3 technical trading tricks you didn’t know about levels

I know that I bang on and on about this, but in trading – levels are everything. If you know where the important levels are, this gives you more of an edge than ANY other piece of technical analysis.

So, if you think you know how to draw support and resistance levels on a chart, today I want to show you three tricks for picking out the superior levels.

I’m talking about the levels where the market is MOST likely to turn – being able to spot these (and cut out the weaker levels) can significantly boost your success rate on trades.

You probably won’t find these tricks in the trading manuals. In fact, some of these may go against what trading manuals tell you, about looking for lots of touches and periods of consolidation … These come from real trading and real charts … and real learn-the-hard-way experience!

Trick Number One:

If support is really strong at a level, there’ll be plenty of buyers there. If resistance is strong, there’ll be plenty of sellers.

This means that the price won’t hang around at these levels – instead, it’ll touch them and bounce rapidly away.

If we see prices getting sticky and dragging their heels at a level, then that tells us that there are buyers and sellers battling it out – this means indecision. Next time, the buyers might win … or the sellers might win …

So, while the training manual might tell you that the strongest level of support has at least 3 touches, and should be littered with doji candlesticks … and might overlook a spike where the price has barely touched a level … you could follow this advice at your peril.

If we see a no-hesitation bounce – it tells us that there’s no doubt here. This is a level to watch for.

In the example below, we see the price bounce rapidly off A. There’s no will-they, won’t-they. This tells me that next time the price comes to this price level, I want to buy.

We get a turn-around at B; and I get my trade opportunity at C. Second time around, the price fires up off this level – remember, this is likely to be a fast move, so you can’t wait around for lots of confirmation signals.

Trick Number Two:

The second trick is only subtly different to the first. Number one looked at how much time the chart spent at our key level. Number two looks at how fast the chart moves away from our level.

Does it move steadily away?

Does it shoot off in a spike?

Or does it gap at this level?

While we don’t often see lots of gaps open up on large instruments, we can see how quickly a price moves from a level. This tells us that, if it’s an area of resistance, there’s no shortage of selling power. And at an area of support, there’s no shortage of buying power.

Next time the price comes to this level, those buyers and sellers will be out in force again …

In the chart above, we’re left in no doubt about the volume of sellers that will come in at the 825 price level – next time the price comes here, we can expect these to be out in force once again – and sure enough, the next day, we get our chance.

Again, this is a fast touch – other sellers aren’t hesitating here, so you can’t afford to either.

Trick Number Three:

The third trick is a little different and will appeal to more cautious traders who are looking for extra security on key levels.

It uses a doubling-up principle, by stacking up key levels, one behind the other.

Here’s an example …

Unlike the previous two tricks, this isn’t relying on the speed with which the last reversal moved, but instead looks at where the buyers and sellers are.

In this example, we believe there will be a host of sellers coming in at around the 241 level. But we also believe there’s another line of sellers queuing up at 249. This increases the chances that the price will turn again at around these levels, but it may not reach the higher one.

We can use this information to get into a sell trade, with some added security of knowing that there’s plenty more sellers at a slightly higher price, which should keep driving the price in the direction we want it to go. It also gives us the perfect siting for our stop levels.

So, when you’re looking at levels on your charts, bear these three rules in mind, and I’m confident you’ll find that you get better and better at pin-pointing turning points. This means you can get into trades faster, boosting your reward-to-risk ratio.

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Support and Resistance Trading Tricks Six tricks to trade support and resistance reversals like a pro