Drawing your major support and resistance
lines with this 3 step process, is the simplest way to find out whether the stock is a long
or a short intraday. How to draw support and resistance lines in
day trading. I know i’ve done a video on a similar topic
before but I’m going to really slow things down today and take you step by step through
how to draw out these levels and applying them when trading intraday. I’ll also be going over some quick and simple
way I use my indicators. So by the end of this short video, you’ll
be able to draw support and resistance levels that actually matters on your stock charts.
and analyze the overall trend of the stock in the simplest way possible. So if you’re a beginner or novice trader
looking to learn technical analysis and drawing price levels, this video is made for you. I’ll also sharing the story about my trading
mentor from years ago, who taught me almost everything I know. So if you’re interested in hearing the story. Then keep on watching. And don’t forget to always destroy that
like button for the Youtube algorithm. Thank you very much! Alright guys let’s dive right into it. When I draw out my levels for any stock, be
it small cap penny stocks or mid cap large cap stocks. I always always start drawing on the daily
chart first. The daily price and volume levels are the
most significant. And why is the daily chart the most important
tool? To answer that question we must understand
what exactly is a candlestick chart. The chart is basically a visual representation
of major transactions, both on the buying side and the selling side. So this chart maps out the price levels and
where that big money decide to buy. And the reason i say big money is because
it’s the funds, the banks, and millions of dollars going in and out of the stock that
can actually move the price of a stock such as $ROKU. This company has 16 billion market cap. So to move the stock 5% up or down you need…hold
on So basically you need about 2600 worth of
lambo money of either buying or selling to move this stock 5%. And That's what i mean by big money. They are the money that can cause major selling,
which creates resistance levels. And vice versa, where the big money buys up
the stock, create support. So let's draw some lines. The first thing I i always do is mark out
the price levels that show major volume break out on the daily chart. Daily Volume tells you is the amount of shares
bought and sold on that day. And when we see major volume break out on
the daily, that means those areas are where the big money in the past decided to buy or
sell this companies shares. Ok so now that we’ve drawn out major price
levels that had volume breakout. The second thing I look for is whether or
not there are gaps on the daily chart and mark out those levels as well. Because if you think about it. There had to be major selling or buying from
the big money to create that overnight gap. Usually these visual gaps on the daily are
caused by fundamental catalysts like earnings or FDA approvals or fails. If you look at ROKU, these icons on the bottom
of thinkorswim daily chart are when they had earnings report. And whether the company beat on earnings or
fail earnings, that fundamental news drove the big money to buy and sell, hence creating
these visual daily gaps. And many times these visual gaps match with
the volume break out too. So lets go in and mark out those levels Missed earnings, funds decided to get out,. Beat earnings, big money see more upside so
they pour money back in. the value of the stock is determined by the
company earning potential. So if this publicly traded company said in
their conference call that they expect to be affected by the trade war and sales will
decrease in the next quarter. That means their revenue will decrease they
can’t make money for their shareholders. So that's why almost always see big money
movement after each earnings. Ok so after marking out the lines on that
daily that had major volume and cause daily gaps, the third step to drawing key support
and resistance, is to smash the like button if you haven't done that already. I’d really appreciate it. Ok the third step, We want to go in and adjust
each horizontal price level. The rule of thumb is this, you want each price
line to have touched these candles multiple times in the past. Why? Because like I said earlier, these charts
are a map of historical transactions that happen at these price levels. And we want to see multiple buying and selling
had been done in the past around those lines. Thats hows us, thats the level the big money
is using. So usually I want the lines to have touched
at least 3 times. So let's do some adjustments here. Once you’re done, a very quick and easy
way to double check whether your support and resistance lines make sense, is to flip the
daily chart to the weekly. The chart should still look very clean. And I want to double check that the lines
still land on major volume breakouts. And still have touched the candles multiple
times in the past. So you can add or move them here if you want
to. When I’m swing trading for more than 2 days,
I use the levels especially on the weekly chart. Ok so now that we have support and resistance
lines charted out. Lets go over some indicators i use in the
charts. And if you want to see how to use daily support
and resistance lines to trade intraday, check out these two videos. I don’t trade intraday with 200SMA, like
i said this is just a general guide on the And these Indicators only “work” if the
masses know them, and use them. Thats why i think its so funny whenever people
tell me they have this secret indicator, and they’re not going to tell anyone. Or they are going to package the secret indicators
in a $5000 dvd. If only you and your neighbor know the indicator
and use it, its not likely to work. Like I’ve said many times in the past videos,
don’t rely on indicators or chart patterns. If you rely on them you’ll always be one
or two steps behind. I’ve read many times in the comments that
the way i describe charts and price levels are similar to how Forex traders do it. And that is completely true. In 2016 I was mentored by a forex trader his
name is Orane. He started first in forex trading then moved
on to trading penny stocks using the same methodology. He was sharing many free video lessons and
ideas on a well known penny stock community site run by a well known penny stock guru. All his insight on the stocks and psychology
is what caught my eye and I started following him. But of course, eventually he got banned from
this guru’s site, because he was sharing free ideas and videos that were much much
more useful than the guru’s $5000 alerts and dvd’s. So after he got banned he moved on to work
as a hedge fund manager. And the fund started an educational program. and that's where I followed him to from 2016
to 2017. The program was expensive, that's where my
lambo money went. But it was worth every penny. The training program no longer exist now because
he has moved on from trading forex and stocks and on to the next new venture for himself. But we are still in contact, and hopefully
i’ll get to interview him on this channel one day. But the way he taught me about psychology
and how to use it to analyze daily support and resistance lines was truly transformational
in my own trading. This method of charting and set up makes things
simple and very clean to read. I don’t use anymore indicators besides those
I mentioned in this video. That way I can focus on price action, trader
psychology, and how the candles are reacting to each support and resistance levels, instead
of spending the time to check whether all the bollinger bands, RSI, MACD and the stars
in the universe line up. If you find this video helpful, please drop
me a like and subscribe. I create quality day trading videos here every
single week. Like I said before, my mentor came from a
forex background. I don’t trade forex, but I did find some
basic forex videos that explain support and resistance further. I’ll leave them in the description below.
