Swing Trading – Part 2 – Support And Resistance In Swing Trading

– [Trade With Trend] So this
is the second part of our Swing Trading series. In this particular
part, we’ll be looking at support and resistance
while swing trading. In the first part, we
just looked at some basics of swing trading and in
this particular part, I’ll be showing you
reliable methods on how to choose support
and resistance level that we will be applying in
various swing trading strategies ahead so let’s get started. – [Announcer] In this Channel
we talk about trading, investing and market
analysis to help you become a better investor and trader
so if you’re new here, consider subscribing. – [Tutor] So the learning
objectives for this series is as follows. So in this part, I’ll be
taking your through some basics of support and resistance,
then I’ll be showing how support and
resistance is applied based on technical
analysis concepts. I’ll also be highlighting
the importance of Fibonacci Retracement
in identifying high probability support
and resistance level. And then I’ll be moving to
sort of a unique concept for support and
resistance that I use, though this concept is based
on market profile volume nodes. So I’ll be showing you what
a basic volume node is, how do you categorize
between a high volume node and a low volume node
and then I’ll help you identify support and
resistance level based on volume nodes. So in case, I’ve actually
split this support and resistance part
into two phases. In the first part, I’m gonna
show you the traditional method of using support and resistance
and in the second part, we’ll be doing it
through volume profile. So in case any one of
you does not have access to volume profile charts, you
can use the traditional method as well that I’m gonna
show you in combination with Fibonacci Retracement. Both of these methods
work very well and you can choose based
on your own preference. So I’ll just show you what
a basic support level means in technical analysis. So here, we have a chart,
we’ve had some retracement of about 5 to 10% on the down
side and what we see here that is between November 16th and 2017 Jan, that price sort of
fluctuates in range. So if we were at this
point, then this would have been the lowest low level, this got violated
somewhere in November, that’s a December. And then the support line
was tested many times over the next few days. Now the typical mistake
that beginners do while trying to learn about
support and resistance is that they tend
to get too focused on one particular level. Now, before coming to this
aspect, I’ll just show you how resistance looks. Now this is how typical
resistance looks. The price has actually probed
this region several times and then it actually moves down. In the previous chart, price
actually probed this region many times and the
price actually moved up. So the mistake that traders
do is that they tend to get too focused on
one particular level. Hypothetically, let’s
assume that this is 200 so traders tend to get into
a habit of staying that 200 is the resistance level. Now, what I wanna show
you is that resistance or support, it actually
always functions as a range and not as a particular level. And if you try to look
at charts from now on with respect to range
that is range as support and range as resistance,
then I think your trading would definitely improve
going ahead in terms of quick decision making. Now I’m just making
my point clear here. So see, this is a low
formed in January, 2016. Then this low got
breached in February, 2016 and then price sort
of fluctuated here. So you cannot say
that this level of 170 is the support here. The reason being that maximum
amount of price rotation or fluctuation has
happened in this range, which is why the range
between 200 and 180 is actually valid support
in this particular chart, same goes for this segment,
that is November, 2016 and March, 2017, again,
the same thing has repeated that price has sort of
consolidated in a range, taken proper support. Mind you, in February,
this lower low has breached so obviously, it will
look as the support level being breached or what
happens is that again, if you look at this
level as a range and if you analyze price
here, then this will have been a valid support range
and you can sort of manage your trade better based
on a well defined range. Again, this repeats here. We aren’t looking for a
particular level as support. We’re looking for a
five to 10% range. Only that can be classified as a valid swing
trading support. Now, when I discuss
positional trading or extremely long term
trading, how you have to determine support
and resistance in those particular methods,
I’ll show you in detail. But for swing trading, in
case you’re a swing trader, or you want to
learn this method, get into a habit of identifying
support and resistance as a range and not as a
particular single level. So same concept
applies to resistance. In this particular chart, this
range becomes the resistance. For this phase, again, I
have identified this box. For this phase, again, we
have seen a particular range so if you see all
this four segments, that is time segments
in the same chart, the range of support
or range of resistance actually varies
between five to 7%, which actually makes
sense because in case you’ve identified, in
case you re trading here, and you mark this as
resistance, you know what, based on the volatility of
this particular asset itself, this would be a wrong
approach because highest high of this point cannot
be a valid resistance or a support level until
and unless you have a well defined sort of a
volatility based range. Now this volatility
concept, I have covered in my Bank Nifty video also
and market analysis video that I do every week, which
is why it’s always safe if you’re trying to swing
trade to identify resistance or support as a
