Support Resistance Channels advanced

Table of Contents

1. Overview
2. Indicator Basics
3. Understanding the Channels
4. Trading Strategies
5. Entry and Exit Signals
6. Risk Management
7. Best Practices
8. Common Mistakes to Avoid

Overview

The Support Resistance Channels indicator automatically identifies and displays the strongest support and resistance zones based on pivot points. Unlike simple horizontal lines, this indicator creates channels (zones) which better represent real market behavior where support and resistance act as areas rather than precise levels.

Key Features

• Automatic Detection: Identifies pivot highs and lows automatically
• Channel Zones: Shows support/resistance as zones rather than lines
• Strength-Based Ranking: Displays only the strongest S/R levels
• Dynamic Coloring: Different colors indicate whether zones act as support, resistance, or when price is inside
• Break Alerts: Optional visual alerts when S/R levels are broken

Indicator Basics

Color Coding

The indicator uses three colors to help you quickly identify market context:

• 🔴 RED Channels: Resistance zones (price is below the channel)
• 🟢 GREEN Channels: Support zones (price is above the channel)
• ⚪ GRAY Channels: Price is currently inside the channel (neutral zone)

Parameters Explained

Settings 🔨

Pivot Period (4-30, default: 10)

• Determines how significant a high/low must be to qualify as a pivot
• Lower values = more pivots (more sensitive, more channels)
• Higher values = fewer pivots (less sensitive, fewer but stronger channels)
• Recommended: 8-12 for intraday, 10-15 for daily charts

Source (High/Low or Close/Open)

• High/Low: Traditional pivot detection using candle wicks
• Close/Open: Uses candle bodies, filters out wicks
• Recommended: High/Low for most markets

Maximum Channel Width % (1-8, default: 5)

• Maximum width of S/R zones as percentage of recent price range
• Lower values = tighter channels
• Higher values = wider channels that capture more pivot points
• Recommended: 4-6 for forex, 5-8 for crypto

Minimum Strength (default: 1)

• Minimum number of pivot touches required for a channel to display
• Higher values = only show the most tested zones
• Recommended: 1-2 for active trading, 2-3 for key levels only

Maximum Number of S/R (1-10, default: 6)

• How many channels to display simultaneously
• Fewer = cleaner chart focusing on strongest levels
• More = comprehensive view of all significant zones
• Recommended: 4-6 for clarity

Loopback Period (100-400, default: 290)

• How many bars back to analyze for pivot points
• Shorter = recent market structure only
• Longer = historical levels included
• Recommended: 200-300 for most timeframes

Colors 🟡🟢🟣

Customize channel colors to match your chart theme and preferences.

Extras ⏶⏷

• Show Pivot Points: Display "H" and "L" labels at pivot points
• Show Broken S/R: Display arrows when channels are broken
• Moving Averages: Optional MA overlays (50 SMA, 200 SMA)

Understanding the Channels

What is a Support/Resistance Channel?

Traditional S/R draws single lines, but markets rarely respect exact prices. The channel approach recognizes that S/R acts as a zone where:

• Multiple pivot points cluster together
• Price repeatedly bounces or consolidates
• Market participants have demonstrated interest

Channel Strength

Channels are ranked by strength, which considers:

1. Number of pivot points within the zone
2. Number of times price touched the zone
3. Recency of the touches

The indicator shows only the strongest channels up to your maximum setting.

Channel Width

The width of each channel represents the consolidation zone where pivot points clustered. A wider channel indicates:

• More scattered pivot points in that area
• A broader zone of interest
• Potentially more volatility when broken

Trading Strategies

Strategy 1: Bounce Trading (Range Trading)

Best For: Ranging markets, choppy conditions, lower timeframes

Setup:

1. Identify when price is between two clear channels (support below, resistance above)
2. Wait for price to approach a channel
3. Look for rejection signals at the channel boundary

Entry Rules:

• LONG: Price reaches green support channel + bullish reversal pattern (hammer, engulfing, pin bar)
• SHORT: Price reaches red resistance channel + bearish reversal pattern (shooting star, bearish engulfing)

Stop Loss:

• Place stop below the support channel (for longs)
• Place stop above the resistance channel (for shorts)
• Give room: stop should be beyond the channel width

Take Profit:

• Target the opposite channel
• Scale out: take 50% at mid-range, let 50% run to opposite channel
• Use trailing stop once price moves favorably

Example:

Resistance Channel (RED) ████████████ ← SHORT entry at rejection ↑ Price bounces ↓ Support Channel (GREEN) ████████████ ← LONG entry at bounce

Strategy 2: Breakout Trading (Trend Trading)

Best For: Trending markets, higher timeframes, strong momentum

Setup:

