Never Miss Another Trade With Support And Resistance Zones

Gets old, doesn’t it?

You place a resistance level, eagerly anticipating a reversal so you can snag a profitable short entry. But just as the price gets close, it pulls back, leaving you high and dry with no entry signal.

Bummer.

Frustrating, right?

If you trade support and resistance, this scenario probably hits a little too close to home – I’ve been there myself, countless times!

But what if I told you there’s a simple way to reduce the frequency of these missed opportunities? It’s not foolproof, but it can significantly improve your chances of catching those reversals.

The solution?

Transform your levels into support and resistance zones.

Intrigued?

Let’s begin…

Why Price Often Misses Support And Resistance Levels

Have you ever wondered why price often reverse just before hitting a support or resistance level? Is it mere coincidence?

Or a quirk of fate?

At first glance, it may seem so.

After all, what else could sway price? While other technical aspects sometimes influence reversals, they don’t account for all instances. The frequency with which price bypasses the levels feels less like a calculated outcome and more like a roll of the dice.

But let’s debunk that myth.

The reason price often misses support or resistance levels has nothing to do with luck or incorrect level placements.

It’s due to the linear nature of these levels.

Forex is a complex market populated by diverse players: short-term traders, long-term investors, companies conducting business, and governments hedging. This mix of participants and their varied motivations injects a certain level of unpredictability.

This means nailing down the exact moment and location of price changes is quite challenging.

So, how does this tie into support and resistance levels being lines?

The linear existence of these levels amplifies the impact of randomness on their effectiveness and their propensity to induce reversals. To trigger a reversal, price must intersect a witha slim line, a tough ask amid the swirling randomness.

Hence, price frequently skirts these levels.

Picture this: If you were fishing in the ocean, would you opt for a rod or a wide net?

Likely the net, as its larger size mitigates the randomness of fish movements, increasing your chances of a good catch.

In the context of support and resistance levels, we’re essentially fishing with a rod (line) in a vast ocean (market), hoping for a catch (reversal).

Given the randomness of market movements, our success rate is predictably low.

Now, let’s explore how we can transform these levels from a fishing rod into a large net, thereby improving our odds.

A Better Way Of Trading Support And Resistance

The primary issue with support and resistance levels is their representation as lines, which are too narrow, causing price to frequently miss them.

This isn’t due to inaccurate drawing, but rather the size of the lines themselves.

So, how do we modify these levels to increase their accuracy and capture more profitable trading opportunities?

The answer, as suggested by the title, is to depict them as zones, not lines. This approach provides a broader surface area for price reversal, similar to supply and demand.

Here’s the typical missed trade scenario that happens using S & R as lines – look familiar?

Price rises to the level and then, a few pips before touching and providing some sort of entry pattern, reverses without giving any sort of entry signal.

Annoying, to say the least.

Now let’s take a look at this again, but this time, rather than draw the level as line, let’s mark it as a zone.

A huge difference, isn’t it?

When we mark the support level as a zone, rather than miss the level, price reverses inside. It falls, spikes into the zone, before reversing and moving higher. Sure, it doesn’t move completely into the zone – part of the pin bar still sticks out above – but touching and being partly inside is a valid signal to go long.

This is how useful support and resistance zones are, and why they work so much better than using lines.

When we marked the level with a line, we missed the trade… the pin never hit the level, so we got no signal to get in. Marking it with a zone, however, gave us a valid long signal, as the pin formed after price hit the zone.

So, support and resistance zones are obviously quite powerful, but how do we draw them on the chart?

Well, let me show you…

How To Draw And Identify Support And Resistance Zones On A Chart

You don’t need to be a pro to map out support and resistance zones, but mastering the basics of drawing standard levels is essential—it sets the foundation for accurate zones.

Struggling to spot or draw these levels?

Here’s my top 3 recommended indicators to help you easily identify support and resistance levels.

I’ve seen some self-proclaimed gurus teaching how to draw these zones, and honestly, much of it is nonsense. Their approach boils down to: spot a level, slap a zone on top, and voila – that’s your support and resistance zone.

There’s no logical or reasoned approach, just arbitrarily sticking a zone on a level.

Adopting such a method won’t bring you much success.

Let’s go through an example…

First, identify the support or resistance level you want to convert into a ‘zone’.

We’ll use this one, as it has lots of nice touches.

Now, you can’t just plonk a zone over a level in any old fashion. You need to place the zone so each edge is the same number of pips away from the level. If the edges are a different number of pips away, price won’t return to the zone properly. You’ll still have lots of missed trades.

How many pips away from the line price needs to be depends on what timeframe the level has formed on.

Price doesn’t move as much on lower timeframes, so the zone doesn’t need to be that big. On the higher timeframes, the opposite is true; price covers a much bigger distance, so the zone needs to be larger.

Here’s a quick guide on how many pips from the center you need to mark the zone.

1, 5 or 15 min – 50 pips

30 min, 1 hour – 100 pips

4 hour – 150 pips

Daily – 250 pips.

In our example, the zone formed on 1-hour time frame and at 1.11099. So we need to mark a zone that goes from 1.10999 (100 pips below) to 1.11199, which is 100 pips above.

And with the zone marked, this is how it looks.

See how each edge is 100 pips below and above the level… or thereabouts? 

You don’t have to get this bang on when you mark the zone – don’t zoom right in to make sure it’s exactly 100 pips above and below the level. So long as it’s within 5 – 10 pips, the level should work as intended.

Two Ways To Trade Support And Resistance Zones

When it comes to trading the levels, you have two options…

Either watch for pin bars and engulfing candles to form once price enters or touches the zone – just like trading normal support and resistance levels. Or place a limit order at the edge of the zone, so when price returns, it triggers the order and puts you in a trade.

Waiting for pins and engulfs works better, but the limit order can also work well.

For the stop loss, always place it the opposite side of the zone depending on what signal you took – so for a bullish pin, it goes BELOW the zone; above for a bearish pin. And once price moves out of the zone, make sure to move the stop to the low/high of the pattern.

That’ll reduce the risk in case price reverses.

Remember: Support And Resistance Zones Are NOT The Same As Supply And Demand Zones

It’s easy to get confused between supply and demand zones and support and resistance zones, so before we come to the end, let get one thing straight…

Support and resistance zones are NOT the same as supply and demand zones.

Yes, they both exist as zones where price could reverse. And yes, we draw them in a (slightly) similar way. But S & R zones have NO resemblance to supply and demand zones. They don’t form in the same way, we don’t draw them from the same points, and they don’t cause price to reverse for the same reason.

If you’re ever in doubt, just remember…

Supply and demand zones only form AT THE SOURCE of rises and declines.

Support and resistance zones, on the other hand, only form at support and resistance levels. Sometimes they fall in-line with the source of rises and declines, like S & D zones, but they’re always drawn from the level first.

Make sure you don’t get mixed up between them, otherwise, you might find yourself getting into some strange trades.

Summary

Try support and resistance zones out for a while, see how you get on. I can’t promise you won’t still miss the odd trade from time to time – all strategies give missed signals, no matter how much you change them – but the zones will reduce this number drastically, making the levels much more profitable to trade.