What is it?
Speed Resistance Lines (SRL) is a support and resistance indicator that was developed by Edson Gould. It consists of three trend lines that are based on ⅓ and ⅔ retracements from prominent tops or bottoms. They are used to identify possible support and resistance levels and are similar to Fibonacci Fans and Gann Lines.
How is it calculated or drawn?
In a down trend, the first speed line in a down trend is drawn from the high to the low. The second speed resistance line is drawn from the high point through ⅓ of the vertical height between the high and the low. The third speed line is drawn from the high through the ⅔ of the vertical height between the high and the low. In an uptrend the first line is drawn from the low to the high and the subsequent speed lines are drawn from the low.
Most charting software applications have Speed Resistance Lines as a drawing tool but if not, Speed Resistance Lines can be achieved by customizing Fibonacci Fans. This can be done by changing the Fibonacci ratios of 61.8% and 38.2% to 66.6% and 33.3% respectively.
How is it used or interpreted?
Speed Resistance Lines (SRL) are similar to other trend lines in that they mark potential support and resistance levels and in that they define the trend. The two speedlines drawn in an uptrend marks two possible support levels, while the two speedlines drawn in a down trend marks two possible resistance levels. A break below the lower support speedline in an uptrend and a break above the upper resistance speedline in a down trend mark the end of the existing trend and the possible emergence of a new trend. However, the broken speedline can also become support or resistance to a reaction back to the speedline.