Support and resistance are two aspects of trading that may be difficult to understand and identify for novice traders. You can increase your trading edge and have a clear understanding of these important concepts by using a TradeStation Multiple Time Frame (MTF) price action indicator.
In order to understand price action on MTF you need to use trend lines that have almost no lag on each of the following time periods: 5, 15, 20, 30, 60, 120, 240, and daily. The interaction of the MTF trend is the key to identifying on your trading chart where price actually changes direction. Support is shown when price is headed down and gets stopped and goes back up. Resistance is shown when price is headed up and gets stopped and goes back down.
Resistance will be shown on the MTF indicator when the upward trending price is too far away from the daily price line. When this happens commonly the price will start forming a consolidation or topping pattern and then reverse back down towards the daily line.
Support will be shown on the MTF indicator when the downward trending price is too far away from the daily line. When this happens commonly the price will start forming a consolidation or bottling pattern and then reverse back up towards the daily trend line.
Whenever you see the fastest price line change directions at any one of the 60, 120, 240 or daily price lines, this reaction is showing key points of support or resistance.
If you are trading on a fast time chart, anything from a 1 to 5 minute chart, and you see a consolidation pattern and are unsure about the trade direction, you should look at the MTF higher periods directional bias. These higher period biases show the highest probable direction of the next price movement. If multiple higher charts all run in a given direction, then the odds are good that the 1 minute or the 5 minute chart will resolve any indecision in that same direction.
Seeing the interaction of these different time charts and seeing where these price trend lines change direction will show the current price bouncing off of the 60 minute, 120 minute, 240 minute, and / or daily trend lines. When you see the interaction of these lines, you'll be able to confidently identify support and resistance zones.
By using Multiple Time Frame TradeStation indicators you will develop a great understanding of support and resistance and increase your trading performance.