particular range. Now, I’ll show you
why this is important when I’ll come to the
Fibonacci Retracement aspect of identifying high
probability support and resistance levels. So this is the Fibonacci
Retracement chart. Now we have a proper
down trend here, then the price
retraces on the upside and then sort of moves ahead. I think this is
Nifty 50 or I think it’s some infrastructure
index I think. Yeah, so what I’m trying
to show you is that once price forms a bottom
and it moves up, in swing trading especially,
this Fibonacci Retracement of 50% level plays a vital
role in determining support or resistance. So in subsequent slides, I’ve hidden this 38.2%
retracement level and I have hidden
this 61.8% level. I’ve just kept this
50% level here. So what we have seen is
that price has moved up and it finally retraces
and takes support at 50% retracement and
then it moves ahead. So which is why the previous
slide that I showed you about proper range as
support of resistance. This is what comes
into picture here. I’ve not marked this
particular box as support because it would have
cluttered the chart too much but if you can just
imagine a box here, so this would have been
a valid support level at 50% retracement level. So this is how you combine
Fibonacci retracement with sort of traditional
technical analysis method of marking out support
and resistance. There are just two minor
adjustments we have done; number one, is that instead
of a particular level, we are marking out a particular
range and number two, to validate that particular
range that we’ll mark out, we’ll be plotting Fibonacci
Retracement levels so that we can visualize
whether the price has taken support at
50% retracement or not. There will be times when price
will actually take support at the 38.2% level itself,
that is also completely fine. So this particular
chart is for resistance. Now what has happened,
sorry, for support, support breaking down,
what has happened is I have taken swing from
this low to this point and I have extended the
50% retracement line on the right side. So what we see is that
over a period of many days, price to take support at
this 50% retracement level. In fact, there is one instance
here after which price moved and then sort of
consolidated sideways, but look at the struggle
at 50% retracement line. So what is happening here is
that at 50% retracement level, there is a lot of fight
going on between buyers and sellers and
eventually sellers
actually overpower buyers and price steadily moves down. So whatever strategies
we are going to discuss from fifth part and onwards,
this is where these concepts would come in handy. I have taken up the support
and resistance topic earlier because you can
get some amount of time to start practicing
on how to apply these particular
concepts till the point we actually reach the
strategies section. So what we have to do is we have to identify two
relevant swing points and then just mark out
50% retracement level. In case you want to
learn how you have to mark out relevant swing
lows, that is pivot low and pivot high, I’ve placed
a link in the description box below because I’ve done
a separate video on this, please go through that. So once the price
actually breaks down the 50% retracement
level that is this low, it steadily moves down. So this is, I’ve purposely
pulled out this phase of market. This is 2008 corrective action. Most of the traders who
are new to the market or even veterans,
this was a phase which was extremely scary
in market where price was just falling but
if you would have taken out some time to analyze
what is going on, you would have seen that
how beautifully main index or some key stocks, I
would say many key stocks actually followed
the simple principle of Fibonacci Retracement. So this was the fall that we
saw in January where price fell from 6300 to 4700,
so what I’ve done is I’ve put out this swing
high and this swing low and this is the 50% retracement,
look after few months how price started
taking resistance here and then moved down,
eventually price again rallied somewhere in May, June. Again, it has taken
resistance around this level. Again, what I want to
highlight is don’t be stuck to one level, you
have to mark out a box or a range on a chart
that becomes your range of support and resistance
and then price moves down. So again, I take up
one swing high here and the swing low formed here, I put out the 50%
retracement line and I extend it, look over
the subsequent months. Again, prices found resistance
at 50% retracement level and moved down. So the first thing that
would come to your mind is this has happened in 2008,
that such thing happened in our current market
conditions or not, I’ve put out a chart
of 2018 as well, I’ll just come to that in a
bit but I just wanna show you that even in the most
panic sort of phases in the market, there are some
basic technical principles which always work. Now this could have
been 38.2% also or 61.8 but that is fine. Most of the times you would
see that 50% retracement actually acts as an excellent
indicator when it comes to identifying support
and resistance level based on Fibonacci Retracement
so do keep this in mind. So this is 2018, I just told
you I’ll show you a chart of 2018 as well. So this is the corrective
action in Nifty that we have seen in 2018,
prices retraced from 11,000 to, we’re currently at
10,852 but if we had retraced at about 10,000. So what I’ve done is I’ve
selected this swing high and this swing low and I’ve
extended 50% retracement and 61.8% retracement level. Now at the time of
recording, this is July 10th so see what is happening. Price is trying to
sustain above this 50% and 61.8% retracement level. If you compare this
chart with 2008 chart, what was consistently
happening was that price was not able to breach
