use RSI on the 5-minute chart. It’s also helpful to look for divergences between the price chart and the RSI chart on the H1, H4, or D1 charts, as these divergences can provide strong reversal signals.

Key tips for trading with RSI:

(i) Use RSI(21) instead of the standard 14-period setting

(ii) Divergences between price and RSI can signal powerful reversals

(iii) Use RSI(21) on the H4 and D1 charts to evaluate key price reversals or continuations

(iv) Use RSI(21) on the 5-minute chart for short-term overbought or oversold levels

(v) To time trades well, wait for RSI(21) to reverse after reaching overbought or oversold levels (20/80)

🔗 More: » RSI Precision v.3 (Multisignal Indicator)

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