Past Self: "Here is a support! Oh look, here are two more support resistance! " Future self: "No no no, stop!
" Future Self: "Do you know the win rate of your support resistance? " Past Self: "No. " Future Self: "Do you know how many times they work?
" Past Self: "No. " Future Self: "Then why are you risking money on them? Here, I analyzed 100 support resistance areas and found this win rate.
" Past Self: "How did you analyze them? " Future Self: "First I drew the support resistance like this and waited for the price to react or ignore it. Look, the price reacted from the support.
I did this 100 times to find the approximate win rate. " Past Self: "But isn't drawing support resistance biased? " Past Self: "Since you have more trading experience, you will draw support resistance better than me, right?
" Future Self: "Yes! And because I've drawn support resistance for 1000s of hours, I can teach you the best way to draw it. I will also back everything I recommend with data.
" Past Self: "Nice! " Future Self: "Here, you take this chart and I will take the same chart, and we will see who draws support resistance better. " Future Self: "See anything different?
" Past Self: "You have fewer support resistance lines and I have more. Why didn't you draw this support resistance like me? " Future Self: "In my experience, a support or resistance area is more likely to work if most traders can see it.
" Future Self: "Remember that support resistance only works because people believe it works. " Future Self: "So if you draw this support resistance area, and switch to a higher timeframe, it will no longer be clearly visible like before. If only your entry timeframe traders can see it and higher timeframe traders can't, that support resistance area will be weak.
" Future Self: "The area I have marked on my chart can be seen clearly on multiple timeframes. Since most traders can see it, it has a higher chance of working. You will see the win rate of drawing support resistance like this soon.
" Past Self: "But since I'm a beginner trader, it's hard for me to tell which areas are strong and which are weak. How do I draw strong support resistance areas step by step? " Future Self: "I was asked a similar question on the Trading Rush Discord Server recently.
Here's what I replied:" Future Self: "Step 1. Open a clean chart and Zoom Out to see the big picture. " Future Self: "Step 2.
What do you see on this chart? Where has the price clearly reversed from? " Past Self: "From this area.
" Future Self: "Then draw that reversal area and extend it! " Future Self: "Step 3. Do you see more clearly visible reversal areas?
" Past Self: "Yes. Here, here, and here. " Future Self: "Step 4.
Are these two resistance areas too close to each other? " Past Self: "Yes. " Future Self: "Then combine two nearby areas and see it as one wide area.
" Past Self: "But why? " Future Self: "Because if two support resistance areas are nearby, there will be confusion. Some will take their positions on the first one and some on the other one.
Since we don't know which one will work, we combine them and see them as one. " Past Self: "Oh, nice! " Future Self: "Do you see more reversal areas?
" Past Self: "Yes, here. And since this one is close to the other one, we will combine it! " Future Self: "That's correct!
" Future Self: "Step 5. Go to a higher timeframe and check if the same support resistance area is clearly visible or not. If you can't see it easily, chances are many other traders will miss it and that area will not work.
" Future Self: "This is how I drew support resistance while analyzing them 100 times. This is how I have been drawing them for many years, and they got a win rate of approximately 63%. " Future Self: "This is excellent!
It means that the price respected and reversed from the support resistance 63% of the time. " Past Self: "Oh, so if I draw areas like you mentioned and buy sell near support resistance respectively, my probability of making money will be good. " Future Self: "Not only that, but a 63% win rate means you should also avoid buying near resistance and selling near support if you want to make money in the long run.
" Past Self: "Oh, thanks! " Future Self: "Now watch how this 7 steps trading setup made me profitable.