this 50% retracement mark and hence, we saw a
follow up of the down move but something exactly
opposite is happening in the current phase which is the price is
trying to move above the 50% and 61.8 retracement level. I tried to move here
then it moved down but again, it has moved up. It sort of formed
support region here and now it is trying
to move up again. So had price been in a
negative price structure, it would have faced a
lot of resistance at 50% and 61.8% so which is why
even in my weekly videos, I had just marked
out some trend levels and I’ve always encouraged
people who want to trade in Nifty 50 or Bank
Nifty to try and be long even in this scenario. It’s only because price
structure analysis is not suggesting a break
down in Nifty or Bank Nifty or some large cap index as well. So while the news
flow is very negative, in the current context, but
still, the price itself, trying to move above the
50% and 61.8% level shows that there is some sort
of strength in the market. So this is the same chart. What I’ve done in this
previous chart is I’ve taken swing high here and
swing low at this mark. Now for this phase,
for this chart, what I’ve done is I’ve
taken this swing low that is formed at
10,000 and a swing high to see what has happened. Now the same thing that
was working in 2008, it is still working in 2018,
that is 10 years down the line. Now what we’ve seen here
is that Nifty has bounced from, 10,000 to about
11,000 and then look, the retracement that has
happened has taken support at 50% again so which
is why I wanna show you that if you wanna become
a serious swing trader, get into a habit of
identifying proper support and resistance level
based on point number one, that is range marking. Don’t get into a habit of
marking out one particular level and number two, on your charts, start using Fibonacci
Retracement, especially the 50% mark. So this is not a historical chart,
this is the current chart. We’re in July, this is July
so look what has happened, all the past two months
price has taken support again at 50% retracement
and since then, it has not retraced back
or rather tested this level and today, we have seen
price actually moving well over 10,900 as well,
so I hope my point is clear. So before moving on to the
concept of high volume node, again, I would repeat
that the previous section, what we have seen as classic
technical analysis method, where we mark out support
and resistance level for swing trading, I’ve just
made two small modifications. Number one, instead
of a particular level, we’re trying to pick out a
range as support and resistance and number two, we’re using
the Fibonacci Retracement, 50% retracement indicator to pick out high probability
support and resistance regions. Now this is a market
profile concept that is of volume nodes. I have done about 10
videos in market profile, that’s a complete course,
in case you’re interested, you can go through it. But I’ll just sum up what
high volume node means. In this particular
chart, what you’re seeing is I’ve marked out two regions,
one is in the green line and one is the orange line. Now this is the low volume node where very less volume
activity happens and this is the high volume
node where you’re seeing prices sort of fluctuating a
lot and then it moves up. So I’ll just explain you
how price actually moves. So what we have is that
we form a typical region, a lot of price
rotation happens here, a lot of exchange between
buyers and sellers so naturally, the volume
that forms is pretty high. I’ll just show you how it looks. So this is the high volume
node where a lot of volume is formed and then price
finally breaks out. And it quickly moves
to the low volume node. Why does it quickly move,
because in this region, there is not much
volume present, not much trading
activity has happened which is why there
won’t be many sellers that you will find
in this region and price moves to
the low volume node. And then again, price
rotation begins, in case the trend is strong,
it will just zoom past this level and gravitate towards
the next high volume node but in case the
trend is not strong, then price again, rotates
here and this low volume node which we saw during this
phase, this now becomes a high volume node, why does
it become a high volume node? Well, the amount of trading
activity that has happened here brings in more amount
of buyers and sellers in this region. So this is how the
concept of price moving from low volume node
to high volume node and then from high volume
node to low volume node actually works so it’s
a very basic concept, I’ll just take you
through some charts, it will be clear, I
know at this stage, especially if you’re very new
to market profile concepts, this will sort of be confusing
but in subsequent slides, this thing will be
very clear to you. So what we have here
is volume profile, that is volume node from
this point, this swing low to this swing high. So this chart, I just
placed to show you how a low volume node and
high volume node looks. Now this is a high volume
node where you see so much of volume that has spurting out and this is a low volume node,
look at the trading activity here, it is less when
compared to this. Now in market profile concept,
even this will be categorized as high volume node and the
small volume that you see here is low volume node but again,
there is a slight modification from my end, what I
particularly like to do is instead of picking out this
single high volume region, I pick out a proper range. For me, this entire node
becomes a sort of a range, very similar to the
traditional technical analysis, support and resistance that I
showed you a few slides back. So again, I won’t be inclined
to mark this particular line here as low volume node. I would actually take
a particular range. So instead of identifying
one single point as support or resistance,
