Learn how to identify support and resistance levels by counting how many times price has hit them and how recent those hits are. The speaker shows how to read charts and use this data to spot key levels worth trading, especially for counter-trend entries at frequently-tested zones.
So if I'm looking at a chart like this, I can see that I've got an area of resistance up here. I've got an area of support down here, and I've got a potential area of resistance here. When I'm looking at this, what I'm looking at is I'm looking at the frequency in terms of how often price has reached that level, and I'm looking at the proximity as what has happened most recently. In this scenario, I've got 2 high hits here and I've got 3 here. So as far as I'm concerned, I would define those as key levels because at the moment I've got frequency and proximity. What has happened most recently? 2 hits high and nothing else happening. 3 hits low, nothing else happening there. Whereas in here, not only am I a little bit more mid relative to the range, if I look at what's happening prior to this move here, what's happened most recently? I've got one hit, and then what I look at further back, what have I got? Price breaking that level. If I'm looking at that, I'm going to evaluate those levels differently. If I'm looking at the hits up here, the key level at the top and the key level at the bottom, I am far more likely to make a decision about trading counter-trend there or there, whereas here I'm not.
