What are the best key levels to trade?
This year I analyzed more than 1500 key structures on Forex, Gold, Crypto and Indexes.
In the today's article, I prepared for you a list of 5 elements of a perfect support and resistance for trading.
As always, remember that the best key levels are always on a daily time frame. So all the structures that we will discuss will be strictly on a daily.
Also, all the structures that I analyzed and traded are available on my TradingView page, so you can back test them by your own.
1. Clear historical significance
The structure that you spotted should act as a significant historical support or resistance.
Here are the important historical support and resistance that I spotted on USDCAD on a daily time frame.
2. Psychological significance
The structure that you identified should match with round numbers.
All the structures that we spotted on USDCAD match with psychological numbers.
3. Confluence with other technical tools
The best structure should align with other trading tools such as trend lines of Fibonacci levels, strengthening its significance.
After adding fibonacci levels and a significant falling trend line on the chart, the confluence was found in Resistance 6, Resistance 3, Resistance 2, Resistance 1, Support 2. Other structure does not match with technical tolls.
The level experiences high trading volumes, indicating strong participation and interest from market participants, especially smart money.
All the structures that we underlined show significant volume spikes. By volume spike, I mean a volume being higher than the average volume - a blue curve on volume.
5. Multiple touches
The more, the better. There are numerous instances where price has respected and reacted to the structure, confirming its strength (at least 2).
Only these 3 structures were confirmed by the multiple touches. These resistances will be considered the strongest ones.
That checklist will help you to identify the most significant structures from where you will be able to catch impulsive movement and make nice profits.