How to Find Key Levels in Trading
Have you ever wondered why order blocks fail? That’s because price action maybe at a key level.
Important key levels on a stock are areas where buyers and sellers show a lot of interest.
Identifying key levels on a stock, combined with order blocks, will give you more confidence in your trading.
Let’s get started.
5 Criteria to Identify a Strong Key Level
The objective is to find strong key levels. To identify these strong key levels on a stock it has to meet 1 of the 5 criteria.
1. Turning Points
The turning points are price areas that has reversed the market trend. Turning points are areas where the market has decided the price of a stock has been deemed overbought or oversold.
Turning points have a high probability for future price to react when they’re met.
2. Multiple Rejections
Multiple rejections on a support or resistance area tells the trader that price action is very strong.
If price action rejections are getting weaker, this can be an indicator that price will breakthrough and turn to the opposite of what it was orginally.
3. Acted as Both Support & Resistance
If a certain price area has acted as both as support and resistance, it increases the probability of price to reject or bounce this level again.
4. Strong Rejection
Price levels that had a drastic rejection. When price comes back to these levels, they tend to struggle to breakthrough, and will eventually reject even harder.
5. Newly Created Resistance or Support
Recently created resistance and support are always the ideal key levels to look for.
What Timeframes to use to Analyze Strong Key Levels
When seeking for strong key levels on a stock, you’ll want to analyze the weekly timeframe followed by the daily timeframe.
Once you’ve draw your key levels on the weekly, you’ll want to go into the daily timeframe to adjust