1. Identify strong directional move toward a major channel
2. Wait for clear break and close beyond the channel
3. Look for retest of broken level (optional but safer)

Entry Rules:

• LONG Breakout:
  • Price closes above red resistance channel
  • Optional: wait for pullback to retest (channel turns green)
  • Confirm with volume increase or momentum indicator
• SHORT Breakout:
  • Price closes below green support channel
  • Optional: wait for pullback to retest (channel turns red)
  • Confirm with volume increase or momentum indicator

Stop Loss:

• Initial: opposite side of the broken channel
• After confirmation: below/above the retest low/high

Take Profit:

• Target next major channel level
• Trail stop using ATR or previous swing points
• Ride trend until opposite channel is hit

Example:

Strong Breakout ↑
Resistance ████████ ← Broken, now becomes support (turns GREEN)
              ↓ Retest (ENTRY)
              ↑ Continuation
Next Resistance ████████ ← Target

Strategy 3: Rejection Trading (High Probability Reversals)

Best For: All market conditions, swing trading, key level trades

Setup:

1. Price makes strong move into a channel
2. Price penetrates the channel but fails to close beyond it
3. Strong rejection candle forms (long wick, immediate reversal)

Entry Rules:

• LONG: Price wicks down into green support channel, closes back above it
• SHORT: Price wicks up into red resistance channel, closes back below it
• Stronger signal if rejection happens at channel edge after multi-bar test

Stop Loss:

• Tight stop: beyond the rejection wick
• Conservative stop: beyond the entire channel

Take Profit:

• Quick scalp: 1:2 or 1:3 risk-reward
• Swing trade: next channel level or 50% retracement

Example:

Resistance ████████ ↑ Spike (false breakout) | Long wick rejection ↓ SHORT entry on close back below

Strategy 4: Channel Confluence Trading

Best For: Higher timeframes, position trading, low-frequency high-confidence

Setup:

1. Identify where multiple channels overlap or align closely
2. Look for additional confluence: moving averages, Fibonacci levels, round numbers
3. Wait for price to reach the confluence zone

Entry Rules:

• Only trade when 2+ channels align within similar price area
• Add weight if moving averages also present at that level
• Require strong price action confirmation (engulfing pattern, pin bar)

Stop Loss:

• Wide stop beyond all confluent channels
• Position size accordingly to maintain proper risk

Take Profit:

• Major levels typically offer better reward:risk (aim for 1:3 minimum)
• Hold longer-term positions, using next major confluence as target

Entry and Exit Signals

Entry Checklist

Before entering any trade, confirm:

✅ Channel Identification

• [ ] Clear channel identified (red resistance or green support)
• [ ] Channel has adequate strength (multiple touches)
• [ ] Price is approaching or at the channel

✅ Price Action Confirmation

• [ ] Reversal pattern formed (for bounces)
• [ ] Clean break and close (for breakouts)
• [ ] Rejection wick visible (for rejections)

✅ Market Context

• [ ] Trend direction identified
• [ ] Trading with trend (higher probability)
• [ ] Volume confirms the move (if available)

✅ Risk Management

• [ ] Stop loss level defined
• [ ] Position size calculated
• [ ] Risk:Reward ratio acceptable (minimum 1:2)

Exit Strategies

Planned Exits (before entry):

1. Target Channel: Exit at next major S/R channel
2. Fixed R:R: Exit at predetermined risk:reward (1:2, 1:3)
3. Trailing Stop: Use ATR-based trailing or swing point trailing

Signal-Based Exits:

1. Opposite Channel Hit: Price reaches target channel
2. Channel Break Against You: Stop loss hit
3. Price Goes Gray: Price enters neutral zone (consider partial exit)
4. Reversal Pattern: Opposite pattern forms (exit discretionary)

Time-Based Exits:

• Close trade at end of trading session
• Exit if trade hasn't moved in X hours/days
• Exit before major news events

Risk Management

Position Sizing

Conservative Approach:

• Risk 0.5-1% of account per trade
• Use for higher risk trades (counter-trend, breakouts)
• Appropriate for beginners

Moderate Approach:

• Risk 1-2% of account per trade
• Use for high-probability setups
• Requires experience in pattern recognition

Formula:

Position Size = (Account Size × Risk %) / (Entry Price - Stop Loss)

Stop Loss Placement

Tight Stops (Scalping/Intraday):

• Just beyond the channel boundary
• Below/above the rejection wick
• Pros: Better risk:reward, more trades
• Cons: Higher stop-out rate

Medium Stops (Swing Trading):

• Beyond the entire channel width
• Below/above the pivot point
• Pros: Balanced approach
• Cons: Requires larger position size adjustment

Wide Stops (Position Trading):

