► Introduction

In this article we will discuss how to find key support and resistance areas quickly and easily. We will use a simple method to reach this goal. This is a step-by-step guide. Some charts and examples are also included. They will help us understand this method better and visualize different points we’ll discuss.

Although this method is very technical, it does require some practice at first. I suggest that you first read this article. Then, open some daily charts of different currency pairs and try to find the key support and resistance levels in them. If you have some knowledge of Supply and Demand levels, this could be handy. I hope you will find this article helpful for your trading. :-)
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► Currencies To Use

The method is a pure technical method. Therefore, it works for all currencies. You can use it for any currency that you feel comfortable trading. Actually, you can use it for other markets too. For example, you can use this exact method for finding key support and resistance areas in Gold, Silver, Stocks, Futures and so on.
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► Time Frames

The best time frames for using this method are the higher time frames, from the Daily and up (Daily, Weekly, Monthly and Yearly). On these time frames the key support and resistance areas are very easy to detect. Price usually respects them very well and for an extended period of time.

If you are an inter-day trader or scalper, you can try to use this method on the 4 Hours and 1 Hour time frames. However, please note that price will not respect the levels so well. Sometimes, price will just hover around or zigzag through support and resistance levels. Also, some news announcement may come out and price could easily break through a support or resistance level.
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► Step #1: Open The Daily Chart

We will use Dukascopy's Web Platform for the following chart examples. First, let's open the EUR/USD daily chart. Here is what it looks like:


This chart shows us price movement between 8/9/2013 and 12/20/2013. This period is the last four and a half months, more of less. However, this is not enough for us. We are really interested in seeing the "bigger picture". Therefore, our next step is to zoom out and view more price history.
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► Step #2: Zoom Out

Our next step is to zoom out. We want to view price movement in the last year. At the top of the platform, there are two buttons with a picture of a magnifying glass. One button has a plus sign in it, the other has a minus sign in it. We are interested in the magnifying glass with a minus sign, to zoom out. Here are some of the top buttons. The Zoom-Out button is surrounded by a red rectangle:


We click on the Zoom-Out button (magnifying glass with a minus sign) four times. Then, we will see the following chart. It shows EUR/USD price movement between 2012-19-12 and 2013-20-12, the last whole year:


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► Step #3: Find V-Shaped Support Areas

Our next step is to find V-Shapes. A V-Shape is a candle formation where at the left side there is a strong price movement lower. The move lower should be at least 200 pips. At the middle there are between one and five candles (from one day to one week).

The lows of the candles at the middle are at the lowest price in the V-Shape formation. At the right side there is a strong price movement higher. This movement should reach back to the origins of the V-Shape, and is at least 200 pips. The whole candle formation should resemble a V-Shape. Here is an example:


The low area of the V-Shape represent a strong support area. Fact is that price rushed lower, tested this area, and then reversed back and moved higher. The reason for such price behavior is that there are strong buyers at the bottom of the V-Shape. In the EUR/USD Daily chart after zoom out, there are three V-Shape formations. I have marked them in the following picture:


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► Step #4: V-Shapes' Price Confirmations

We are interested in the low areas of the V-Shapes. These areas can be between 50 and 100 pips high. We draw horizontal support areas around the bottom of the V-Shapes, across the whole chart. We want to capture as much price action as possible that confirms that these areas are support areas.

This means, that we examine price throughout the chart near the horizontal support area and see if it has been tested before. If it has been tested before, as support or as resistance, and held price - this is a good confirmation! Here are the V-Shapes's lows shown as horizontal support areas. I've marked any price action that confirms them with arrows:


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► Step #5: Find Upside-Down V-Shaped Resistance Areas

Our next step is to find Upside-Down V-Shapes. An Upside-Down V-Shape is a candle formation where at the left side there is a strong price movement higher. The move higher should be at least 200 pips. At the middle there are between one and five candles (from one day to one week).

The highs of the candles at the middle are at the highest price in the Upside-Down V-Shape formation. At the right side there is a strong price movement lower. This movement should reach back to the origins of the Upside-Down V-Shape, and is at least 200 pips. The whole candle formation should resemble an Upside-Down V-Shape. Here is an example:


The high area of the Upside-Down V-Shape represent a strong resistance area. The fact is that price rushed higher, tested this area, and then reversed back and moved lower. The reason for such price behavior is that there are strong sellers at the top of the Upside-Down V-Shape. In the EUR/USD Daily chart after zoom out, there are three Upside-Down V-Shape formations. I have marked them in the following picture:


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► Step #6: Upside-Down V-Shapes' Price Confirmations

We are interested in the high areas of the Upside-Down V-Shapes. These areas can be between 50 and 100 pips high. We draw horizontal resistance areas around the top of the Upside-Down V-Shapes, across the whole chart. We want to capture as much price action as possible that confirms that these areas are resistance areas.

This means, that we examine price throughout the chart near the horizontal resistance area and see if it has been tested before. If it has been tested before, as support or as resistance, and held price - this is a good confirmation! Here are the Upside-Down V-Shapes's highs shown as horizontal resistance areas. I've marked any price action that confirms them with arrows:


Following this guide step-by-step can help any trader find key support and resistance areas. It takes just a few minutes and is quite easy after some practice! I hope to post some more examples of finding key support and resistance areas on my blog and in a future article. Please try this method on your favorite currencies and share your experience with us! I hope you will find it helpful for your trading. :-)
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