Many traders use various analytical tools in trading. Trying to determine the direction of the trend movement, the best entry and exit points, they use multiple indicators. Many of them show delayed data, others go "ahead" of the market. There are those that give a lot of false signals.
Many books describe the classic technical analysis - support and resistance lines. Figures are simple and clear, but the reality is much more complicated. You have to build support and resistance levels manually. When you trade one or two symbols, it does not take much time. But what if you trade a dozen of symbols? Indicators can help you. There are a lot of available tools on the Internet.
However, the main disadvantage of the indicators that draw support and resistance levels is that they plot a lot of different lines. Many of these lines are useless, and it's hard to find a really important level. Can this problem be solved? Of course it can.
The Prism indicator is a solution to this problem. This indicator not only draws support and resistance levels on price peaks and bottoms. It analyzes the pricing chart, seeking points where the levels touch and cross the price. It highlights really strong support and resistance levels, and deletes those levels that are useless. Strong levels serve as benchmarks for placing pending orders, and for the Take Profit levels.
- count - number of bars for analysis. Recommended value is 300-500.
- support_color- color of the support level.
- resistance_color - color of the resistance level.
Simple levels are shown as a dotted line. Break through these levels usually means nothing. Rollback from such a level makes it potentially strong (one rollback after the appearance of this level is enough). These levels are best used for setting Take Profit levels.
Levels indicated by the solid line are strong levels. The width of the levels depends on the number of "touches" with the price. They are best used for placing pending orders. Stop Loss levels are placed behind these level. ST<=TP.
If two or more levels (simple or strong) are located close to each other, such a cluster should be regarded as an area of support/resistance.
Do not forget about the allowed value of the level breakthrough. If the price went n points beyond the level once or more, then the next time the price approaches the level the same should be expected. This should be taken into account when setting Stop Loss.