This website or its third-party tools use cookies which are necessary to its functioning and required to improve your experience. By clicking the consent button, you agree to allow the site to use, collect and/or store cookies.
Please click the consent button to view this website.
I accept
Deny cookies Go Back
  • Price Action Trading Course
  • Trading Setups
  • Topics ↓
    • Price Action Trading
    • Day Trading
    • Trader Development
    • Site Map
  • TSR Trading Guides
  • Resources
    • Udemy Trading Course
    • Trading Books
    • Trading Indicators
    • Forex Tester 4
    • NinjaTrader & Kinetick
  • Member Login

Trading Setups Review

Trading Strategies, Guides, and Articles for Active Technical Traders

You are here: Home / Trading Articles / 5 Ways To Find Support and Resistance With Price Action and Volume

5 Ways To Find Support and Resistance With Price Action and Volume

By Galen Woods in Trading Articles on October 27, 2017

Want to succeed at trading the markets? Good trading tactics start with finding reliable support and resistance. These critical zones are helpful for entering new trades and for taking profits.

Finding reliable support and resistance is a crucial ability of a professional trader. Support and resistance are supply and demand manifested by price action.

Learn to ignore the market noise on your charts. Focus on finding the support and resistance zones that matter for your trading plan.

There are many ways to find support and resistance. But for the best results, you should concentrate on price action and volume.

Hence, the five methods here are mainly derived from price action and volume.

#1: Swing Highs and Lows

When you track market swings, you are following the turning points of price action. Each turning point is the result of the market being supported or resisted.

Hence, observing market swings is fundamental to identifying support and resistance levels.

The example below shows how swing pivots acted as support before flipping into a resistance level.

Support and Resistance - Swing Highs and Lows

Many novice traders had only a vague introduction to drawing swing highs and lows. As a result, they lack precise rules for marking out swing highs and lows.

This subjectivity is a huge problem. On historical charts, you can mark out swings that perform well as support and resistance. But you will find it tough to replicate the same results on a real-time chart.

To ensure consistency, you must learn an objective method for marking market swings. One standard method for marking out swings is the percentage method. In my course, I cover another swing analysis method based on bar highs and lows.

#2: Congestion Areas

Congestion areas are one of my favorite ways to find support and resistance zones.

When the market congests within a price range, it means that the market is interested in that price range.

And market interest is not quickly forgotten. Thus, past congestion areas become significant support and resistance.

The blue zones below are Congestion Zones as defined in Day Trading With Price Action.

Support and Resistance - Congestion Areas

Note the three Congestion Zones within a tight price range. This observation implied its potential as a support (resistance) area.

Learn more about trading with congestion areas with this article.

#3: Extremely High Volume

Remember, support and resistance is merely market interest manifested as price action.

You are looking for the interest of the market. Hence, you must not overlook trading volume.

If you are interested in the market, you trade it, contributing to its trading volume. The same goes for everyone else. Hence, trading volume is a powerful indicator of market interest.

In practice, you should look for price bars (candlesticks) with extremely high volume. Then, use them to project support and resistance.

What is extremely high volume?

My definition:

Volume that exceeds the long-term average volume by at least three standard deviations

Tip: Use the Upper Band of a Bollinger Band applied on volume to identify these extreme signals.

Support and Resistance - High Volume Bars

If you look closely at the price action before the high volume bar, you will notice sideways trading. Both congestion areas and high volume bars are signs of market interest. Hence, it’s common for them to occur together.

For more examples, see this article – Reliable Support and Resistance Zones With High Volume Signals.

#4: Price Gaps

Price gaps are also effective support and resistance zones. Why?

Gaps create a vacuum. Although the market has moved past them, no actual trading has taken place within the gap zone.

Hence, traders who intended to buy or sell within the gap range missed their chance to do so. And they are now waiting for the market to give them a second chance.

When the market returns to the gap, they will seize that second chance and send in their trading orders. This behavior creates the potential for support or resistance zone.

In the example below, you will see how a bearish gap acted as an effective market resistance.

Support and Resistance - Price Gaps

Using price gaps as a support and resistance zone is a rewarding strategy for the patient trader.

Many traders get excited after an opening gap and are eager to get into the market. You might be better off waiting for a chance to trade the support (or resistance) that the gap implies.

#5: Psychological Numbers

Take a look at these headlines:

  • Wall Street points to lower open as investors eye Dow 20,000
  • S&P 500 Closes Above 2000 for First Time
  • Nasdaq Breaks Through 6,000 Barrier, But Should We Party Like It’s 1999?

They are just a small sample of headlines that show interest in specific round numbers.

In the line chart below, you will see how the $50 and $100 levels acted as support and resistance for QQQ (NASDAQ 100 ETF).

Support and Resistance - Psychological Levels

It’s clear that certain price levels have a psychological impact on investors and traders. These levels attract the market’s attention.

Again, it’s all about market interest. And round numbers are the prime example.

The Natural Number Trading Method is a trading strategy that tries to capitalize on this psychology.

