Interestingly, the MT4 trading platform does not come with a built-in tool that automatically identifies and draws support and resistance levels. Yet these levels are fundamental components of technical analysis and are widely used by traders. The Auto Support & Resistance indicator addresses this limitation.
Indicator Overview
The Support and Resistance indicator automatically marks key support and resistance zones directly on the chart.
Resistance areas are highlighted in red, while support areas appear in blue. Support levels suggest potential buying interest when the price moves toward them. In contrast, resistance levels signal possible selling interest as price approaches those zones.
By automatically plotting current support and resistance levels, the indicator saves traders significant time and effort during chart analysis. This feature is especially beneficial for both experienced traders and beginners.
That said, new traders are encouraged to practice drawing these levels manually. Doing so helps build a deeper understanding of price behavior in the forex market. When drawing levels by hand, the indicator’s automatic levels can serve as helpful references or guidance.
The support and resistance zones shown by the indicator can also assist in setting stop-loss and take-profit orders, as well as identifying potential entry points for trades.
How the Indicator Draws Levels
Support and resistance levels are typically identified using market highs and lows, commonly referred to as fractals. In the MT4 trading platform, the built-in Fractals indicator helps traders spot these key turning points by highlighting price extrema.
The Support and Resistance indicator incorporates the Fractals indicator within it. It automatically draws support and resistance levels based on areas where fractals appear most frequently, marking zones of significant price reaction.
The resistance level in this example is formed based on 11 fractals. To see which specific fractals were used, simply click on the number displayed at the start of the resistance level.
The thickness (or height) of support and resistance levels is determined by the distance between the fractals.
When the upper and lower fractals that define a support or resistance level are far apart, the level appears thicker on the chart.
On the other hand, if the upper and lower fractals are positioned close together, the level will appear thinner.
The indicator does not repaint; instead, it adjusts the height of its levels whenever new fractals form.
How to use the indicator for trading
Support and resistance strategies are usually interpreted as signals to either trade a breakout or a bounce off key levels. However, the way these strategies are applied differs depending on whether the market is ranging (flat) or trending.
In a ranging market, trading between the lower support and upper resistance levels — and vice versa — is generally considered one of the simplest and potentially most profitable approaches.
That said, it’s crucial to remember that a ranging market is only temporary. Eventually, the flat phase will give way to a new trend.
The support and resistance levels here are aligning to create a narrow consolidation range.
Based on technical analysis, price is more likely to break out of a consolidation range in the same direction as the prior trend. In this case, a breakout above the resistance area appears more probable than a move downward.
This outlook supports looking for buying opportunities near the support zone during the trading session. It also justifies planning mid- to long-term trades that target an upward breakout from the range.
When the market is trending, support and resistance zones function as key levels. Traders can often enter profitable positions at these levels, provided they trade in alignment with the dominant trend.
Using trend lines together with support and resistance zones within a trading strategy significantly improves the probability of a successful trade.
To identify the current trend, we can apply the AutoTrendLines indicator.
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Just like in a ranging (flat) market example, selling from the resistance zone can be suitable for intraday trading as well as for medium- to long-term strategies.
Overall, the Support and Resistance indicator can serve as a valuable tool in chart analysis. Thanks to its flexible settings and strong effectiveness, it can be successfully integrated into nearly any trader’s trading system.
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| Download the mt4 version here |
Effective for both scalping and swing trading