I’m using high volume node and low volume node as
some sort of a range, depending on what sort
of trading activity has happened to mark
them as high volume node or low volume node. Now again, this concept
will be confusing so what you can do is just
go through this video once and then repeat
again after some time so that these concepts
actually, you know, you can sort of focus
more on this concept especially if this is the first
time you’re watching this. So I’ll now explain you
how you can use support and resistance in form
of high volume node. So what I’ve done is I’ve
plotted volume profile from this swing high
to this swing low. So what are the volume
activity you’re seeing is for this down move only. So what we’re seeing
here is that price is consistently forming
lower high and lower low. Once we mark out a
particular swing move, that is on the upside or
downside, the next step is to mark out which is the
most relevant high volume node. Well, if you look
at this region, this is extremely high
on volume but look at this region also
and this region also, volume is not less here. So which is why instead
of just marking out this as a high volume
node, what I do is I’ll mark out this entire
region as high volume node. Now, why this is relevant
is because once this swing is completed, look what
price is doing here. Since this is a high
volume node region, price is actually
rotating here and buyers are actually seeing there is
still strength that comes in, which will actually
take prices higher, so which is why just above
this high volume node, you see these two strong
candles that are forming. It is only because there is
a lot of trading activity that has happened here and it
takes some bit of buying here so that this range is crossed. Now, as soon as this
range is crossed, price actually moves swiftly
to the next high volume node, that is price has transitioned
from this volume node to the next volume
node which is high. So this happens from
this level to this and again, what you
see is because this is a high volume node, so
price has had some sort of retracement here so
be very carefuL here. If you want, just
pause this video here because I’ll explain
this once again. The reason why you see some
sort of consolidation happening here is because price has
approached a high volume node. Now as soon as price breaks
out, it immediately moves up to the next high
volume node region and again, the sort
of consolidation
or retracement that you’re seeing is because of
this high volume node itself. Now again, you see two strong
demand candles forming here, very similar to these two
candles and then you swiftly see that price again moves up. Why it is moving
up so with momentum because there is not
much trading activity that has happened
at higher levels. So which is why it
becomes extremely easy
for price to move. Whenever you see two very big or let’s say clearly marked
out high volume node regions, wait for the price
to move above those because during that phase, price
will do absolutely nothing. It will just sort of rotate
in a flat sort of range. So that is how the concept
of trend development and range rotation happens. Because price rotates in
sort of a horizontal range and when the price breaks
out, it is actually moving out of a high volume node
region and gravitating towards a low volume node. So how do you choose these
two swing pivot points? Well the move has to be
at least eight to 10%. So this move is about 10%
which is why I’ve chosen these two points and once we
finish with these two points, we simply plot the
volume profile indicator and we get these
volume distributions. I hope I’m clear. So this was high volume node
as support, why support? Because once price
broke out here, it sort of consolidated
but never came below this high volume node
region and then it moved up. Again, once the
price broke out here, it took support, that
is this retracement, again, at this high volume
node region and it moved up. So what I’m going to show
you here is for resistance. Again, what I’ve chosen is
I’ve chosen this swing high and this swing low so these
are volume distributions that has happened so
let’s assume we are here. So now what happens is
I look how much of price is struggling in this range. Remember, our first
step was that we draw a volume profile region
over 10% or more. Ideally, it can be eight to 10%. Our second step is that
we need to identify the most relevant high volume
node, which is obviously this region because this is
where maximum volume transaction has happened and then
we go and analyze the complete price structure. Now, I’ll just repeat,
this box that you see, this is the region where volume
profile has been plotted, that is this swing
high to this swing low, and currently
we’re trading here. So once we have this
distribution on the chart, in case price has to break
out of this high volume node, which is the next
relevant volume node? It is this region so
if trend is strong, price will break out
here and simply gravitate towards this high volume node. But look what happens,
because there is so much of volume distribution
that has happened, tries to break out
but it sort of fails and then finally breaks
this level and moves down. Again, remember, I’ve not
chosen one particular level as resistance or support. What I’ve done is I’ve
marked out an entire region and why it is helpful is
because in case you choose this as a particular
support or resistance level and you find price here, you
will feel that you know what, price is high than
this particular level so this is a proper break
out and you will start scaling or increasing
your position size but when you have a
particular range marked, you actually sort of
escape this mistake because you want a
decisive break out and decisive price
movement to happen away from this range which
