Kardec Trader explains how to spot support and resistance levels on price charts by combining frequency (how many times price hit it) and proximity (how recent those hits were). Two recent hits at a level beats three older ones for reliable counter-trend trades.
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. 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. What has happened most recently in this scenario, I've got two high hits here and I've got three 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, 3 hits low. Whereas in here, not only am I a little bit, little bit more mid relative to the range, if I look at what's happening prior to this move here, I've got one hit and then when I look at further back, what have I got? Price breaking that. 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. But I'm not going to be as aggressive at this point. So what I'm trying to do is, so when I'm looking at any chart, I'm going to look for what I call the key levels, which have a combination of frequency and proximity.
