Day Trading Support & Resistance

Any trading method can be greatly improved by adding accurate day trading support and resistance levels. That’s because these levels are not an invention, they are a natural part of the markets. They exist whether you know about them or not.

Whether you are day trading the emini’s, stock market day trading, or trading any other US financial market device, and regardless of how you’re trading them, you are already day trading support and resistance. I’ll show you why you are, and what’s more important, I’ll show you how to do it right.

Suppose you’re trading divergences on an oscillator, and the signal says “enter long.” Some entries are better than others because, if you enter long above a resistance zone, your odds are much better than if you enter long just below a resistance zone. However, if you don’t have accurate zones, you’ll never know…you’ll be trading blind.

Or if you trade a trend-following breakout system, you can avoid some of the draw-downs if you only take the long entry signals a little above support and not right below resistance. (Turn it around for short entries.)

Of course, accurate support and resistance zones are a MUST.

I write a market newsletter each day, giving my "game plan" for the next trading day. I'm as specific as possible including Support and Resistance levels that I will be buying and selling against, which provides you with great trade set ups nearly everyday. My support and resistance zones have been dead-accurate since 1996, attracting professional traders from around the world.

I’ve been day trading support and resistance for more than 20 years, my own trading style centers around RBI support and resistance, as well as the dynamic support and resistance levels I teach to other traders who want to learn day trading.

I use support and resistance for entries and exits, as well as for clues about where the market is going. Markets change, rendering most back-tested systems obsolete after awhile. But support and resistance trading never becomes obsolete, because support and resistance levels are caused by human nature. They are a natural occurrence in all liquid markets, they always have been and they always will be.

Here’s a chart example. In my TradeStalker’s RBI Trader’s Update dated August 23, 2005, I wrote:

“Initial resistance is at the 1223.25-1224.50 area on the SP futures….

“The big support is at the 1216.25-1215.50 area on the SP futures….

“If the market gets down here by late morning or early afternoon and then turns up, another rally should begin.”

As it turned out, the market bottomed right at major RBI support. Take a look at the 5 minute SP futures chart below where the early bottom is labeled “A.”




The horizontal lines are my RBI day trading support and resistance.

The turn up from the minor double bottom at A was the “perfect” place to take a long position. But trading is rarely perfect. For me to enter at A, I would like to see “emotional exhaustion” within that circle. (I developed a chart that shows emotional extremes so clearly, I’ve been able to make my living with it (in combination with support and resistance) for over 20 years.

Looking back at the chart, if I could not get long at A, I would be looking for the first pullback to enter long, because when the market hits RBI support and resistance directly and turns away it signals a new intraday trend that’s often strong. This is especially true at key times of day.

In the chart, the market turned up from support at A, and the new trend had legs. So if I missed the long entry at A, I’m looking to get long near the bottom of the first pullback which turns out to be the center of the circle labeled B.



There is a “line in the sand” just above the low at B where the market makes 4 identical bottoms, 2 before the low at B and 2 after. This is a sign that downward momentum is gone.

Somewhere in the B circle my emotion gauge pulls back to zero, telling me that the pullback is over. It’s time, I pull the trigger and enter a long position somewhere after point B.

If I didn’t move quickly enough to get long at A, somewhere near B is the next place to enter because a long position there has a good edge based on the way the market bounced directly off RBI support.

Ideally I would target the next resistance zone, but in practice I get out when momentum first starts to fizzle, (at least on part of a position).

At C, the bids dry up in the initial RBI resistance zone, giving a clue that the next time the market reaches this zone, it will probably pull back again. So I plan to take a short position there if I get a chance later in the day.

At the center of circle D, the market hits one of my “dynamic supports,” a moving average that’s lavender in this graph. It bounces from it, but the slope of the moving average is not steep enough, so I probably wouldn’t try to go long there.

At E, the market shows a little respect for another dynamic support, the 20 ema (which is blue). Another “line in the sand” is formed at E.

(I have 4 key moving averages on three chart times. When the market is between RBI support and resistance zones and the slopes are steep, I use them to enter in the direction of the immediate trend.)

Suddenly the market makes a run to point F, right into the RBI resistance zone that was proven accurate at C. I wait for momentum loss, and watch my intraday sentiment gauge for emotional exhaustion. When I see the upward momentum fizzle, I get short (using a limit order). Sometimes I don’t get a fill, but that’s ok. I rarely chase the market more than one tick.

If my order is filled, I expect to find support at the blue moving average (20 ema) that was proven valid at E. That dynamic support at E becomes my exit target.

The chart shows a very nice morning that’s great for teaching purposes. But things don’t have to be “perfect” to make a living from your trading. On less average days, the same principles apply when the market makes turns close to RBI support and resistance.

One of the key trading tips is…

Wait for your best setups… don’t settle for less.

You’ll never know which setups are your best ones if you don’t have accurate support and resistance levels to guide you.

No matter what setup strategy you use, you are already day trading support and resistance, even if you don’t know it. The levels are there in the market to help or hinder you.

My RBI Trader’s Updates have the most accurate levels you’ll find anywhere. It’s easier to make money if you’re not trading blind to them. When you see the market’s natural “supply-and-demand zones,” they’ll take your trading to a new level.

Click Here to get my daily RBI Trader’s Updates in “Real Time”. They provide you with the most accurate day trading support and resistance levels that you’d find anywhere – these are the same levels I use in my own trading.

If you don’t have your entry setups clearly defined or if you’re looking for a better edge on your set of defined entries, learn day trading from an experienced professional trader who’s making a living trading.

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Disclaimer:
The financial markets are risky. Investing is risky. Past performance does not guarantee future performance. The foregoing has been prepared solely for informational purposes and is not a solicitation, or an offer to buy or sell any security. Opinions are based on historical research and data believed reliable, but there is no guarantee that future results will be profitable.

We are not advocating trading futures. The prices and contracts in the TradeStalker's RBI Updates specify a manner in which you could trade. We occasionally mention the SP500 and Nasdaq futures markets because it is extremely liquid and tends to lead the other markets. This is not an endorsement or recommendation of the SP500 and Nasdaq futures markets. The risk of loss in futures is substantial. You can lose more than your original investment. We are not Registered Investment Advisors or Commodity Trading Advisors.

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