does not happen in this case. And eventually you see
this range being broken on the down side and
then price moves down, look where it retraces
back and takes resistance. It is again at this
high volume node and then it moves away. So this is how a high
volume node can act as a support or a resistance
while trying to swing trade in the direction of trend. Now this support
and resistance level that you’ve seen under
high volume node section, I’ll covering this
up in great detail when we’ll moving to
swing trading strategies but I just wanted to
give you a brief overview so that you start
practicing this concept. In case you’ve found this
concept little complicated, you can use the traditional
concept that I’ve shown you along with
Fibonacci Retracement because that is something
that even I prefer. I do look at this high volume
node support and resistance as well, I kind of combine
both of those methods in trying to determine valid
support and resistance levels in swing trading but in
case you’re not comfortable with this high volume node
method, you can simply switch to that method,
both actually are the same and they kind of identify
support and resistance within range of
one or 2% itself. So as far as long
term is concerned, switching to either this
method or the previous method, it won’t make much
of a difference. So again, what I’ve show
here is that this is the box where I’ve taken swing high
here and swing low here. This is a profile which
is drawn a 10% move. So our first step is that
we choose such a region that is eight to 10%,
draw our volume profile then mark out the most
relevant high volume node which is this volume node. So now let us assume
price is here, so price tries to move up
but it faces resistance in this high volume node region, which again moves
down but this time, it tries to move up,
faces resistance, but it is successful in
breaking out of this range. But look what
happens after that. In this initial phase, this
HVN that I’ve marked out in green was acting
as a resistance but once the price broke out, this HVN now started acting
as support because look at the price rotation here. And then how swiftly
price has moved away from this high volume node
to this high volume node. Look at the vertical rise. So I hope my point is clear
and you can clearly see why it’s worth exploring
even this method when it comes to
support and resistance. So again, since this is a
high volume node, we again see some sort of price retracement
and rotation happening and then price again, takes off. Now, this is how price moves
from a high volume node to low volume node and then
again, to a high volume node. Again, all these concepts, I’ll
be covering in great detail when I’ll be taking up swing
trading’s strategy section. So this is the volume
profile that I’ve drawn from this swing high
to this swing low. This is is eight to 10%. Our second step becomes to
identify the most valued high volume node
which is this region. The second most important
volume node is at this region. So what happens is price
moves below this region, takes resistance a couple
of times and then moves up. This acts as support
and price rallies. Again, what we have seen is
that price rotation happens as the previous high
volume node itself, now this chart and
the previous chart are actually the same but
what I’m trying to mark out is the difference
between high volume node and the traditional method. So you’ve seen how we’ve
marked support and resistance based on high volume node. Now, in case we don’t have
all of this on the chart and we just follow the
traditional method, without the range marking
and without Fibonacci, what we would have done
is that instead of marking this as a support or
resistance region, you would have simply
taken this swing high and drawn a line and
this would have become the real resistance. See, this is not wrong
but I hope till now you have seen why
there is a better way both on traditional method basis and this high volume
node basis to mark out high probability support
and resistance levels. All you have to do is move away
from this concept of drawing a line at one particular
level and try and see support and resistance in
forms of proper ranges, that is one to 3%, that is fine. So I’ll just sum
up the key points. So I’ve shown you
some modification of the traditional
method wherein we look for ranges and we don’t look
for one particular level. I’ve then shown you
how you can combine the simple Fibonacci
Retracement indicator that is 50% retracement
to identify high probable support and resistance level. Now, I have also shown you how
you can identify support and resistance level
based on high volume node and low volume node. I do understand that this is
slightly complicated subject and in case you’re
not comfortable or till the point you
want to be comfortable with this method, try and
use this traditional method and Fibonacci Retracement
indicator together to identify support
and resistance level. Now, this particular
subject was just a basic sort of thing that I’m
covering because then once we move to the swing
trading strategy section, what I’ll do is
I’ll be covering up both this traditional method and this high volume node
method in great detail and that is when we’ll
be identifying proper Entry, Exit and Stop Loss. So the next part in this
swing trading series will be about
instrument selection, that is whether you wanna choose
few of those options stocks or some other
available instruments so that we’ll be
releasing soon as well. So in case you have any doubt
about what I’ve shown you, do leave a comment below
and I’ll get back to you as soon as possible. Thanks a lot for
watching this video. – [Announcer] Click on
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39 thoughts on “Swing Trading – Part 2 – Support And Resistance In Swing Trading”

