Trading Tools - Drawing

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🎨Function of Drawings

Drawing tools enable assistance in trading through charts. They help in the analysis of price movements in more than one way, but for better understanding, you need to have a quick overview of "Support and Resistance Levels"

💹Support and Resistance Levels 

The support level marks the point at which the asset value takes a U-turn and starts to climb up again. When the asset value hits the support level, it bounces back and begins to rise anew. 

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The point at which the value of an asset starts to decline and reverse is known as the resistance level. When the asset value starts to fall and reverse, it is referred to as the resistance level. The resistance level is the price point at which the asset value begins to reverse and decline. 

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The area where the chart is positioned, bounded by the inclined support and resistance levels, is known as the price channel. 

🔍Drawing support and resistance levels

To identify the support level, focus on the lowest prices, specifically the lower shadows of the candlesticks. Select a few of these lowest prices and utilize the horizontal line tool to draw a line through them. On the other hand, to determine the resistance level, look at the highest prices, namely the upper shadows of the candlesticks. Pick a few of these highest prices and draw a line through them. 

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The accuracy of support and resistance levels increases as you incorporate a wider range of lowest and highest prices. To achieve this, consider using timeframes starting from 1 hour and extending beyond. It's worth noting that the older the timeframe, the more precise the support and resistance levels become. 

📝Types of drawing tools

1️⃣Trend Line

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A trend line is like a horizontal line, but with a twist. It's a handy tool that you can use to mark support and resistance levels on a chart. Unlike the straight and rigid horizontal line, the trend line is flexible and follows the price, adapting to any direction it takes.  

2️⃣Horizontal Line

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Traders often rely on the horizontal line as a handy tool to mark support and resistance levels on a chart. These levels play a crucial role in determining when the asset value starts to reverse and embark on an upward direction. When the resistance level is reached, the asset value takes a U-turn and starts its descent. 

3️⃣Vertical Line

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This tool is commonly employed in chart analysis to establish boundaries on the time axis. It serves various purposes, such as indicating the turning point in a trend or highlighting significant news on the chart. To create a vertical line, simply select a point on the chart. You can then adjust its position by moving it left or right. Additionally, you have the option to customize the line's color and thickness in the settings. 

4️⃣Ray

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It is a chart analysis instrument similar in function to the "trend line" instrument. It is also created with two points on the chart. However, unlike a trend line, a ray continues infinitely to the right beyond the line segment that creates it. 

5️⃣Fibonacci Levels

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Fibonacci levels are levels of support and resistance which divide the chart into defined zones created on the principle of the Golden Ratio using the Fibonacci Sequence. 

✅How to Correctly Create Fibonacci Levels

Fibonacci Levels are derived from the highest and lowest price points, serving as a valuable tool across various time frames. The formation of these levels is contingent upon the market's condition, whether it's aligning with a trend or experiencing a correction. 

6️⃣Fibonacci Fan 

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A Fibonacci Fan is a powerful tool that displays support and resistance levels based on the Golden Ratio principle, derived from the Fibonacci Sequence. It helps you to identify key price levels formed by the minimum and maximum prices. 

Fibonacci Fans can be used for any time interval. In trading with Fibonacci Fans, you can trade on breakthroughs or on rebounds. 

📍Trading on Breakthroughs

Wait until a candlestick crosses one of the levels of the fan going up or down. If the candlestick crosses one or more levels upward, you can open a "buy" trade. Wait until a candlestick crosses one of the levels of the fan going up or down. If the candlestick crosses one or more levels downward, you can open a "sell" trade. 

📍 Trading on Rebounds

Wait until a candlestick rebounds off one of the levels of the Fibonacci Fan and open a trade in the direction of the price movement. If the price bounces downward, you can open a "sell" trade. If the price bounces upward, you can open a "buy" trade. 

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