Support and Resistance Indicators


Support and Resistance indicators are used to determine probable levels at which the current trend might experience resistance to further buying or levels at which support may hamper further selling. These indicators can generally be grouped into indicators that plot trend lines, such as Gann lines, Speed Resistance Lines (SRL) and Fibonacci fans, and indicators that plot support and resistance lines, such as Fibonacci retracements and Fibonacci extensions. Some of them, such as Andrews' Pitchfork and Envelopes, also plot trend channels. As such, these indicators are well suited to use in trend following trading systems and strategies.

The Fibonacci retracement levels, which suggest a number of possible support or resistance levels, is the most widely used support and resistance indicator among technical analysts. Other popular support and resistance indicators include: Fibonacci fans, Andrews' Pitchfork, Speed Resistance Lines (SRL), and Envelopes.

Most charting software packages have these indicators as drawing tools that can be drawn directly on the price chart. The technical analyst is simply required to identify the start of the current trend and draw the initial line at the significant market tops and bottoms that mark the start of that trend. The drawing tool then plots the subsequent set of lines that determine probable support and resistance areas.