27 April 2017
Monthly Notification , Saxo Bank
Support & Resistance Key Levels are prices where a financial instrument historically has been rejected and reversed more than once. Determining future l...
Support & Resistance Key Levels are prices where a financial instrument historically has been rejected and reversed more than once. Determining future levels of support could improve the returns of a short-term investing strategy, because it gives you an accurate picture of what price levels should prop up the price of a given asset in the event of a correction. Conversely, foreseeing a level of resistance can be advantageous as it signifies an area where investors have a high willingness to sell the asset.
Trade Signals by Autochartist identifies Support & Resistance key levels automatically for you and presents them as “Approaching” or “Breakout” on the SaxoTraderGO platform.
In the filtering to the left on the Trade Signals page, you can select whether you would want to show Approaching signals, Break-out signals, or both. Please note there is not probability calculation for Key levels.
Approaching a Key level
An instrument can approach a Key Level from above or below. From above it is approaching a support, while from below it is approaching a resistance.
In the example below, AUDNZD is approaching a Resistance Key Level. The resistance level is indicated by the blue horizontal line on the chart at around 1.08395 and will also be the “Take Profit”, if one was to enter a buy/go long in this instrument.
Stop loss for Key Levels is the last high/low turning point before approaching the Key level.
In this example the Stop Loss at 1.07645 is the last low price before moving towards the Resistance level.
Both price levels can be added to the Trade ticket by clicking on ADD TO TICKET.
You can also set your own Take Profit and Stop Loss levels. To do so, just click Add Take Profit/Stop Loss below the SELL button.
Breakout of a Key Level
When a financial instrument has been tested and rejected at least twice from a Support or Resistance Key Level, and now finally has broken through, it is expected to move either lower or higher.
In the below example you can see a Resistance Key Level identified at approximately 170. This level has been tested and broken through a couple of times, so there seems to be a lot of interest around that level. Now the price has broken through (the resistance) once again and is expected to move higher.
We have zoomed in on the chart to see the price action more clearly. Three days ago the price broke above the Resistance line and we can then calculate a price target and a stop.
Take profit and stop loss are calculated as follows:
Take Profit = Closing price at break out + 0.3*(Second highest high – second lowest low).
Stop loss for Key Levels Break-out is identical to Stop Loss for Key Levels Approach. It is the last high/low turning point before breakout. In this example it would be the lowest price at the last real turning point before break out i.e. 164.10.