• Beyond multiple channel levels
• Beyond major swing point
• Pros: Low stop-out rate, ride bigger moves
• Cons: Lower risk:reward, requires smaller positions

Trade Management Rules

1. Never Move Stop Loss Against You

   • Only move stops to lock in profit
   • Original stop protects against being wrong

2. Scale Out Method

   • Exit 50% at first resistance/target
   • Move stop to breakeven
   • Let remainder run

3. Maximum Risk Rules

   • Never risk more than 2-3% on single trade
   • Maximum 5-6% total portfolio risk across all trades
   • Take break after 3 consecutive losses

4. Correlation Management

   • Avoid multiple trades in correlated pairs
   • Example: Don't go long EUR/USD and GBP/USD simultaneously
   • Diversify across different instruments

Best Practices

Chart Setup Recommendations

Timeframe Selection:

• Scalping (M1-M5): Use tighter settings (Pivot: 5-8, Width: 3-5)
• Intraday (M15-H1): Default settings work well
• Swing (H4-D1): Use wider settings (Pivot: 12-15, Width: 6-8)
• Multi-Timeframe: Analyze D1 for major levels, enter on H1/H4

Clean Chart Principle:

• Don't clutter with too many indicators
• This indicator + price action is often sufficient
• Add only: volume, momentum oscillator (RSI/Stochastic)
• Remove: excessive trend lines, multiple MAs

Color Scheme:

• Use colors that contrast well with your chart background
• Ensure channels are visible but not overwhelming
• Consider using semi-transparent fills

Multi-Timeframe Analysis

Top-Down Approach:

1. Higher Timeframe (HTF) - Identify trend and major levels

   • Daily/Weekly: What's the overall market direction?
   • Where are the major support/resistance channels?
   • Trade direction should align with HTF trend

2. Medium Timeframe - Identify setup

   • 4H/1H: Look for channel bounces or breaks
   • Wait for price to approach HTF levels
   • Identify entry setup type (bounce/break/rejection)

3. Lower Timeframe (LTF) - Time the entry

   • 15M/5M: Fine-tune entry point
   • Look for precise price action triggers
   • Enter with better risk:reward

Example:

Daily Chart: Uptrend, price approaching major resistance channel 4H Chart: Clear channel test forming, wait for rejection or break 1H Chart: Bearish engulfing forms at channel = SHORT entry

Confluence with Other Analysis

Enhance Probability by Combining:

1. Moving Averages

   • Enable MA1 (50) and MA2 (200) in indicator settings
   • S/R channel + MA = stronger level
   • Trade pullbacks to MA that align with channels

2. Fibonacci Levels

   • Draw Fibonacci retracement on swings
   • S/R channel at 50%, 61.8%, or 78.6% = high probability
   • Both tools identifying same zone = excellent

3. Round Numbers & Psychological Levels

   • S/R channel near 1.2000, 1.2500, etc. = stronger
   • Whole numbers act as self-fulfilling prophecies
   • Traders cluster orders at these levels

4. Volume Profile (if available)

   • S/R channel at high volume node = strong level
   • Low volume zones between channels = quick moves expected

5. Market Structure

   • Higher highs & higher lows = uptrend
   • Support channels more reliable in uptrend
   • Resistance channels more reliable in downtrend

Common Mistakes to Avoid

1. Trading Every Channel Touch

Problem: Not all channel touches result in bounces or breaks

Solution:

• Wait for confirmation (price action pattern)
• Consider market context and trend
• Only trade the highest probability setups

2. Ignoring the Trend

Problem: Fighting the trend by fading every resistance in uptrend

Solution:

• Identify higher timeframe trend first
• Favor breakouts in trend direction
• Be more selective with counter-trend trades
• Require stronger confirmation for counter-trend

3. Poor Stop Placement

Problem: Stops too tight = constantly stopped out

Solution:

• Give trades room to breathe
• Account for channel width
• Adjust position size instead of using tight stops
• Consider volatility (ATR) when placing stops

4. Overtrading

Problem: Taking every signal leads to death by 1000 cuts

Solution:

• Focus on quality over quantity
• Set daily/weekly trade limits
• Only trade when all confluence factors align
• It's okay to have days with no trades

5. Moving Stops Against You

Problem: Turning small losses into large losses

Solution:

• Accept the loss when stop is hit
• Original stop exists for a reason
• Moving stop = breaking your own rules
• Take the loss and find next opportunity

6. Not Adapting to Market Conditions

Problem: Same settings for all market conditions

Solution:

• Ranging market: Favor bounces, use strategy 1
• Trending market: Favor breakouts, use strategy 2
• Volatile market: Wider stops, smaller positions
• Low volatility: Tighter targets, quicker exits

