Support & Resistance Levels
Feb 8, 2021
The Support & Resistance Levels indicator identifies and plots horizontal key price levels based on fractal occurrences to highlight areas of market interest and potential trend reversals.
Usage
The Support & Resistance Levels tool is used to find zones where price has historically reacted. The indicator dynamically updates the color of these levels based on the current price position:
- Support: When price is trading above a level, it is colored green, acting as a potential floor for price action.
- Resistance: When price is trading below a level, it is colored red, acting as a potential ceiling for price action.
The indicator uses line thickness to represent the chronological significance of the levels, with the most recent levels often appearing with more visual prominence. Traders can use these levels to set profit targets, place stop-losses, or identify breakout opportunities when price closes beyond a specific level.
Details
The script identifies levels using bullish and bearish fractals. To prevent the chart from becoming cluttered with overlapping lines, the indicator employs a proximity validation algorithm. This algorithm uses the average candle size (ATR-like calculation) multiplied by a user-defined setting to ensure new levels are only added if they are sufficiently distant from existing ones.
The indicator stores the six most recent valid fractal levels. When a price close crosses a level, the script flips the bias of that level from support to resistance (or vice versa), reflecting the "role reversal" concept common in technical analysis.
Settings
- Proximity Multiplier: Adjusts the sensitivity of level creation. A lower value increases the frequency of levels by allowing them to be closer together, while a higher value filters out nearby levels for a cleaner chart.
FAQ
How do I use these levels for trading?
You can look for price rejections at these levels for reversals or wait for a candle to close convincingly beyond a level to signal a potential breakout.
Why do some levels disappear?
The indicator tracks the six most recent valid key levels. As new fractals are formed and validated, older levels are removed from the array to keep the data relevant to current price action.
How can I access the Support & Resistance Levels indicator?
You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.
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