Support and Resistance Indicator for MT5

November 24, 2020

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Introduction to Support and Resistance Indicator (MT5)

There are many ways to identify Support and Resistance levels. Some traders plot diagonal trendlines and channels as support and resistance levels. Others use horizontal support and resistance levels. Some traders manually plot support and resistance lines. Others use indicators to identify such levels.

The Support and Resistance indicator is a tool that automatically plots horizontal support and resistances to help traders identify such price levels objectively.

What is the Support and Resistance Indicator?

The Support and Resistance Indicator is a custom technical indicator which automatically plots horizontal support and resistance levels.

It plots lime dots forming horizontally to represent the resistance levels, and magenta dots also forming horizontally to represent the support levels.

How the Support and Resistance Indicator Works?

This Support and Resistance indicator plots horizontal support and resistance levels based on fractals, or pivot highs and pivot lows.

This method of identifying support and resistance levels is also commonly used by many traders. Price had already reversed on such price levels historically. Thus, it is also very likely that the market is also considering such levels as possible support or resistance levels where price could either reverse or breakout from.

How to use the Support and Resistance Indicator for MT5

Since the levels identified by this indicator are valid support and resistance levels, traders can trade based on these levels as such.

Traders can trade reversals or breakouts based on how price action interacts with these levels. However, since these support and resistance levels are somewhat based on the short-term, there would be many instances where the levels would not hold as a support or resistance level. Because of this it would be more prudent to trade breakouts on these levels rather than trading reversals.

Because these levels are support and resistance levels, it can also be used as a basis for stop loss placements. Aggressive traders who would want to squeeze the most profits out of a breakout can also use these levels for trailing stop losses.

Buy Trade Setup

When to Enter?

Open a buy trade as a bullish breakout candle closes above a resistance level with strong momentum. Set the stop loss on the support level opposite of the bullish breakout.

When to Exit?

Trail the stop loss below the support levels as each level is identified by the indicator. The trade would be closed in profit as the trailing stop loss is hit.

Sell Trade Setup

When to Enter?

Open a sell trade as a bearish breakout candle closes below a support level with strong momentum. Set the stop loss on the resistance level opposite of the bearish breakout.

When to Exit?

Trail the stop loss above the resistance levels as each level is identified by the indicator. The trade would be closed in profit as the trailing stop loss is hit.

Conclusion

This Support and Resistance Indicator is another tool that traders can add to their arsenal. Traders can use it either as a breakout signal indicator coming from a market congestion or as a part of a trend reversal.

Using this indicator for trailing stop loss exits can also be effective for traders who would want to stay with the trend until it ends. However, this method is not the most efficient trade exit technique.

This indicator is only a tool and should still be used just as a part of a strategy.