Conclusion

For finding support and resistance, the most important concept is market interest.

You want to find out the price zones that the market is interested in.

You can indeed combine the tools above for a more compelling location of market supply and demand.

However, it’s good to stick with one primary technique to find support and resistance. Use other tactics to supplement it. This way, you will not dilute your attention by trying to watch out for too many features.

Another point to note is this. Finding support and resistance is not enough for a trading strategy.

To create a trading framework, observe how price behaves around support and resistance. Consider the volatility and price action around the support and resistance.

Then, form a plan to determine an entry trigger, stop-loss point, and profit-taking point.

Finally, identifying support and resistance is an art.

There is no guarantee that the support and resistance you find will hold up each time. In fact, it’s guaranteed that they will fail you sooner or later.

Nonetheless, support and resistance is a crucial concept that you cannot ignore. Knowing how to identify support and resistance will definitely upgrade your trading performance.

Read more about Price Action Trading, Support And Resistance, Volume

Serious Traders Only!

Day Trading With Price Action – A complete course that teaches you the art of price action trading.

Perfectly structured with step-by-step guides to help you understand the principles of price action analysis.

Click here for the course syllabus

More From Trading Setups Review

The Ultimate Moving Average Trading Guide

How To Catch Trends With Heiken-Ashi Candlestick Analysis

Three-Bar Inside Bar on HD Daily

Trading Course Banner

Comments

  1. GANESH says

    January 4, 2018 at 9:01 PM

    Thank-you…WONDERFUL ARTICLE

    Reply
    • Galen Woods says

      January 9, 2018 at 2:07 PM

      Thank you too. Glad you like it!

      Reply
  2. Ratiranjan says

    January 15, 2018 at 9:23 PM

    RESPECTED SIR
    I ALWAYS GOOGLE EVERY STARTEGY AND ANALYSIS OF FX MARKET.AND KEEP MYSELF UPDATE IF I STOOPED IT ONEDAY I FEEL I M NT JUSTICE TO MYSELF .LAST SOME DAYS I LOOKING TO TSR ITS DIFFRENT AND PROCESS OF ANALYSIS IS VERY CLEAR AND SIMPLE ITS A VALUABLE GUIDE .U R THE BEST.AND THANK U AGAIN FOR UR KIND EFFORT TO HELP AND MAKE EVERYONE A BETTER TRADER.MAY GOD BLESS U .U R SUPERB SIR. I BET NO ONE CAN MATCH U.MY HEARTFUL WISHES TO U IN YOUR LIFE,AND LIKE ALWAYS IM WAITING FOR UR VALUABLE UPDATES HERE.

    Reply
    • Galen Woods says

      January 17, 2018 at 3:47 PM

      Thank you for your kind words. I’m glad to hear that you find the website helpful. If you want to get updates on our latest articles, please join our mailing list here.

      Reply
  3. Srinivasan says

    August 9, 2019 at 9:36 PM

    SIR

    WILL U CONSIDER PREV DAY CLOSE ,HIGH & LOW PRICE AS SUPPORT & RESISTANCE FOR DAY TRADING ?

    REGARDS

    SRINIVASAN K

    Reply
    • Galen Woods says

      August 11, 2019 at 8:55 AM

      Hi Srinivasan, yes, for day trading the previous day’s high, low and close prices are key levels to observe.

      Reply
  4. Kamsi says

    June 23, 2020 at 12:35 PM

    Thanks so much

    Reply
    • Galen Woods says

      June 25, 2020 at 9:53 AM

      You’re welcome!

      Reply
  5. Onans says

    January 30, 2021 at 4:45 AM

    This is the platform to be glued to

    Reply
    • Galen Woods says

      January 30, 2021 at 11:12 AM

      Thank you for your support!

      Reply

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *


Search Trading Setups Review

Get a Free Course Chapter from Galen Woods' Day Trading With Price Action Course [PDF]

Plus, our latest trading guides and tips in right your inbox.

Recommended For You

The Ultimate Parabolic SAR Trading Guide

3 Key Trading Barriers and How to Overcome Them

5 Steps to Surviving Losing Streaks in Active Trading

MACD Basic Trading Setup (With 6 Detailed Examples)

6 Effective Ways to Learn Day Trading

6 Timeless Trading Ideas from Legendary Traders

9 Tips to Improve Your Trading Willpower

Trading Course Banner

Trading Setups Review

  • About Us
  • Contact Us
  • Advertise With Us
  • Privacy Policy
  • Affiliate Disclaimer
  • Full Risk Disclosure

Learn More

  • Day Trading With Price Action Course
  • TSR Trading Guides
  • Trading Setups
  • Trading Articles
  • Trading Books
  • Site Map

Futures and forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.


The website contents are only for educational purposes. All trades are random examples selected to present the trading setups and are not real trades. All trademarks belong to their respective owners. We are not registered with any regulating body that allows us to give financial and investment advice.


Trading Setups Review © 2012–2021