INITIAL CONSIDERATIONS

The Speed Resistance Lines constitute a method that combines the retraction percentage of a move with trendlines. They have the advantage to take into account the growth rate of prices, adapting to new levels they are formed. In order to explain how to get these lines, I will consider two cases: a rise in prices, which leads to the Bullish Speed Lines and a fall in prices, which leads to the Bearish Speed Lines.


- To obtain a Bullish Speed Line, you must do the following:
  1. Identify the maximum point and the minimum point of a bullish move;
  2. Then when the peak is reached, draw a vertical line between this point and the level of the identified minimum;
  3. This vertical line will be divided into 3 equal parts;
  4. Then are drawn three trendlines, which depart from the minimum point and passes through the maximum, another passes through the 2/3 level and the last goes through the 1/3 leve;
  5. When a new maximum is formed , it is necessary to redesign the Speed Resistance Lines, since the original vertical line defining the levels is no longer valid;

- The Speed Resistance Lines serve the objective of contraction in price movements:

  • The first correction of a bullish move has a minimum goal the 2/3 line, which is the steepest line after the line that connects the maximum and minimum, a first prices contraction generally tend to reach this level;
  • If this support line is broken, the new goal of the upward movement correction will be the 1/3 line, the less inclined of the 3 lines;
  • If the price correction does not end at the level of the 1/3 line, it means that this is a reversal and most likely, prices will reach the level of the beginning of the upward movement and can then break it. The 1/3 line brand is so, the limit beyond which it is considered that the bullish trend has ended;

I would also point out that, before being broken, the Speed Resistance Lines, serve as a target for the prices. In an upward movement they assume the role of support levels, while in a downward movement act as resistance levels defining the price movements.

The drawing method of a Bearish Speed Line is analogous to the Bullish Speed Line. We determine the vertical line between the maximum and minimum of a downward movement, which then is divided into 3 equal parts.



The TIP


The image below demonstrates how to plot the Bearish Speed Lines with the calculations listed above. We have to agree that it is a lot of manual work, although a very important tool to analyze support and resistance points as well as reversal points of the market.

Image-1 : Divide the vertical line between the max and the min in 3 equal parts, and draw the oblique lines



To reduce and facilitate all this work, just draw the graph tool provided by JForex platform, Fibonacci Fan Lines and proceed as described in the following 3 images. As you can see is extremely easy to design the levels of Speed Resistance Lines.

Image-2 : Select Fibonacci Fan Lines in JForex Menu


Image-3 : Attach the Fibonacci Fan Lines to your chart, between max and min


Image-4 : Edit Levels and change the values to 33.33% and 66.66%, and you have the Speed Resistance Lines



I hope this tip is useful to anyone who has not yet realized the operation of this lines.
Good Trades
LinnuxFX
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