Please be introduced a manual and methods of support line and resistance line building on the basis of trade secrets - Fibonacci, Pivot, Camarilla, Woody и DeMark. The tool that enable to build above lines fully automatic in Binarymag (example for pair eur/usd ). We’ll discuss what these lines are and how operate with them.
For more details in working with table is in manual.
Resistance and support lines in technical analysis
Above lines is a basic property in market that replies for "intense" areas in price motion. The price within areas shall either push off or go on a pulse. I do not want to immerse myself into theory now, finally there is perfect information for above lines where all theoretic and practical questions for operation with classic lines are considered in details. This article is here.
Review of basic procedures for lines application onto graph:
1- Pivot lines
2- Fibo (Fibonacci lines)
3- Camarilla lines
4- Woody lines
5- DeMark lines
You can have a look at webinar concerning support and resistance lines where the classic method is considered of operation with lines.
Pivot: calculation principles of application on chart
Henry Chysez has described a procedure for pivot point or pivot as early as 1930. This is an important element in technical analysis that indicates reversal and support lines in market. Any trader knows how important to be able to define and to use these lines.
Pivot consists of the following elements:
- P (Pivot Points) it is calculated by formula: P=(Higth+ Low+ Close)/3. For example, (1,08167+1,07140+1,07187)/3 = 1,07498. There is a blue line in the figure.
- R1 и S1. Pivot-1 and Resistance-1 . It’s calculated by formula: R1 =PP*2-Low. S1=PP*3-Higth,where in our example R1=1, 07856, and S1=1.06829. There are orange lines in the figure.
- R2 и S2. Pivot-2 and Resistance-2 . It’s calculated by formula: R1=PP + Higth-Low=1.08525. S1=PP- Higth +Low=1.06471. There are green lines in the figure.
Generally PP is Pivot, S - resistance, а R - support. Three lines are usually applied on the graph, but general principle of calculation расчета именно as mentioned above. It is fairly hard to make calculations on all time frames manually, that’s why you can use our financial tool and receive Pivot points fully automatic.
Fibonacci is one of the most common lines which are known for many traders. A lot of trading systems are based on these lines. Each of us knows from math that Fibonacci sequence exists - 0, 1, 1, 2, 3, 5, 8, 13, 21 and so on. The same principle is put into the lines.
Trader is interested in solely correction lines in technical analysis: 23, 6%, 38,2%, 61,8%, 76,4%. What are these percents? Take Higth and Low for definite period (for example, the last candle stick for one day). That is a distance 0 - 1, correction are built based on it further and also corrections are beyond limits but with increase +/-100%, +/-200% and so on. That is what it looks.
We obtain again the support and resistance lines fully automatic. Only three nearest lines to the current price are taken for convenience.
Camarilla lines: principle for building and operation и работы
Camarilla lines are built up to 4 lines for single use. General vision of this procedure for lines’ building is that price reaching peaks or lows of previous move will strive to neutral values. All calculations are performed on previous candlestick.
These are formulas for calculation. Support is lettered with R or H and resistance is lettered with S or L. Support lines calculation to Camarilla (blue lines on graph) is performed as follows образом:
- R1 (H1) = Close + (Higth-Low)*1.1/12
- R2 (H2) = Close + (Higth-Low)*1.1/6
- R3 (H3) = Close + (Higth-Low)*1.1/4
- R4 (H4) = Close + (Higth-Low)*1.1/2
As to support to Camarilla (orange lines on graph), the formulas are as follows:
- S1 (L1) = Close - (Higth-Low)*1.1/12
- S2 (L2) = Close - (Higth-Low)*1.1/6
- S3 (L3) = Close - (Higth-Low)*1.1/4
- S4 (L4) = Close - (Higth-Low)*1.1/2
Generally these lines are interesting by means that price moves from one line to other. Accordingly very good signals are arrived for trading.
Woody lines – principle of operation
Woody reversal lines is similar to Pivot but difference in that calculations are made not in three 3 lines but in the 2 lines. In spite of many Woody traders do not use this tool for trading (some of them do not know about it at all) this tool provides very good data for trading.
The basic for Woody building is Pivot Point (PP) that is calculated by formula: (Hight + Low + 2*Close)*4.
Support lines to Woody is computed by formula:
-R1 = 2*PP - Low
-R2 = PP + Hight - Low
Resistance by Woody:
- S1 = 2*PP - Hight
- S2 = PP - Hight + Low
There are significant variations from standard building on the basis of support and resistance lines to Woody. That’s why these lines are extremely useful and have a lot of information about market giving perfect entry points.
Tomas DeMark is famous not only as a creator of cognominal index but as a former of procedure to define the support and resistance lines. These lines are often called by pivot-DeMark line. It is Pivot classical like but it has some discrepancy.
Starting with that reference line varies from Pivot in no way. Determine point PP = (Higth +Low +Close)/3. These data are not shown in the table because they are un essential first and they are shown in the Pivot table second.
2 lines are applied on the chart in total. Their formula is very simple: 2,14817
- R1 = X/2 - Low
- S1 = X/2 – Higth
It only remains to compute the X value.
Calculations are made by the following formulas:
Plotting candlestick - decline. Higth + 2*Low + Close
Plotting candlestick - rise. 2*Higth + Low + Close
Plotting candlestick - doji. Higth + Low + 2*Close
For example how Demark line are plotted with previous decline candlestick.
WE observe 5 independent approaches to formation of resistance and support lines. Each of these approaches provides perfect possibilities and technical analyst shall bear in mind. On the other hand time will be not enough to check 5 types of lines manually within all time frames. That’s why we propose you automation of above process where all lines are computed fully automatic. There is no sense to waste time for this operation .