SupRes MA

Support and resistance zones

You may have noticed how the price on a chart slows down sharply after a strong movement. It's as if it's hitting an invisible barrier. This can happen when the price reaches the level of a pending order with a large volume. If this situation occurs during an upward movement, it means that someone wants to sell a large amount of a financial asset. Until this volume is bought back by other market participants, the price will not be able to move higher. Once this happens, the "barrier" for further movement will disappear. A similar situation occurs during a downward movement. In this case, someone wants to buy a large amount of a financial asset. Until other market participants sell the asset in the required quantity, the price cannot fall below this level.

Often, buyers and sellers place not one pending order with a large volume, but several pending orders with smaller volumes. These orders are placed close to each other. This cluster of pending orders forms a zone. If the pending orders with large volumes are placed below the current price, they will "prevent" the price from falling. In other words, they will "support" the current price. If these orders are placed above the current price, they will "prevent" the price from rising. In other words, they will "resist" the price movement. Such zones can be conditionally called zones of support and resistance. 

 However, these zones are formed not only because of pending orders. The price moves only at the will of traders who make trades in real time. Because zones can be formed due to a large number of trades with small volumes. All these trades are made in a narrow price corridor. And in the future, some of them may act as "support" or "resistance".

 How will the price react to these zones?

When the price reaches a certain level, it may behave differently:

• To bounce off it. This can happen during strong movements, for example, during the release of important news or the publication of macroeconomic data. At such moments, a large number of trades are made, and the financial asset changes hands in a matter of minutes. These movements can be profitable, but they can also lead to significant losses. During such periods, many traders' decisions can quickly change. Some may choose to take profits, while others may choose to take losses. Support and resistance zones serve as a guide for many traders. If a trader considers a zone to be "strong" enough, they will open and close trades near or within the zone. The more traders who do this, the "stronger" the zone will be. This means that the price will "bounce" off the zone.

•  To break through the zone. This is possible when the volumes of pending orders are fully selected by traders. This means that the number of real-time trades exceeds the total volume of pending orders that form the zone. Then the price goes through these zones like a knife through butter.

• Change the movement to consolidation, i.e. go to a sideways trend. In this case, the volumes of transactions for buying and selling the asset are approximately equal. Most of the traders are either waiting for favorable conditions to enter the market, or they have made their trades earlier and are now watching where the price will go. Another reason for consolidation is several pending orders with large volumes.

 How to find these zones?

 Support and resistance zones can be identified in different ways:

1. By candlestick highs and lows
2. By opening or closing prices of trading sessions
3. Using indicators

Creating zones based on the maximum and minimum values of candles is a subjective approach. It is not always clear which maximums and minimums should be used. Therefore, the levels created by different traders may not match.

 The second method avoids subjectivity, but the opening and closing levels of trading sessions do not always act as support and resistance.

The third method, on the one hand, completely eliminates subjectivity, since the zones are determined by a certain algorithm. On the other hand, the algorithm is developed by the trader and recorded by the programmer. And this also introduces a certain degree of subjectivity. 

 The SupRes MA indicator determines support and resistance levels on the price chart. The search algorithm relies on the exponential moving average (EMA).

The indicator looks for areas on the chart where the price has been fluctuating within a certain range for a long time. Then, using the EMA, these areas are filtered, and a support and resistance zone is built based on them.

 The process of selecting zones may depend on the trader's preferences. By configuring the indicator, the trader can further filter the zones for analysis.   

 Input parameters

• The color of the active support zone  - You can choose the color for the "working" support zone.
• The color of the active resistance zone - You can choose the color for the "working" resistance zone.
• The color of the inactive support zone - You can choose the color for the support zone that has lost its importance.
• The color of the inactive resistance zone - You can choose the color for the resistance zone that has lost its importance.
• The number of times the zone can be crossed  - This is the number of times the price can cross the zone. When the number of crosses reaches this value, the zone becomes inactive.
• Distance between zones (in points) -  If a new zone is located near one of the existing zones at a distance less than specified in this parameter, then the new zone will not be displayed
• Start date is specified - if you want to display zones on a specific time interval.
• End date is specified  - if you want to display zones on a specific time interval.
• Number of calculation bars - The zones are searched based on the specified number of recent bars. This option is used when the previous two parameters are equal.
• Number of bars to start searching - A combination of the specified number of bars is used to search for the desired zones.
• Period for calculating the exponential moving average 
• Price type for calculating an exponential moving average
• Maximum zone width (in points) - If the calculated zone width is greater than this value, the corresponding