  1. Hey Guys,

    Thanks for watching this video.

    So in this week's Swing Trading video, I introduce the concept of Support and Resistance.

    I have divided this part in two segments; Traditional method to identify Support and Resistance and Using High volume node to identify Support and Resistance.

    I have shown how Fibonacci Indicator works very well in identifying key support and resistance level for Swing Trading.

    Volume node based Support and Resistance is another wonderful way to visualize this on chart.

    Do let me know if you have any queries. Have a great weekend and be safe.


  2. thanks a lot for the informative video. I believe its the best series of video for Swing Trading, with contemporary examples.

  3. Hi Sir, Thank you for all the analysis and because of you i have learned lot of information. Referring to this video, what is the time frame to be chooses for swing trading, to mark support and resistance levels?

  4. Good Morning sir
    I have seen many videos on swing trading but the way you are teaching and told is just awesome and very very clear
    I mean everything thing about swing trading you have covered in these brief video series

    No body till date on any YouTube channel teach like you on swing trading

    You have teach every aspect about swing trading

    I am very much fan of swing trading

    Thanks a lot for sharing knowledge

    God bless you sir

  5. If you see first breakout … now we can say it doesn't sustain, but my question is .. had you been there at that time … what would you had done? take position ? or wait. …… I am also a learner sir…

  6. सर प्रणाम
    सर हिन्दी में विडियो बनायेंगे तो अच्छा और आप ऐक वटसप गुरुप बनाये जहां आप आपके शुभ चिंतक आप से किसी शेयर में technicals or fundamentals केसे है पुछे तो गुरुप के सभी मेंबर को उस शेयर के बारे में जानकारी मिले जायेगा

  7. HVN & LVN wonderful explanation with Simple traditional method. One more S&R looking at Range marking. Good. Thanks for all Swing trading videos.

  8. This has been by far one of the best videos I have seen on YT for Indian markets !
    I hope you keep creating content like this

  9. Swing Trading All Parts https://www.youtube.com/playlist?list=PL9myHLrE5hrPQI6ljQCNZ0KQsnvTsgENG

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  10. Sir iam new to trading .I started learning about trading from you.Its really helpful.I heard about ningatrader from you and I try it .But i can't set instruments charts etc useful for stocks.will you help me to understand ningatrader

  11. Super Man. I come across so many videos, This is something special it is noise free and very clear pronunciation. Great this unique in your video.

  12. sir,nice explanation  and detailing not found elsewhere. pl tell us from to HVN AND LVN in charting. which platform give his tool.

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