Support Resistance Strategy

This trading strategy operates on a simple support and resistance principle using a moving average as a dynamic level to identify potential entry points. When the price crosses above the moving average, a resistance level is created, marking a potential long entry. Conversely, a support level is formed when the price crosses below the moving average, suggesting a short entry.

To trade this strategy manually on TradingView:

• Use the Simple Moving Average (SMA) indicator with a length input (LB), which is set to 10 periods by default.
• Identify resistance (R) as the highest high since the last time the price crossed above the SMA.
• Identify support (S) as the lowest low since the last time the price crossed below the SMA.
• Plot these levels on the chart as reference points; the resistance level with a green line and the support level with a red line.
• Enter a long position (buy) when the price crosses above the resistance level.
• Enter a short position (sell) when the price crosses below the support level.
• Color-coding bars can be applied as an optional visual aid: green when the price is above resistance, yellow when between support and resistance, and red when below support.

Improving the Support Resistance Strategy for manual trading on TradingView requires a refined approach to market analysis and entry/exit point selection. Here’s a systematic plan to enhance the effectiveness of this strategy:

• Refine the Moving Average: While the script uses a Simple Moving Average (SMA) with a period of 10, consider experimenting with different types of moving averages like the Exponential Moving Average (EMA) for more sensitivity to recent price changes, or increase the period length for more significant support and resistance levels in higher timeframes.
• Volume Confirmation: Add volume indicators such as the Volume Profile or On-Balance Volume (OBV) to confirm the strength of the support and resistance. Higher volume at these levels can signify stronger, more reliable zones.
• Multiple Time Frame Analysis: Assess support and resistance levels across multiple time frames. Levels holding in longer time frames can add validation to the strength of the level identified in the trading time frame.
• Price Action Confirmation: Before executing a trade, look for price action confirmations such as pin bars, engulfing candles, or other reversal patterns near the identified support or resistance levels.
• RSI and Stochastic Divergence: Use indicators like the Relative Strength Index (RSI) or Stochastic Oscillator to identify divergences at support and resistance levels. Divergences can often precede reversals, giving a trader a heads-up on potential entries or exits.
• Setting Stop Losses: Properly place stop losses just beyond the support or resistance level to minimize the risk in case the level does not hold.
• Profit Targets: Set realistic profit targets based on historic price movements and the average true range (ATR) of the asset. Consider scaling out of positions as targets are met to secure profits while still allowing room for the trade to run.
• Backtesting: Use TradingView's backtesting feature to assess the historical performance of the identified levels. This can fine-tune the sensitivity of your chosen input length (LB) and help you understand the strategy’s effectiveness over time.
• Continuous Learning: Enhance your understanding of market structure and technical analysis by studying market cycles and price correlation between different assets. This can help in anticipating breakouts or bounces from your support and resistance levels.
• Psychological Preparation: Recognize the psychological aspect of trading. Even with a robust technical setup, managing emotions and maintaining discipline is critical to the success of the strategy.

This strategy is tailored for traders who are inclined towards technical analysis, appreciating clear, evidence-based signals for trade entries and exits. It is particularly well-suited for:

• Swing Traders: Those who hold positions for several days can use the support and resistance levels to capitalize on significant price moves.
• Intraday Traders: Active traders will find the dynamic levels useful for making quick decisions based on short-term price action.
• Beginner Traders: New market participants can adopt this straightforward approach as it provides a clear framework to understand price movements.

The trading style associated with this strategy is one that prioritizes meticulous market observation and patience, waiting for price to reach key levels where reversals or breakouts are anticipated, thereby necessitating a moderate risk tolerance and a disciplined approach to adhere to the strategy's rules.

• Strategy Essence: Uses moving average crossovers to determine dynamic support and resistance levels for trade entry and exits.
• User Group: Ideal for swing traders, intraday traders, and beginners who focus on technical analysis.
• Manual Trading: Involves plotting moving averages and identifying highs and lows for support and resistance without a coded script.
• Strategy Automation: Boils down to setting up alerts for crossover points, allowing for a mix of automated signal generation and manual execution.
• Optimization Techniques: Include checking multiple time-frames, incorporating volume and additional confirmation indicators like RSI or Stochastics.
• Risk Management: Involves proper stop loss placement and realistic profit target setting based on asset volatility and historical behavior.
• Enhancing Performance: Backtesting adjustments, analyzing market cycles, and studying price correlations are key for strategy refinement.
• Trading Discipline: Adhering strictly to signals and managing emotions are crucial for the successful application of the strategy.