New article: Drawing Resistance and Support Levels Using MQL5

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MetaQuotes 2015.09.25 15:18
 

New article Drawing Resistance and Support Levels Using MQL5 has been published on mql5.com:

This article describes a method of finding four extremum points for drawing support and resistance levels based on them. In order to find extremums on a chart of a currency pair, RSI indicator is used. To give an example, we have provided an indicator code that displays support and resistance levels.

All trend figures, lines and models are combinations of support and resistance lines, which underlie the classical trend analysis. Resistance line is based on maximum prices, which occur when traders ("bulls") stop buying currency at a higher price and begin closing open positions for buying. The price of a financial instrument responds to this with a rollback until a similar situation occurs among "bears", i.e. support line is based on minimum prices.

Trading with support and resistance lines can occur outside these lines, as well as at price fluctuation inside the figure formed by these lines.


Principle of finding extremums

Determining maximum and minimum prices at a given period of time does not pose any difficulties. It is important to choose length of analyzed chart (time interval) right, that it is constantly changing and therefore can not be set manually. To find this currency chart section, I'll use Relative Strength Index (RSI) indicator, that is included in the standard set of indicators of MetaTrader 5 terminal.

Overbought and oversold levels are determined according to levels of RSI indicator. At these moments the chart of our currency pair deviates from its direction (trend) leading to a price rollback. Specifically here our extremums will be formed, at these gaps we will be searching for minimum and maximum prices.

As an oversold level, I will take the RSI indicator value equal to 35; overbought level - 65 (upper and lower levels are equally positioned from the middle of RSI = 50). The period of RSI indicator equals 8.

It should be noted, that often during a strong trend, for example, increasing trend, RSI repeatedly crosses the upper level, but fails to reach the bottom. This leads to a necessity of level adjustment, which does not correspond to the trend direction.

Searching extremum points

Fig.4. Search zones for extremum bars

Author: Aleksandr Teleguz

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