7. Ignoring News and Events

Problem: Entering trade right before major news

Solution:

• Check economic calendar before trading
• Avoid trades 30 minutes before high-impact news
• Be prepared for volatility during news
• Consider closing positions before major events

8. Revenge Trading

Problem: Immediately re-entering after a loss

Solution:

• Take a break after 2 consecutive losses
• Review what went wrong
• Return with clear mind
• Never increase position size to "win back" losses

Advanced Tips

Optimization by Instrument

Forex Majors (EUR/USD, GBP/USD):

• Pivot Period: 10-12
• Channel Width: 4-5%
• Loopback: 250-300
• Respect channels very well due to high liquidity

Forex Minors/Crosses:

• Pivot Period: 8-10
• Channel Width: 5-6%
• May require more confirmation due to lower liquidity

Crypto (BTC, ETH):

• Pivot Period: 8-12
• Channel Width: 6-8% (higher volatility)
• Loopback: 200-250
• Expect wider channels and faster moves

Indices (S&P500, DAX):

• Pivot Period: 10-15
• Channel Width: 5-6%
• Strong respect for channels
• Best traded during market hours

Commodities (Gold, Oil):

• Pivot Period: 10-12
• Channel Width: 5-7%
• Consider fundamentals and seasonal factors

Session-Based Trading

Asian Session (Low Volatility):

• Use tighter channels
• Focus on range trading (Strategy 1)
• Smaller targets, quicker exits

London Session (High Volatility):

• Watch for breakouts at session open
• London open often breaks Asian range
• Use Strategy 2 for breakout trades

US Session (Highest Volatility):

• Major moves often occur
• Good for both strategies
• Watch for reversals at NY close

Session Overlap (London + NY):

• Highest liquidity and movement
• Best time for active trading
• Tightest spreads

Performance Tracking

Trading Journal

Record for each trade:

• Date and time
• Instrument and timeframe
• Entry reason (which strategy)
• Channel levels involved
• Entry price, stop loss, take profit
• Position size and risk %
• Outcome (win/loss) and R multiple
• What went right/wrong
• Screenshots

Key Metrics to Track

Win Rate:

• Calculate: Wins / Total Trades
• Target: 50-60% for most strategies
• Higher isn't always better if R:R is poor

Risk:Reward Average:

• Calculate: Average Win / Average Loss
• Target: Minimum 1.5:1, ideally 2:1+
• Can succeed with 40% win rate if R:R is 2:1

Expectancy:

• Formula: (Win% × Avg Win) - (Loss% × Avg Loss)
• Must be positive to be profitable long-term
• Measures edge per trade

Drawdown:

• Maximum peak-to-trough decline
• Keep under 20% of account
• Measure both monetary and consecutive losses

Monthly Review

At end of each month:

1. Calculate all metrics above
2. Review journal for patterns
3. Identify best/worst setups
4. Adjust strategy if needed
5. Set goals for next month

Conclusion

The Support Resistance Channels indicator is a powerful tool that automates the identification of key market levels. However, the indicator is only as good as the trader using it. Success requires:

• Patience: Wait for high-probability setups
• Discipline: Follow your trading plan
• Risk Management: Protect your capital
• Continuous Learning: Adapt and improve

Start with paper trading or a demo account to familiarize yourself with the indicator. Once comfortable, begin with small position sizes and gradually increase as you develop consistency.

Remember: The goal isn't to win every trade, but to have a positive expectancy over many trades. Focus on process over profits, and the profits will follow.

Quick Reference Card

Best Setups Checklist

Bounce Trade ⭐⭐⭐⭐

• [ ] Price at channel boundary
• [ ] Clear rejection pattern (wick, engulfing)
• [ ] Multiple channel touches (strong level)
• [ ] Trading with trend

Breakout Trade ⭐⭐⭐⭐⭐

• [ ] Strong momentum into channel
• [ ] Clean close beyond channel
• [ ] Volume confirmation (if available)
• [ ] Retest successful (optional)

Rejection Trade ⭐⭐⭐⭐

• [ ] False breakout (wick beyond channel)
• [ ] Close back inside channel
• [ ] Strong reversal candle
• [ ] Key level rejection

Confluence Trade ⭐⭐⭐⭐⭐

• [ ] 2+ channels align
• [ ] Additional indicator confirms (MA, Fib)
• [ ] Round number nearby
• [ ] Strong price action

Risk:Reward Targets by Strategy

Emergency Rules

1. Never risk more than 2% per trade
2. Always use stop loss
3. Stop trading after 3 consecutive losses
4. Never trade during high-impact news
5. Always trade with a plan

Good luck with your trading! Remember: Consistency beats perfection.